The 200-day Moving Average is a technical indicator that helps traders identify long-term trends and determine support and resistance levels. This moving average displays a line on the chart, and it is calculated by taking the average closing price of a market over the past 200 days.
Identifying the trend of the market
Before entering a trade, traders need to identify the market trend. An excellent way to determine the market trend is using the 200 MA on the daily chart. The 200-day moving average is a technical indicator that can identify long-term trends. If the price has consistently traded above the 200 MA in the daily chart, you can interpret that the stock is on an uptrend. When the price is consistently trading below 200 MA, the market is in a downtrend.
Market Trend
The 200 MA to determine Support and Resistance.
Support
When the price moves near or touches the 200 MA and then bounces off of it, then it’s a signal that the market will continue its uptrend. In this case, the 200 MA acts as support. When this situation happens, traders look for opportunities to long the market.