Stock Investments- What is so holy about 200 Days Moving Averages?

Yesterday I had been to my friend’s place and he was busy in going through a sheen of papers with technical charts and graphs indicating the buy and sell points and so on.

I asked him what are all these papers and he replied that it enables him to design his trading plans and take investment and trading positions accordingly. I requested him to recommend me one such indicator that I could follow, understand and implement them practically in my investment decisions

He said I should follow what is called 200 days moving average price of a share.

He showed me number of books and write ups on the subject to convince me to follow it religiously whenever I trade in the market. I wondered many times why I should follow 200 DMA and why not 250 or 300 day moving averages. What is so holy about 200 days moving averages? And what is so unholy about more than or less than 200DMAs ?

I quizzed to my self that if 200DMA is a wonder key to make money in the stock market then why investors are sitting with huge losses? Turn the pages of stock market history you will know the fate of many 200DMAs.

These numbers never gave me any advantage at the ground level trading.

After seeing the plight of poor investors who lost tons of their savings in stock market I do not want to see the ugly black magic face of the technical charts

Any overload of information makes you inactive and confusing. Too much of information (rumor) based stock market investment is not an exception


4 thoughts on “Stock Investments- What is so holy about 200 Days Moving Averages?

  1. 200 DMA provides a great deal of information as with one glance one knows that which are the stocks which can provide a breakout at BSE and NSE and thus one can enter in a profitable set up which makes money every day. However as a caution use due diligence when using this indicator as same be used with some other indicator like volumes to provide the confirmation.


  2. It is very interesting post. I completely agree with you that the moving averages keep moving. I still don’t subscribe to the thought that 200DMA is very critical for the investor to take decisions.If it is very powerful tool why do we have more than 120 technical indicators in technical stock market analysis.A change of mind set is very much required.


  3. One should try to understand the fact that events often either undertake overtake the price movement in the stock market. And definitely not the moving averages of the stock prices.If it is so why investors find burn in their share accounts?


  4. I am of the firm opinion that 200DMA is a seller’s strategy to off load the stocks rather than buyers foolishness to go and buy.If the prices are expected to go up above 200DMA why sellers sell their stocks?


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