Work With Moving Averages

A good idea for reviewing price trends is to take a look at the moving average of a stock. This refers to a series of averages of a stock’s price over an extended period of time.

For instance, you might establish a 14-day moving average to see how the value of a stock is changing. This requires the following:

1. Take the closing price of a stock from each of the last 14 days.
2. Add all 14 of those closing prices together.
3. Divide that total by 14.
4. This will give you the full moving average.
5. Produce as many moving averages for 14-day spans as possible. For instance, you might compare the moving average for March 1-14 with the average for March 2-15, March 3-16 and so forth.

By using as many moving averages as possible, you can get an idea of how the value of a stock changes. Day-traders benefit from shorter moving averages. You should use a variety of short and long-term averages if possible. This would give you an idea of how the market and individual stock values are changing. Looking at how a stock might shift in a short period of time is vital to your trading success, especially if you are trying to make brief trades as a day-trader.