If you're more of a "position" trader-that is, someone willing to hold a stock for up to a year-the 200-day SMA is going to give you a better sense of a stock's long-term price pattern. If you rarely hold a stock for more than 10 trading days, for example, the 20- or even 10-day SMA may give you good insights into how a stock's price has been moving recently. When an SMA acts as a resistance indicator, it runs above the current stock price, acting as a top when the stock price tests the resistance, it typically falls back.ĭeciding which SMA time frame to use often comes down to your trading time horizon.
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