Online Stock Trading for Beginners - Stock Charts and Moving Averages
What is a Moving Average?
If you are a beginner to stock trading it is very important to understand the basic notions of stock charts and moving averages and to have a basic grasp at least of what ia referred to as technical analysis. Why is it important ? Because the professionals use technical analysis and often make decisions based on what the stock charts are telling them. The large numbers of professionals involved means that markets are driven up or down based on the decisions they take. It is therefore important for beginners to online trading to have a basic idea of what chart factors influence their decisions.One of the most basic technical factors is the moving average. A moving average is just the average price of a stock over a given period of time. A particularly important moving average is the 200 day moving average. It is not a good idea for example to buy a stock whose stock price is below its 200 day moving average.
The stock chart above is a 10-year chart of Bank of America with its 200 day moving average in green, notice that during the recent crash the BoA stock price remained below its 200 day moving average until March 2009 and it is now perilously close to it again and may well fall back through it.
For a more in-depth explanation of the 200 day moving average and also why buying stocks when one moving average crosses over another one is sometimes a good idea.
This was just a very quick introduction to the notion of stock charts for beginners and moving averages. There are many other indicators that can be taken into account when studying a stock's price charts but moving averages are probably among the most important along with support and resistance levels.
For more information on why technical analysis of stock market charts is important for beginners to stock trading to understand see - stock trading for beginners
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