MA200 – moving average
The content of this article
MA200, short for 200 day moving average, is the most commonly used mean for technical analysis. MA200 = Average exchange rate over the last 200 bars/time units.
It is in the daily graph that MA200 is used the most. In a daily graph, the graph/price curve is updated once per day with a new bar or line. In other words: every unit in the graph corresponds to 1 day.
MA200 as a strategy and signal to trade
Moving averages are used to estimate if a trend is pointing upwards or downwards. It is also used to obtain signals to either buy or sell.
When assessing trends with the help of moving averages, you check if the price is above or below the moving average. You also check if the moving average is pointing upwards or downwards.
When using moving averages to obtain trade signals you want to find the point when the price breaks above the moving average = buy signal. When the price falls below the moving average = sell signal.
Estimating trends with MA200
- Moving average pointing upwards = rising trend/positive
- Moving average pointing downwards = declining trend/negative
- Price is over and above the moving average = rising trend/positive
- Price is below the moving average = declining trend/negative
Buy and sell signals with MA200
- Price is over and above MA200 = buy
- Price is below MA200 = sell
Death Cross and Golden Cross
MA200 in the daily graph is also used to obtain buy and sell signals with the help of the so called Death Cross and Golden Cross. In order to find these crosses you must add the MA50 in the graph.
- Golden Cross = MA50 crosses MA200 from below
- Death Cross = MA50 crosses MA200 from above
The explanation behind the Golden Cross is that the short term trend (MA50) starts to point upwards while crossing the long term trend (MA200) from below. This signals that a rising long term trend might be on its way, or has already begun, depending on how MA200 looks currently.
The explanation behind the Death Cross is that the short term trend (MA50) starts to point downwards while crossing the long term trend (MA200) from above. This signals that a declining trend might be on its way, or has already begun. It depends on whether MA200 currently is pointing upwards or downwards.
