InvestorQ : Which is the best moving average for swing trade
kurien varghese made post

Which is the best moving average for swing trade

Nishita Gala answered.
3 years ago
Swing traders use different tenure moving averages based on their volatility view and their return requirement. Moving averages are smoothened averages. For example, 5-day moving average considers the arithmetic average of 5-day prices like T to T+5; T+1 to T+6; T+2 to T+7, etc. this series is plotted with the actual price chart to arrive at trends. This is very useful for swing traders looking to track minor shifts in market movement. Here are the five common DMAs that swing traders use.
10-day moving average us is known as hedge fund moving average, as most hedge funds use this DMA to adjust their large positions.  This is very useful for trading in high momentums stocks where trends are changing on a frequent basis.

The 20-day moving average is also popular since there are approximately 20-22 trading days in a calendar month. This gives a good monthly view. Short-term traders and active scalpers establish positions in trending stocks using 20-DMA.

The 50-day moving average is meant for institutions moving large money where trend consistency is more important. This DMA is able to highlight some broader underlying trends that are not visible in 10-DMA and 20-DMA.

At the longer end, there is the 20-week moving average or something akin to half a year since there are 255-260 trading days in a year. Swing traders can benefit knowing it is essentially the 100-day moving average as well.

Finally,  at the longest end, the 200-day moving average is comprehensive but popular among institutional investors as their internal policies and guidelines normally do not allow them to hold stocks that are trading below the 200-DMA. Slightly longer-term traders use this 200-DMA to determine whether the undertone is bearish or bullish. The bottom line is that traders must first establish the core time frame for swing trading and then zero in on the appropriate average accordingly.