A stock price is dynamic. Its value can change multiple times in a fraction of a second or remain unchanged for several minutes. Analyzing the dynamics of stock price change can provide an indication for forth coming uptrend or downtrend in that stock. One such indicator is simple moving averages. Now, Harry wants to analyze the price trend of the stock on the basis of moving averages (MA). Let's consider a moving average of 2-day and 4-day respectively. A 2-day moving average is calculated by taking average of closing price of 2 consecutive days. A 4-day moving average is calculated by taking average of closing price of 4 consecutive days. Now, according to experts whenever a faster moving average curve (2-day MA) cuts the slower moving average (4-day MA) from below, then it is an indication of uptrend in the stock. Similarly, whenever a faster moving averages curve (2-day MA) cuts the slower moving average curve (4-day MA) from above, then it is an indication of downtrend in the stock.
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