SIMPLE MOVING AVERAGE (SMA)
If you add 3 days’ closing price of any scrip and devide it by 3, you will get simple moving average.
If you took average of 1st, 2nd & 3 july . then in next moving average, remove 1 july and take 2,3 & 4 july closing price.
We explained 3 days’ moving average for convinience to explain,
but generally 30 DMA,50DMA & 200 DMA are very popular.
You have not to calculate these averages,already calculated DMA are available on many websites.
It supports us to understand the trend of any scrip.
If Price chart of any scrip is crossing 30 or 50 DMA and going up , then a new short term buying trend started and that will sustain.
This is called a bullish crossover.
if it is going down, then a shart term selling trend confirmed.This is a bearish crossover.
When 200 DMA crossover is there, then it may be medium term.
In the above chart,
We can see clearly that blue line (50 DMA) crossed red line(200 DMA) and went down, then there was a big selling trend.
and when blue line crossed red line & came up , then a big buy trend started and sustained above that level.
MACD – MOVING AVERAGE convergence and divergence works on similar concept but we are not detailing all this to keep everything simple and not to complicate the decision.Decision should be firm but prompt.