Can you explain the 50 day moving average in stock trading?

I am going to participate in a virtual stock trading game in my school so I'm researching what stocks I want to buy. Can someone please explain to me basically what the moving average is telling me and how I am supposed to judge whether I want to buy the stock or not based on it? Thanks a lot.

7 Answers

  • Anonymous
    9 years ago
    Favorite Answer

    The 50 day (or any other term) moving average is very simple to calculate. You simply take today's closing price along with the closing prices for the preceding 49 trading days, add them together and divide by 50. You do a similar calculation for each previous day. These points are generally plotted along with the price action for the day. The price action is generally plotted as a vertical bar connecting the high and low prices for the day, as well as horizontal tick marks off the vertical bar for the opening price (to the left) and the closing price (to the right). The idea of the moving average is to smooth out the daily fluctuations so that the longer term trend is more apparent. The gospel in trading is "the trend is your friend." In other words, buy when there is an uptrend and sell or short when there is a downtrend. There are a number of methodologies that can be used to trade using moving averages. These involve two moving averages crossing, the daily prices touching or crossing a moving average as well as more complicated methodologies or indicators. There is also an exponential moving average which is a bit more complicated to construct, but its use is very similar. Moving averages are probably the easiest and most effective way to depict the near-term, medium-term or long-term trend.

  • Anonymous
    9 years ago

    You may use this to identify the stock trend by looking at the slope, and trade in the direction of the trend.

    Prices above 50MA will have a Buy (Long) bias, and below that will be a Sell ( Short) bias.

    There are different time-frame of moving averages that you can explore as well, like 20, 100, 200.

    Another application is the moving averages cross-over to confirm trend changes, for e.g. 20 crosses 50.

    However, this is just one type of indicator for stock trading and you may use other indicators to setup for higher probability trade.

    Good luck in your competition!

  • Anonymous
    9 years ago

    Every day moving average take for 50 days and average it you get your stock 50 days moving average.

  • 9 years ago

    You don't have to do a whole lot of calculations. The simplest way to do this is to take the close prices of a particular stock in the last 50 days, plot it on a graph and take the middle of it.

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  • Anonymous
    6 years ago


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  • Anonymous
    9 years ago

    First, 50-MA (moving average) is a lagging indicator, the pattern of "Past 50 days" average as reference to compare with today's.

    When to buy ? If you have to use 50-MA, you are actually invest 3~6 months investment, you refer to 20-MA cross above 50-MA as buy, when 50-MA cross below 20-MA as exit. As simple as this.

    Hopefully, this helps.

  • ?
    Lv 7
    9 years ago

    It is telling you what the longer term investors are doing. People compare this average with a shorter one which they hope will indicate which type of investor is gaining control. Something about when the moving averages cross over (either on the way up or the way down). Bit hocus-pocus really!

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