Trade Forex Trading

Learn Stock Indices Trading

Leading Stock Index Indicators

Moving Average Leading Stock Index Indicators

A stock indices trader can choose a moving average based on the stock index chart time frame that he is trading; the stock indices trader might choose to use this Moving Average indicator on the minute stock indices charts, hourly stock indices charts, day stock indices charts or even weekly stock indices charts.


The stock indices trader can also choose to average the closing stock index price, opening stock index price or median stock index price.


Moving average stock indices indicator is a commonly used indicator to measure strength of stock indices trends. The data is precise and its output as a moving line can be customized to a stock indices trader's preferences.


Using the stock indices moving average is one of the basic ways to generate stock indices buy and sell trading signals which are used to trade in the direction of the stock indices trend, since the Moving Average indicator is a lagging indicator and a stock indices trend following indicator - this means that it will tend to give late stock indices entry signals as opposed to leading stock indices indicators. However, as a lagging stock indices indicator it gives more accurate stock indices signals and is less prone to whipsaws compared to leading stock indices indicators.


Stock Indices Traders choose the moving average period to use depending on the type of stock indices they do; short-term stock indices, medium-term stock indices and long-term stock indices.



  • Short-term stock indices: 10 - 50 MA Period

  • Medium-term stock indices: 50 - 100 MA Period

  • Long-term stock indices: 100 - 200 MA Period


The stock index price period in this case can be measured in minute stock indices charts, hourly stock indices charts, day stock indices charts or even weekly stock indices charts. For our example we will use 1 hour stock indices chart time frame period.


Short term stock indices moving averages are sensitive to stock index price action and can spot stock indices trends signals faster than the long term moving averages. Shorter term stock indices moving averages are also more prone to whipsaws compared to long term moving averages and a stock indices trader should choose a stock indices price period that will generate a stock indices signal early but not give too many stock indices whipsaws.


Long term stock indices moving averages help avoid stock indices whipsaws, but are slower in spotting new stock indices trends and stock indices trend reversals.


Because long term moving averages calculate the average using more stock index price data, it does not reverse as fast as a short term stock indices moving average and it is slow to catch the changes in the stock index trend. However, the longer term stock indices moving average is better when the stock indices trend stays in force for a longer time but may also give late stock indices signals.


The work of a stock indices trader is to find a moving average period that will identify stock indices trends as early as possible while at the same time avoiding fake-out signals (stock indices whipsaws).

 

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