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r4bb1t

Why 200 MA?

By r4bb1t, in Technical Analysis

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r4bb1t    10

r4bb1t
Posted

one of most popular MA period would be the 20 MA. when used in Daily chart it's pretty logical since stock market trading days are 20 per month. but what about 200 MA? trading days per year is approximately 250. not 200. what's the logical basis behind this popular period? even people uses 200 MA on every timeframes which is non sense. for example 200 MA on 10 Min chart is just 33.33 hours. what's so special? it's just random number. usually people saying that it's because OTHERS uses it. it's non sense too. MACD would be the most popular indicator but is that really good? should we watch it?

i've asked this to numerous traders but no one have answered it yet. will you?

why 200 MA?

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Tams    20

Tams
Posted
one of most popular MA period would be the 20 MA. when used in Daily chart it's pretty logical since stock market trading days are 20 per month. but what about 200 MA? trading days per year is approximately 250. not 200. what's the logical basis behind this popular period? even people uses 200 MA on every timeframes which is non sense. for example 200 MA on 10 Min chart is just 33.33 hours. what's so special? it's just random number. usually people saying that it's because OTHERS uses it. it's non sense too. MACD would be the most popular indicator but is that really good? should we watch it?

i've asked this to numerous traders but no one have answered it yet. will you?

why 200 MA?

 

This is called "Self-fulfilling Prophecy".

 

Like pivot points, if there are enough people following it, the sun, moon and star will converge on the same axis... and the heaven's door will open, and all the money will pour out into your lap.

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Predictor    11

Predictor
Posted

I don't really pay much attention to any of the moving averages, although I'd pay more attention to the longer term averages. It might have been easier to calculate the 200 MA before computers.

 

 

one of most popular MA period would be the 20 MA. when used in Daily chart it's pretty logical since stock market trading days are 20 per month. but what about 200 MA? trading days per year is approximately 250. not 200. what's the logical basis behind this popular period? even people uses 200 MA on every timeframes which is non sense. for example 200 MA on 10 Min chart is just 33.33 hours. what's so special? it's just random number. usually people saying that it's because OTHERS uses it. it's non sense too. MACD would be the most popular indicator but is that really good? should we watch it?

i've asked this to numerous traders but no one have answered it yet. will you?

why 200 MA?

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SIUYA    11

SIUYA
Posted

why did many people smoke, why then did they all decide to them become anit smoking (apart from the law), why did the Nazis gain so much power, why would humans be interested in who is having which face lift today and who is sleeping with whom, why is a stock trading on a PE of 15 considered cheap one day, and when its trading at a PE of 8 it is considered expensive, why SMA and not EMA....etc; etc;

 

as Tams said self fulfilling prophecy, and Predictor makes a very good point about pre computers.....plus for many its easy marketing as opposed to doing real research and going against the grain.

You should ask those who use it and swear by it, or ask any broker why it works - as you have already found there is no real reason at a guess.

 

 

(I once saw a so called expert say that as every one was watching a 20 day indicator he was watching a 21 day indicator......WHO CARES!

 

For the good/bad trades you miss, there will bad/good trades you get - regardless.)

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GDR    10

GDR
Posted

My understanding is the 200MA is quite relevant on a 1 Min chart, as well as on a daily chart. I believe this is so because many big professional traders use it, and it therefore supports the self fulfilling prophecy as described above. I have watched the indexes , currencies etc bounce around at the 200 for many years, it does not stop the move, can be a reversal point, but it most cases becomes support or resistance after a move through. Simply plot it on a 1 min chart and go back through a trading day, it's easy to see. I don't know about stocks, ETF's etc, but would imagine a daily 200MA would show some pressure on the price as it neared.

The 200MA on a 1 min is an area I watch carefully in my trading, often exiting at it, and then re-entering in the move beyond or on the bounce. My experience is that the price will move through this area easily, only IF there is significant momentum, i.e high volume and the big boys are moving the market.

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