How to Choose a Stocks Trading Moving Average to Trade With

Choose a Moving Average to Trade With Stocks Strategies

A stocks trader can choose a moving average based on the stock chart timeframe that he is trading: the stocks trader might choose to use this Moving Average indicator on the minute charts, hourly charts, day stocks charts or even weekly stocks trading charts.

The stocks trader can also choose to average the closing stocks price, opening stocks price or median stocks price.

Moving average stocks indicator is a commonly used indicator to measure strength of stocks trends. The data is precise and its output as a moving line can be customized to a stocks trader's preferences.

Using the stocks moving average is one of the basic ways to generate stocks buy and sell trading signals which are used to trade in the direction of the trend, since the Moving Average indicator is a lagging indicator and a stocks trend following indicator - this means that it will tend to give late stocks entry signals as opposed to leading stocks indicators. However, as a lagging stocks indicator it gives more accurate stocks signals and is less prone to whipsaws compared to leading stocks trading technical indicators.

Stocks Traders choose the moving average period to use depending on the type of stocks trading they do: short-term stocks, medium-term stocks and long-term stocks.

• Short-term stocks trading: 10 - 50 Moving Average Period
• Medium-term stocks trading: 50 - 100 Moving Average Period
• Long-term stocks trading: 100 - 200 Moving Average Period

The stocks price period in this case can be measured in minute charts, hourly charts, day stocks charts or even weekly stocks charts. For our example we will use 1 hour stocks chart timeframe period.

Short term stocks moving averages are sensitive to stocks price action and can spot stocks trends signals faster than the long term moving averages. Shorter term stocks moving averages are also more prone to whipsaws compared to long term moving averages and a stocks trader should choose a stocks price period that will generate a stocks signal early but not give too many stocks whipsaws.

Long term stocks moving averages help avoid stocks whipsaws, but are slower in spotting new stocks trends and trend reversals.

Because long term moving averages calculate the average using more stocks price data, it does not reverse as fast as a short term stocks moving average and it is slow to catch the changes in the stock trend. However, the longer term stocks moving average is better when the stocks trend stays in force for a longer time but may also give late stocks signals.

The work of a stocks trader is to find a moving average period that will identify stocks trends as early as possible while at the same time avoiding fake-out signals (stocks whipsaws).