What is 200 DMA in Stock Market? – What does a 200-day moving average mean?

In continuation to my previous article, we will cover some more aspects of Moving Average. As this indicator plays a key role in technical analysis so thought of covering separately. Therefore, we will cover What is 200 DMA in the stock market? Let’s get started!

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DMA in Stock Market

DMA stands for days moving average. From a technical analysis point of view, moving averages determine the entry or exit point for a particular stock. Usually, it compares the latest price with the moving average prices over a given period. To analyze a stock, traders pick price data referencing particular days depending upon the trading strategy.

Also Read What are Moving Averages in Stock Market? – Overview, Types, and Examples

In simple words, moving averages is a technical indicator that suggests the average value of stocks over some time. And these values are plotted along with the closing price on a chart. Common usage of DMA is to identify the trend direction and determine support & resistance level.

There are various types of moving averages. The daily moving average is the most often used of these. You can monitor the 30 DMA if you wish to track the trend over a 30-day period, for example. By comparing the current trade price to the average, you can determine if the market is bullish or bearish in the short term.

Also Read RBI RDG Account – Buy & Sell G-Secs, Bonds, T-bills, and State Development Loans

What is 200 DMA in Stock Market?

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The 200-day moving average is a long-term moving average that is used to assess a stock’s overall health. A 200-day moving average is derived by adding the closing prices of any security over the last 200 days, then dividing by 200.

When stocks trade below their 200-day moving average, it signifies a long-term downward trend. Whereas it is above the 200 DMA then reflects a long term upward trend. For each instrument, this measure is calculated in the same units and currency as the quoted price.

200 DMA covers 40 weeks of trading and is best for determining general market trends. You can easily find 200 DMAs data/charts on the money control website or other sites to interpret the trend. Moving averages are also used by many market traders to find profitable entry and exit opportunities into specific securities.

If you wish to take a long-term position, then you can use a 200-day moving average for analysis.

Analysts utilize the 200-DMA in Stock Market, or 200-day moving average, to counteract these wild swings. This average reduces short-term instability by taking into account readings over a 200-day period.

When a stock’s value is down, traders wait for it to reach a level known as support before buying. Similarly, if a stock’s price is increasing, it’s best to hold off until it reaches the upper limit of a range known as the resistance level.

Also Read Government Bonds India – A Detailed Guide for 2021

Top Trading Strategies for using 200 DMA

Here are the top strategies you can use to book huge profits:

  1. In case the closing price is above the 200 DMA, you must look for buying opportunities.
  2. Alternatively, if the price is below 200 DMA, you should look for sell opportunities.
    What is 200 DMA in Stock Market? - What does a 200-day moving average mean?
  3. You should look for a support area on your chart, if the price is above 200 DMA, you can step in.
  4. You can take resistance on the chart if the selling pressure is high. Further, you can find selling opportunities.
  5. In case you’re able to locate a price bounce approach of 200 DMA, then that’s the right entry point in the market.

Bottomline

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Just to sum it up, I would say 200 DMA is quite profitable to investors. You can effortlessly fix the entry-exit points of shares by using this single tool. In case looking for long term investment to pick stocks, do use the above strategies for

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