Meaning , Features and Strategies of 10-Day Moving average

The 10-day Moving Average (MA), is a popular technical indicator. It is represented graphically as a trend line on a price chart. This represents the average closing prices for the last ten trading day. The short-term moving average has many uses. It can be used to indicate how strong a price trend is, and it also serves as a useful indicator for placing sell signals. It does not change the original price but smoothens the data to give traders a better idea of where they are heading by eliminating the effects of noise and daily price fluctuations.

There are many types of moving averages: simple, exponential, weighted and more. We will be discussing the 10-day Simple Moving Average (SMA) in this article.

Calculate

Simply add the closing prices of the last ten sessions to calculate the figure and divide it by the number days.

SMA, or simple moving average, for the first day or first point will be the average price of the last ten closings prices.

The SMA for the next datapoint will remove the first entry (closing prices of day 1) and add the closing prices of the 11 days. The trend line of the moving average is preserved in this way.

Below is the black trend line that shows the 10-day MA for the BSE Sensex

Add to Your Chart!

Many price charts have an Indicators button. MA is an option available in the drop-down menu of Indicators. Clicking on the indicator will prompt you to choose the time period or number of days. In the example above, you can select ten as we want to add a 10 day moving average to our price charts. Next, you'll be asked to choose the type of moving average: simple, exponential, weighted, or any other. For the example above, we chose the "simple" option. This will make the trend line visible on the chart, which overlays the current prices.

Trader Strategies

The 10-day moving-average strategy is slow. This is because by the time averages catchup, significant price movements may already have occurred. The moving averages use historical prices to determine trends. However, these averages still provide strong sell signals according to analyses. If prices trade below the 10-day average, this could signal that price consolidation has occurred and it is time for you to exit.

Response to Prices

Because it is close to the time-closed closing prices, a shorter-term moving average such as ten days can react to price changes. On a price chart, a longer-term MA might appear smoother.

Crossover Strategies

A short-term moving average that crosses above a longer term average (such as a 100-day or 200 day moving average) is a sign that the stock's bullish outlook is confirmed and prices are rising. It signals a downtrend when the short-term MA crosses below the longer term MAs.

Conclusion

A 10-day moving average, despite its volatility to price changes is a powerful tool for determining if prices are in an uptrend and downtrend. So traders can predict whether prices will remain bullish or if buyers will lose steam and prices will likely go south. This average, traders say, can be used as a price indicator, especially when the market is trending, such as during morning trading hours.