Trading with Moving Averages

Moving averages are one of the most popular and easy to use tools available to the technical analyst. They smooth a data series and make it easier to spot trends, something that is especially helpful in volatile markets. They also form the building blocks for many other technical indicators and overlays.
Moving averages smooth out a data series and make it easier to identify the direction of the trend. Because past price data is used to form moving averages, they are considered lagging, or trend following, indicators. Moving averages will not predict a change in trend, but rather follow behind the current trend. Therefore, they are best suited for trend identification and trend following purposes, not for prediction.
Don’t expect to get out at the top and in at the bottom using moving averages. As with most tools of technical analysis, moving averages should not be used on their own, but in conjunction with other tools that complement them. Using moving averages to confirm other indicators and analysis can greatly enhance technical analysis.

Primary Trend
On a daily chart, apply a simple moving average with 200 days as the period. The 200 day MA gives a rough idea of the primary trend. A bull market exists when the closing price is above the 200 day average. A bear market exists when the closing price is below the 200 day average.

Intermediate Trend
On a daily chart, apply a simple moving average with 50 days as the period. The 50 day MA gives a rough idea of the intermediate trend. The intermediate trend is up when the closing price is above the 50 day average. The intermediate trend is down when the closing price is below the 50 day average.