If you have ever, or are currently studying the markets then its highly likely that you have heard of moving averages. They very well could be the most popular, technical indicator available. While I have written about moving averages in the past, the question always comes up, which one is best? Today we will explore moving averages in hopes of solving this for you.
Think about your goals. Are you someone who is quite active? Maybe a day trader, or are you someone who is more of a "Buffet trader". One who looks for strong companies and invests for a lifetime? Now, normally we would segment an article in hopes of helping all the various types of market participants but today we do not have to.
The first moving average, and arguably the best to use is the 200, simple moving average . The question is why is it the best though? The 200 simple moving average holds the highest honor due to its popularity. In my opinion its because it fits everyone and their individual styles. The long term investors are simply hoping their stock stays above it, or at the very least that any dips to the 200 are bought. The short term traders are looking for it to act as a floor for them to use as an entry point, and the day traders have a simple rule, never fight the 200 moving average.
Because of its sheer popularity and use across all market participants there is no argument that the 200, simple moving average is the best of all. If you have any chart on your screens it would behoove you to have it on your screen. At the very least you can see when everyone else is about to react.