Investors have all kinds of tools they use to determine where they think stocks and exchange traded funds (ETFs) are going, and one of the most popular ways of forecasting is looking at price trends. One popular way of doing that is by examining moving averages.
The future is always unknown. Despite the many complex strategies that have been devised by financial experts to forecast the market’s direction, there’s no such thing as a crystal ball.
While you can’t find indications of the future, what you can do is hunt for trends by using moving averages, explains Gary Gordon for ETF Expert.
The most popular moving averages are the 50-day and the 200-day, the latter of which we use. (Why buy-and-hold is dead).
The rules are:
1. When a position moves above its 200-day moving average, it is a buy signal.