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The Importance of 200 Day Moving Average for Traders

The Importance of 200 Day Moving Average for Traders pic

Earlier we covered many of our blog posts on the moving averages and its strategy. If you didn’t go through the previous posts on it, I suggest you read them once. As in this content, I am going to explain a segment of MA 200 Day Moving Average in detail. I will also show you how this moving average can make you rich easily. Here, I am also going to suggest you some stock names which currently cross the 200 moving average level. So let’s start with the basics.

Common FAQ about 200 Day Moving Average

What is 200 day moving average?

Basically, 200 day moving average is a line that is formed by adding the averages of a security’s closing price over the last 200 days. It is one of the most popular technical indicators, helps to identify the market trend of the particular security. Generally, traders and investors like to apply the average of closing prices of the previous days.

How do you trade a 200 day moving average?

The most primary strategy of 200 day moving average is when a stock price goes above the 200 day moving average, it is bullish. Oppositely, if a share price moves below the 200 days MA, the trend is likely to be bearish.

How do you use 50 day 200 moving average?

The crossover of 50 day 200 day moving average is known as Golden Cross. If you see a golden cross, you should hold your position and trade until the 50 MA broke in the downside. Here, you can put a stop loss beyond the bigger top or bottom candlestick prior to the cross.

Why is 200 DMA important?

200 DMA is generally important in defining the uptrend, the downtrend of a script. As I have told you that if the price level breaks the 200 MA line from below and goes above, the trend is up. On the other hand, when the price breaks the MA line from up and moves below it, the trend is down.

How to calculate 200 day moving average?

Generally, the 200 day moving average is calculated by adding up the closing prices of the previous 200 days and then dividing it by 200. So, mainly it is the average of the past 200 days closing prices of the stock.

How to Plot 200 Day Moving Average on Charts?

Now, I will show you how you can attach a 200 day MA on your charting platform. To explain the steps, I have taken India’s top 2 best charting platforms from Zerodha kite, and, Upstox Pro.

Plat 200 days MA in Zerodha Kite

Obviously, you first need to open your Zerodha kite Demat account. If you do not have it or if you want to open it, you can do so by clicking on the link. Then open any of your favorite script over there. Like, I open the Bank Nifty March Future. There go to the Studies section and search for a moving average. Click on it and you will get a small window like this. It is customizable. For example, you can add period, field, type, color, offset, etc. I add 200, field close, type simple, offset 0, underlay none, and the color blue. After that, click on done. Your 200 MA line will appear.

200 Day Moving Average

200 days MA in Upstox Pro

Here, also the process is almost the same. First, login account Upstox Pro. Then open any chart. And open indicator section. There search for moving average. Usually, customizable options available.

200 Day Moving Average

What are the Top Profit Making Strategies using 200 Day Moving Average?

  • If the price is above the 200 day MA indicator, you must look for buying opportunities.
  • Reversely, if the price is below the 200 day MA indicator, then you must look for the selling opportunities.
Bullish Bearish Crossover
  • Try to find a support area on your chart where potential buying pressure could step in. Hence, if the price is above the 200-day moving average, this can be a buying opportunity at Support.
  • You may take resistance on your chart where potential selling pressure could step in. Here also, if the price is below it, this can be selling opportunities at Resistance.
  • Sometime you’ll notice the price bounce approach of the 200MA. And this gives you an opportunity to enter the markets.
Bounce back from 200 day moving average
  • In an uptrend (if a share price above 200MA), you can obviously look for an Ascending Triangle and buy the breakout.
200 Day Moving Average
  • Reversely, And in a downtrend, look for a Descending Triangle and short the breakdown.

Important 200 MA Strategy with Live Example

This is the daily chart of Nifty. Instead of the normal candlestick, here I use Heikin Ashi. I decided to use this charting tool as Heikin Ashi is much more clear and noise-free compared to the normal candlestick.

200 Day Moving Averagey

Now, have a look at the above image. Here, I add 200 days MA. Now see, here I identify three entry points where bullish candle appears without lower tail and confirms the bullish trend further. And do not exist until a red candle without a lower tail confirms the bearish trend. Here, one more thing is important, you must have a close look at the slope of the MA. In the chart, as you can see the MA slope is in an upward direction. That means the price is likely to move up.

Golden Cross

For the golden cross strategy, you need to plot 50 MA and 200 MA together on a chart. here, the yellow line is 200 MA and the blue line is 50 MA. Now, let’s look at the strategy.

Golden Cross

When the 50 MA crosses the 200 MA from below and moves upward, you can assume that the price will go up. Oppositely, when the 50 MA crosses the 200 MA from above and goes below, the trend is about to down. Now, see the above picture. Thereafter the golden cross of 20 and 200 MA, Nifty rallied a lot, almost about 1200 points within a few months. Though in between those months, the graph showed ups and down movement, the 2 MA helps to overlook the noise very much.

Recent Stock List Cross 200 MA

NameCurrent Price200 Day SMAAverage VolumeSector
Supreme Engineering Ltd.27.927.89221272ENGINEERING
Indiabulls Ventures198.25198.182280700FINANCE
CCL Products India Ltd.229.55229.464369094TEA AND COFFEE
Motilal Oswal MOSt Shares Midcap 100 ETF17.7317.6921191424FINANCE
Poddar Pigments Ltd.168.5167.99117624DYES AND PIGMENTS
Nifty Consumption4877.954862.10INDEX
Chalet Hotels Ltd.330.85329.34970010HOTELS
Man Infraconstruction Ltd.26.2526.122165231CONSTRUCTION
The Ramco Cements Ltd.776.3772.056344322CEMENT AND CEMENT PRODUCTS
Shree Pushkar Chemicals & Fertilisers Ltd.105.5104.81553085FERTILISERS
Alkali Metals Ltd.43.2542.95886286CHEMICALS - ORGANIC
Nagarjuna Fertilizers and Chemicals Ltd.4.34.2702586586FERTILISERS
Marine Electricals (India) Ltd.101.75101.03316909DIVERSIFIED
KSB Ltd.677.25672.34727943COMPRESSORS / PUMPS
NIFTY MIDCAP 10017004.316881.10INDEX
Nifty Fin Service1363713533.30INDEX
PTL Enterprises37.537.189814163TYRES
Surana Telecom and Power3.83.765514888CABLES - TELECOM
City Union Bank Ltd.217.15215.034948826BANKS
Carborundum Universal Ltd.327.05323.76177753ABRASIVES
Ruchi Infrastructure Ltd.2.352.3252525526CONSTRUCTION
Welspun Investments and Commercials169.05167.232550FINANCE
Kajaria Ceramics Ltd.549.75543.422174432CONSTRUCTION
Nifty Realty284.15280.520INDEX
Century Plyboards (India) Ltd.159.35157.19206267CONSTRUCTION

Follow the above stock list, there you will find some stocks’ recent crossover of 200 MA.

Conclusion

If you follow this strategy, I am sure you will be benefited from it. This 200 MA is super beneficial for investors. By applying this single tool, you can fix entry-exit points of shares easily. For more such an accurate strategy keep an eye on our blog post and stay updated.

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