{"id":56001,"date":"2021-06-16T14:46:51","date_gmt":"2021-06-16T18:46:51","guid":{"rendered":"https:\/\/www.t3live.com\/blog\/?p=56001"},"modified":"2023-09-05T10:18:39","modified_gmt":"2023-09-05T14:18:39","slug":"sami-abusaad-how-to-use-the-20-and-200-day-moving-averages","status":"publish","type":"post","link":"https:\/\/blog.t3live.com\/2021\/06\/16\/sami-abusaad-how-to-use-the-20-and-200-day-moving-averages\/","title":{"rendered":"How to Use the 20 and 200 Day Moving Averages"},"content":{"rendered":"<p><iframe title=\"YouTube video player\" src=\"https:\/\/www.youtube.com\/embed\/FJ8HX0itglU\" width=\"560\" height=\"315\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\"><span data-mce-type=\"bookmark\" style=\"display: inline-block; width: 0px; overflow: hidden; line-height: 0;\" class=\"mce_SELRES_start\">\ufeff<\/span><\/iframe><br \/>\n<span style=\"font-weight: 400;\">If you hate Moving Averages, odds are <\/span>you don\u2019t know how to use them. <span style=\"font-weight: 400;\">Combined with knowledge of price-action, they are an <\/span><i><span style=\"font-weight: 400;\">invaluable<\/span><\/i><span style=\"font-weight: 400;\"> tool. In this article, I\u2019ll show you how to harness the power of the 20 and 200 Day Moving Averages.<\/span><\/p>\n<h2><b>What Is a Moving Average?<\/b><\/h2>\n<p data-css=\"tve-u-16c0b741af0\">A moving average is a stock's average price over a certain time period.<\/p>\n<p data-css=\"tve-u-16c0b741af0\">That time period can be anything from minutes to days to weeks to months to quarters to even years.<\/p>\n<p data-css=\"tve-u-16c0b741af2\">A daily moving average is the average of a stock's daily closing prices over a specified number of days.<\/p>\n<h2 data-css=\"tve-u-16c0b741af2\"><strong>How Is the 20 Day Moving Average Calculated?<\/strong><\/h2>\n<p>The 20 day moving average is the average closing price of a stock, ETF, or other asset over the last 20 days.<\/p>\n<p>Each day it changes because the oldest closing price gets removed, and the newest one is added.<\/p>\n<p>That's how simple moving averages are calculated.<\/p>\n<p><span style=\"text-decoration: underline;\"><strong><a href=\"https:\/\/blog.t3live.com\/2022\/10\/12\/scott-redler-moving-averages-explained\/\">Exponential moving averages<\/a><\/strong><\/span> use a formula to give a greater weight to recent prices, which is beyond the scope of this article.<\/p>\n<h2><strong>How Does the 20 Day Moving Average Help Us Trade?<\/strong><\/h2>\n<p><span style=\"font-weight: 400;\">Moving Averages are directional guides that speed up the technical analysis of trends.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">If the moving average is pointing up, you know the stock is bullish. If it\u2019s pointing down, you know the stock is bearish.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">They are superior tools in uptrends and downtrends, and their importance in sideways trends is greatly minimized. In this article, I\u2019ll show you how to use them with sideways trends.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">When using moving averages, <\/span><i><span style=\"font-weight: 400;\">the color should be consistent across multiple timeframes.<\/span><\/i><span style=\"font-weight: 400;\"> The type of moving average doesn\u2019t matter, but it should be the same on all time frames.\u00a0<\/span><\/p>\n<h2><b>How to use the 20 Day Moving Average<\/b><\/h2>\n<p>The 20 day moving average is one of my powerful tools.<\/p>\n<p><span style=\"font-weight: 400;\">When Stocks are about to transition up, the 20 day Moving Average with start to hug price and curve up. That is your indication that the stock is about tot transition.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">So, even if the trend is sideways, keeping an eye on the moving average will tell you when the sideways trend is breaking.\u00a0<\/span><\/p>\n<p><img fetchpriority=\"high\" decoding=\"async\" class=\"alignnone wp-image-56003\" src=\"https:\/\/www.t3live.com\/blog\/wp-content\/uploads\/2021\/06\/20-day-moving-average-1.jpg\" alt=\"\" width=\"750\" height=\"422\" srcset=\"https:\/\/blog.t3live.com\/wp-content\/uploads\/2021\/06\/20-day-moving-average-1.jpg 960w, https:\/\/blog.t3live.com\/wp-content\/uploads\/2021\/06\/20-day-moving-average-1-300x169.jpg 300w, https:\/\/blog.t3live.com\/wp-content\/uploads\/2021\/06\/20-day-moving-average-1-150x84.jpg 150w, https:\/\/blog.t3live.com\/wp-content\/uploads\/2021\/06\/20-day-moving-average-1-768x432.jpg 768w, https:\/\/blog.t3live.com\/wp-content\/uploads\/2021\/06\/20-day-moving-average-1-80x45.jpg 80w, https:\/\/blog.t3live.com\/wp-content\/uploads\/2021\/06\/20-day-moving-average-1-220x124.jpg 220w, https:\/\/blog.t3live.com\/wp-content\/uploads\/2021\/06\/20-day-moving-average-1-178x100.jpg 178w, https:\/\/blog.t3live.com\/wp-content\/uploads\/2021\/06\/20-day-moving-average-1-267x150.jpg 267w, https:\/\/blog.t3live.com\/wp-content\/uploads\/2021\/06\/20-day-moving-average-1-423x238.jpg 423w, https:\/\/blog.t3live.com\/wp-content\/uploads\/2021\/06\/20-day-moving-average-1-738x415.jpg 738w, https:\/\/blog.t3live.com\/wp-content\/uploads\/2021\/06\/20-day-moving-average-1-866x487.jpg 866w\" sizes=\"(max-width: 750px) 100vw, 750px\" \/><\/p>\n<p><img decoding=\"async\" class=\"alignnone wp-image-56004\" src=\"https:\/\/www.t3live.com\/blog\/wp-content\/uploads\/2021\/06\/20-day-moving-average-2.jpg\" alt=\"\" width=\"750\" height=\"422\" srcset=\"https:\/\/blog.t3live.com\/wp-content\/uploads\/2021\/06\/20-day-moving-average-2.jpg 960w, https:\/\/blog.t3live.com\/wp-content\/uploads\/2021\/06\/20-day-moving-average-2-300x169.jpg 300w, https:\/\/blog.t3live.com\/wp-content\/uploads\/2021\/06\/20-day-moving-average-2-150x84.jpg 150w, https:\/\/blog.t3live.com\/wp-content\/uploads\/2021\/06\/20-day-moving-average-2-768x432.jpg 768w, https:\/\/blog.t3live.com\/wp-content\/uploads\/2021\/06\/20-day-moving-average-2-80x45.jpg 80w, https:\/\/blog.t3live.com\/wp-content\/uploads\/2021\/06\/20-day-moving-average-2-220x124.jpg 220w, https:\/\/blog.t3live.com\/wp-content\/uploads\/2021\/06\/20-day-moving-average-2-178x100.jpg 178w, https:\/\/blog.t3live.com\/wp-content\/uploads\/2021\/06\/20-day-moving-average-2-267x150.jpg 267w, https:\/\/blog.t3live.com\/wp-content\/uploads\/2021\/06\/20-day-moving-average-2-423x238.jpg 423w, https:\/\/blog.t3live.com\/wp-content\/uploads\/2021\/06\/20-day-moving-average-2-738x415.jpg 738w, https:\/\/blog.t3live.com\/wp-content\/uploads\/2021\/06\/20-day-moving-average-2-866x487.jpg 866w\" sizes=\"(max-width: 750px) 100vw, 750px\" \/><\/p>\n<p><span style=\"font-weight: 400;\">In these examples, the moving averages alert you to the higher-low, which indicates that the stock is about to breakout.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">I call this \u201cthe halt\u201d: when the stock stops criss-crossing the MA and begins to respect it.<\/span><\/p>\n<p><b>The MA applies to every timeframe the same way. <\/b><\/p>\n<p><span style=\"font-weight: 400;\">The only exception is the daily, which has gaps.<\/span><b>\u00a0<\/b><\/p>\n<p><span style=\"font-weight: 400;\">While the moving average is going <\/span><i><span style=\"font-weight: 400;\">through price<\/span><\/i><span style=\"font-weight: 400;\">, <\/span><b>don\u2019t touch the stock<\/b><span style=\"font-weight: 400;\">. When it starts to point up, it\u2019s indicating that the stock is going higher.<\/span><\/p>\n<h2><b>What Does the Direction of the 20 Day Moving Average Mean?<\/b><\/h2>\n<ul>\n<li><span style=\"font-weight: 400;\">A rising 20 Day Moving Average represents positive market action or strength.<\/span><\/li>\n<li><span style=\"font-weight: 400;\">A falling 20 Day Moving Average represents negative market action or weakness.<\/span><\/li>\n<li><span style=\"font-weight: 400;\">During a strong <\/span><i><span style=\"font-weight: 400;\">uptrend<\/span><\/i><span style=\"font-weight: 400;\">, retractments tend to halt at or near the rising 20 day Moving Average.<\/span><\/li>\n<li><span style=\"font-weight: 400;\">During a strong <\/span><i><span style=\"font-weight: 400;\">downtrend<\/span><\/i><span style=\"font-weight: 400;\">, rallies tend to halt at or near the declining 20 Day Moving Average.<\/span><\/li>\n<li><span style=\"font-weight: 400;\">Following penetrations of the 20 Day Moving Average, pullbacks to the broken 20MA become very likely.<\/span><\/li>\n<\/ul>\n<p><img decoding=\"async\" class=\"alignnone wp-image-56005\" src=\"https:\/\/www.t3live.com\/blog\/wp-content\/uploads\/2021\/06\/20-day-moving-average-direction.jpg\" alt=\"\" width=\"750\" height=\"422\" srcset=\"https:\/\/blog.t3live.com\/wp-content\/uploads\/2021\/06\/20-day-moving-average-direction.jpg 960w, https:\/\/blog.t3live.com\/wp-content\/uploads\/2021\/06\/20-day-moving-average-direction-300x169.jpg 300w, https:\/\/blog.t3live.com\/wp-content\/uploads\/2021\/06\/20-day-moving-average-direction-150x84.jpg 150w, https:\/\/blog.t3live.com\/wp-content\/uploads\/2021\/06\/20-day-moving-average-direction-768x432.jpg 768w, https:\/\/blog.t3live.com\/wp-content\/uploads\/2021\/06\/20-day-moving-average-direction-80x45.jpg 80w, https:\/\/blog.t3live.com\/wp-content\/uploads\/2021\/06\/20-day-moving-average-direction-220x124.jpg 220w, https:\/\/blog.t3live.com\/wp-content\/uploads\/2021\/06\/20-day-moving-average-direction-178x100.jpg 178w, https:\/\/blog.t3live.com\/wp-content\/uploads\/2021\/06\/20-day-moving-average-direction-267x150.jpg 267w, https:\/\/blog.t3live.com\/wp-content\/uploads\/2021\/06\/20-day-moving-average-direction-423x238.jpg 423w, https:\/\/blog.t3live.com\/wp-content\/uploads\/2021\/06\/20-day-moving-average-direction-738x415.jpg 738w, https:\/\/blog.t3live.com\/wp-content\/uploads\/2021\/06\/20-day-moving-average-direction-866x487.jpg 866w\" sizes=\"(max-width: 750px) 100vw, 750px\" \/><\/p>\n<p><span style=\"font-weight: 400;\">In this example, we see the stock bouncing off of the 20MA on the uptrend. When the retracement breaks the 20, the next several retracements also break it. The 20MA is no longer relevant as the stock goes sideways. This is anindication that the trend is over.\u00a0<\/span><\/p>\n<p><b>What does the Slope or Angle of the 20 Day Moving Average mean?<\/b><\/p>\n<p><span style=\"font-weight: 400;\">The slope or angle of the 20MA is indicative of the strength or weakness of the underlying stock!<\/span><\/p>\n<p>A 45 degree angle is ideal.<\/p>\n<ul>\n<li><span style=\"font-weight: 400;\">Steeper than 45 indicates that the trend is not sustainable and will soon run out of fuel.<\/span><\/li>\n<li><span style=\"font-weight: 400;\">Shallower than 45 degrees indicates that the stock is weak and lacks momentum.<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Here is an example of an ideal Rising 20MA slope.<\/span><\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"\" src=\"https:\/\/www.t3live.com\/blog\/wp-content\/uploads\/2021\/06\/20-day-moving-average-slope-1.jpg\" width=\"750\" height=\"422\" \/><\/p>\n<p><span style=\"font-weight: 400;\">Here is an example of an ideal Declining 20MA slope.<\/span><\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"\" src=\"https:\/\/www.t3live.com\/blog\/wp-content\/uploads\/2021\/06\/20-day-moving-average-slope-3.jpg\" width=\"750\" height=\"422\" \/><\/p>\n<p><span style=\"font-weight: 400;\">Here, the MA starts at a 45 degree angle, but becomes steeper (unsustainable), and tops out:<\/span><\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"\" src=\"https:\/\/www.t3live.com\/blog\/wp-content\/uploads\/2021\/06\/20-day-moving-average-slope-4.jpg\" width=\"750\" height=\"422\" \/><\/p>\n<h2><b>How to Play the Trend of the 20 Day Moving Average<\/b><\/h2>\n<p><i><span style=\"font-weight: 400;\">The odds are much higher in the direction of the MA.<\/span><\/i><\/p>\n<ul>\n<li><span style=\"font-weight: 400;\">The 20MA must be going from bottom left corner to upper right corner (when playing long)<\/span><\/li>\n<li><span style=\"font-weight: 400;\">Price is at or near the 20ma, not far away from it (not extended)<\/span><\/li>\n<li><span style=\"font-weight: 400;\">The 20MA is not crisscrossing price<\/span><\/li>\n<li><span style=\"font-weight: 400;\">The 200MA must be below price, not above it.<\/span><\/li>\n<li><span style=\"font-weight: 400;\">The correct entry is almost always at\/near the rising 20MA or the declining 20MA<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">However, we do not enter because price is near the 20MA. We must have a tradable pattern<\/span><\/p>\n<h2><b>Other Ways to use the 20 Day Moving Average<\/b><\/h2>\n<ol>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><strong>Expedite the scanning process:<\/strong><span style=\"font-weight: 400;\"> For bullish stocks, look for a rising 20 MA. A flat 20 MA indicates the stock is currently momentumless.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><strong>Determine the stock\u2019s extension: <\/strong><span style=\"font-weight: 400;\">If a stock is tracking just above the MA, the stock is not extended. If the distance between the stock price and 20 MA grows rapidly, the stock becomes extended.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><strong>Locate support\/resistance: <\/strong><span style=\"font-weight: 400;\">In an uptrend, support is almost always found at or near the MA.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><strong>Determine if there is a price divergence:<\/strong><span style=\"font-weight: 400;\"> if a stock price shoots up above the MA while the MA continues at the same rate, the stock will most likely pullback to the 20 MA.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><strong>Anticipate reversals: <\/strong><span style=\"font-weight: 400;\">when a stock is in an uptrend, price respects the 20 MAs. You can spot reversals before they even happen.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><strong>Anticipate a rise in volatility: <\/strong><span style=\"font-weight: 400;\">If using two MAs (a faster and slower), cross overs between the two MAs indicate volatility.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><strong>Calculate risk to reward: <\/strong><span style=\"font-weight: 400;\"><strong>w<\/strong>hen the 20 Day MA is your target, you can calculate the risk\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\"><strong>Determine Relative Strength to Relative Weakness<\/strong>:<\/span><span style=\"font-weight: 400;\"> If a stock is trading above the 20 MA, it is showing Relative Strength. If it\u2019s trading below the 20 MA, it\u2019s showing Relative Weakness.<\/span><\/li>\n<\/ol>\n<p data-css=\"tve-u-16c0b741af2\">Now let's talk about <span style=\"text-decoration: underline;\"><strong><a href=\"https:\/\/www.t3live.com\/200-day-moving-average\/\">the 200 day moving average<\/a><\/strong><\/span>.<\/p>\n<h2 data-css=\"tve-u-16c0b741af2\"><strong>How Is the 200 Day Moving Average Calculated?<\/strong><\/h2>\n<p>The <span style=\"text-decoration: underline;\"><strong><a href=\"https:\/\/www.t3live.com\/200-day-moving-average\/\">200 day moving average<\/a><\/strong><\/span> is the average closing price of a stock, ETF, or other asset over the last 200 days.<\/p>\n<p>As with the 20 day, the 200 day moving average changes every day because the oldest closing price gets removed, and the newest one is added.<\/p>\n<h2><b>How to use the 200 Day Moving Average<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">While the 20 moving average is most powerful when it\u2019s trending, <\/span><b><i>the 200 day moving average. is strongest when it\u2019s flat.<\/i><\/b><\/p>\n<p><span style=\"font-weight: 400;\">Think of the 200 moving average as a floor to stocks above it (support) and a ceiling to stocks below it (resistance): a level floor is always preferable to a slanted one.<\/span><\/p>\n<ul>\n<li><span style=\"font-weight: 400;\">In general, stocks trading above the 200 moving average are being accumulated.\u00a0<\/span><\/li>\n<li><span style=\"font-weight: 400;\">Stocks below the 200 moving average are going through their distribution phase<\/span><\/li>\n<li><span style=\"font-weight: 400;\">As such, do not short stocks above their 200 moving average on that timeframe<\/span><\/li>\n<li><span style=\"font-weight: 400;\">Similarly, do not buy stocks currently below the 200 moving average<\/span><\/li>\n<\/ul>\n<p><b>Support:<\/b><span style=\"font-weight: 400;\"> When price is declining towards the 200 moving average<\/span><\/p>\n<p><b>Resistance<\/b><span style=\"font-weight: 400;\">: When price is rallying up towards the 200 moving average<\/span><\/p>\n<p><i><span style=\"font-weight: 400;\">This is especially true if the stock was extended. Even more if the stock was extended and put in 3+ consecutive green or red bars to the 200MA.<\/span><\/i><\/p>\n<p><span style=\"font-weight: 400;\">Here, you see the 200 moving average (the red line) acting as support after the stock gaps up and as resistance after the stock gaps down:<\/span><\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-56010\" src=\"https:\/\/www.t3live.com\/blog\/wp-content\/uploads\/2021\/06\/200-day-moving-average-1.jpg\" alt=\"\" width=\"750\" height=\"422\" srcset=\"https:\/\/blog.t3live.com\/wp-content\/uploads\/2021\/06\/200-day-moving-average-1.jpg 960w, https:\/\/blog.t3live.com\/wp-content\/uploads\/2021\/06\/200-day-moving-average-1-300x169.jpg 300w, https:\/\/blog.t3live.com\/wp-content\/uploads\/2021\/06\/200-day-moving-average-1-150x84.jpg 150w, https:\/\/blog.t3live.com\/wp-content\/uploads\/2021\/06\/200-day-moving-average-1-768x432.jpg 768w, https:\/\/blog.t3live.com\/wp-content\/uploads\/2021\/06\/200-day-moving-average-1-80x45.jpg 80w, https:\/\/blog.t3live.com\/wp-content\/uploads\/2021\/06\/200-day-moving-average-1-220x124.jpg 220w, https:\/\/blog.t3live.com\/wp-content\/uploads\/2021\/06\/200-day-moving-average-1-178x100.jpg 178w, https:\/\/blog.t3live.com\/wp-content\/uploads\/2021\/06\/200-day-moving-average-1-267x150.jpg 267w, https:\/\/blog.t3live.com\/wp-content\/uploads\/2021\/06\/200-day-moving-average-1-423x238.jpg 423w, https:\/\/blog.t3live.com\/wp-content\/uploads\/2021\/06\/200-day-moving-average-1-738x415.jpg 738w, https:\/\/blog.t3live.com\/wp-content\/uploads\/2021\/06\/200-day-moving-average-1-866x487.jpg 866w\" sizes=\"(max-width: 750px) 100vw, 750px\" \/><\/p>\n<h2><b>How to Use the 200 Day Moving Average as a Gap Strategy<\/b><\/h2>\n<ul>\n<li><span style=\"font-weight: 400;\">Buy at the open stocks gapping up just above a flat 200 moving average on daily chart, <\/span><i><span style=\"font-weight: 400;\">regardless of the quality of the gap<\/span><\/i><\/li>\n<li><span style=\"font-weight: 400;\">Short at the open stocks gapping down just under a flat 200 moving average on daily, <\/span><i><span style=\"font-weight: 400;\">regardless of the quality of the gap<\/span><\/i><\/li>\n<li><i><span style=\"font-weight: 400;\">Wait<\/span><\/i><span style=\"font-weight: 400;\"> for a pullback to the 200MA before buying stocks that gap well above a f200 moving average<\/span><\/li>\n<li><i><span style=\"font-weight: 400;\">Wait<\/span><\/i><span style=\"font-weight: 400;\"> for a counter-rally to the 200MA before shorting stocks that gap well below a f200 moving average<\/span><\/li>\n<\/ul>\n<h2><b>How to Use the 200 Day Moving Average as a Breakout Strategy<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">-Look to buy stocks in an uptrend that base at or near the 200MA as soon as the rising 20MA catches up to price<\/span><\/p>\n<p><span style=\"font-weight: 400;\">-Alternatively, look to short stocks in a downtrend that base at or near the 200MA as soon as the declining 20MA catches up<\/span><\/p>\n<p><span style=\"font-weight: 400;\">This is a very effective for <\/span><b>long term trading.<\/b><\/p>\n<h2>Thank You For Reading!<\/h2>\n<p>We hope you enjoyed this powerful lesson on moving averages. Make sure you pick up my ebook below to learn even more about technical analysis.<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>\ufeff If you hate Moving Averages, odds are you don\u2019t know how to use them. Combined with knowledge of price-action, they are an invaluable tool. In this article, I\u2019ll show you how to harness the power of the 20 and 200 Day Moving Averages. What Is a Moving Average? A moving average is a stock&#8217;s average price over a certain time period. That time period can be anything from minutes to days to weeks to months to quarters to even years. A daily moving average is the average of a stock&#8217;s daily closing prices over a specified number of days. How Is the 20 Day Moving Average Calculated? The 20 day moving average is the average closing price of a stock, ETF, or other asset over the last 20 days. Each day it changes because the oldest closing price gets removed, and the newest one is added. That&#8217;s how simple moving averages are calculated. Exponential moving averages use a formula to give a greater weight to recent prices, which is beyond the scope of this article. How Does the 20 Day Moving Average Help Us Trade? Moving Averages are directional guides that speed up the technical analysis of trends. If the moving average is pointing up, you know the stock is bullish. If it\u2019s pointing down, you know the stock is bearish.\u00a0 They are superior tools in uptrends and downtrends, and their importance in sideways trends is greatly minimized. In this article, I\u2019ll show you how to use them with sideways trends. When using moving averages, the color should be consistent across multiple timeframes. The type of moving average doesn\u2019t matter, but it should be the same on all time frames.\u00a0 How to use the 20 Day Moving Average The 20 day moving average is one of my powerful tools. When Stocks are about to transition up, the 20 day Moving Average with start to hug price and curve up. That is your indication that the stock is about tot transition.\u00a0 So, even if the trend is sideways, keeping an eye on the moving average will tell you when the sideways trend is breaking.\u00a0 In these examples, the moving averages alert you to the higher-low, which indicates that the stock is about to breakout.\u00a0 I call this \u201cthe halt\u201d: when the stock stops criss-crossing the MA and begins to respect it. The MA applies to every timeframe the same way. The only exception is the daily, which has gaps.\u00a0 While the moving average is going through price, don\u2019t touch the stock. When it starts to point up, it\u2019s indicating that the stock is going higher. What Does the Direction of the 20 Day Moving Average Mean? A rising 20 Day Moving Average represents positive market action or strength. A falling 20 Day Moving Average represents negative market action or weakness. During a strong uptrend, retractments tend to halt at or near the rising 20 day Moving Average. During a strong downtrend, rallies tend to halt at or near the declining 20 Day Moving Average. Following penetrations of the 20 Day Moving Average, pullbacks to the broken 20MA become very likely. In this example, we see the stock bouncing off of the 20MA on the uptrend. When the retracement breaks the 20, the next several retracements also break it. The 20MA is no longer relevant as the stock goes sideways. This is anindication that the trend is over.\u00a0 What does the Slope or Angle of the 20 Day Moving Average mean? The slope or angle of the 20MA is indicative of the strength or weakness of the underlying stock! A 45 degree angle is ideal. Steeper than 45 indicates that the trend is not sustainable and will soon run out of fuel. Shallower than 45 degrees indicates that the stock is weak and lacks momentum. Here is an example of an ideal Rising 20MA slope. Here is an example of an ideal Declining 20MA slope. Here, the MA starts at a 45 degree angle, but becomes steeper (unsustainable), and tops out: How to Play the Trend of the 20 Day Moving Average The odds are much higher in the direction of the MA. The 20MA must be going from bottom left corner to upper right corner (when playing long) Price is at or near the 20ma, not far away from it (not extended) The 20MA is not crisscrossing price The 200MA must be below price, not above it. The correct entry is almost always at\/near the rising 20MA or the declining 20MA However, we do not enter because price is near the 20MA. We must have a tradable pattern Other Ways to use the 20 Day Moving Average Expedite the scanning process: For bullish stocks, look for a rising 20 MA. A flat 20 MA indicates the stock is currently momentumless.\u00a0 Determine the stock\u2019s extension: If a stock is tracking just above the MA, the stock is not extended. If the distance between the stock price and 20 MA grows rapidly, the stock becomes extended.\u00a0 Locate support\/resistance: In an uptrend, support is almost always found at or near the MA.\u00a0 Determine if there is a price divergence: if a stock price shoots up above the MA while the MA continues at the same rate, the stock will most likely pullback to the 20 MA. Anticipate reversals: when a stock is in an uptrend, price respects the 20 MAs. You can spot reversals before they even happen. Anticipate a rise in volatility: If using two MAs (a faster and slower), cross overs between the two MAs indicate volatility.\u00a0 Calculate risk to reward: when the 20 Day MA is your target, you can calculate the risk\u00a0 Determine Relative Strength to Relative Weakness: If a stock is trading above the 20 MA, it is showing Relative Strength. If it\u2019s trading below the 20 MA, it\u2019s showing Relative Weakness. Now let&#8217;s talk about the 200 day moving average. How Is the 200 Day Moving Average Calculated? 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