The 200-day moving average is a popular indicator used by traders to understand the long-term trend of a stock. If the stock is trading above the 200-day average, it signals a strong and positive trend. If it is below the 200-day average, it shows weakness. It helps traders decide when to buy, hold, or sell a stock based on its long-term trend.

What is the 200-Day Moving Average?

The 200-day moving average (200 DMA) is the average closing price of a stock over the last 200 days. It smooths out price movements and shows the long-term direction. Traders use it to see if the overall trend of a stock is up or down.

Why is the 200-Day Moving Average Important?

The 200-day moving average is important because it shows the long-term trend. If the stock price is above it, the trend is positive. If it’s below, the trend is negative. This helps traders avoid short-term noise and focus on the bigger picture.

How Does the 200 DMA Help in Buy or Sell Decisions?

If a stock moves above the 200-day moving average, it’s often seen as a buy signal. If it drops below, it may be a sell signal. It helps traders decide entry and exit points by confirming the strength or weakness of a trend.

Can the 200-Day Moving Average Show Support and Resistance?

Yes, the 200 DMA often acts as a strong support or resistance level. If a stock falls to the 200 DMA and bounces back, it acts as support. If it rises to the 200 DMA and then falls, it acts as resistance. Traders use this to plan their trades.

Is the 200 DMA Reliable for Long-Term Investors?

Yes, long-term investors use the 200 DMA to stay invested in strong stocks. It helps them avoid panic during small corrections. As long as the price is above the 200 DMA, the stock is considered healthy and worth holding for long-term growth.

How to Combine 200 DMA with Other Indicators?

The 200 DMA works well with indicators like RSI, MACD, and volume. For example, if the price crosses above the 200 DMA and RSI also shows strength, it gives a stronger buy signal. Combining indicators increases accuracy in trading decisions.