A Moving Average (MA) is an indicator used in technical analysis to show the average price of a stock over a set period of time.
The most common MA periods are 50 day, 100 day, and 200 day. That said, there are several combinations used by Trader's depending on their specific trade style coupled with the time frame they are considering.
Day Traders tend to focus on 2 day, 5 day, 10 day MA's. Swing Traders tend to use 10 day and up.
Moving Averages are not useful in every occasion. There must be a relationship between a stocks price action and a specific MA time period for the functional indicator to be of any worth.
For example, say you notice a tendency for C to bounce every time if dips to 100 day MA. If the stock is dipping to a support level coupled with a 100 day MA, a technical analyst will likely take a long position in that stock.On the flip side, if C has never had any reaction to the 100 day MA, then MA analysis would be of no use.
They are typically used to track momentum and identify possible areas of support and resistance. MA is frequently used in a day trading system, stock trading system, options trading system, or a futures trading system.