How to use Moving Average in Intraday? – Work In All Time

Moving averages are the most popular and widely used trading tools by traders. Moving averages are one of the most powerful trading tools if you know how to use them but when it comes to trading with moving averages, most traders, make some l mistakes.

In this blog, we will discuss a brief about how to use moving average in intraday trading and the different strategies based on moving averages that will help you to take trading decisions.

So, before we start you need to know:

The fundamentals of moving average

  • There are mainly two moving averages used by the traders.
  • No: 1 is the Exponential Moving Average (EMA), which reacts faster when the price starts changing direction.
  • No: 2 is Simple Moving Average (SMA), which moves much slower as compare to EMA.
  • There is the only difference between EMA and SMA is that EMA gives more weight to the most recent change in the price direction.
  • When price turns, SMA takes a long time than EMA to give the signal.
  • For Intraday Trading You can select the popular time period settings, which are as follow:
  • 10 or 9 Period: It is often used by traders as a directional filter and fast-moving.
  • 21-period:  One of the most accurate moving average and best for riding trends. ( Medium Term)
  • 50-period:  Best setting for identifying the longer-term direction.

How to Use Moving Averages in Intraday Trading?

Now you knew about the fundamentals and time period setting for Moving Average, so we can have a look at the methods to use moving average in day trading and ride the trends.

Golden Cross and Death Cross

The trend is the best friend of a trader.
So, here we can use moving averages to identify the direction of the market.

Golden Cross and Death Cross is a signal given by the 50 and 200 periods moving average. And these signals are mainly used on the daily time frame.

Golden Cross and Death Cross
Image By, Trading Fuel

In the above example, you can see that when 50 –MA cross the 200-MA and 50-MA is below 200- EMA, the cross signal has occurred and we can go for short.

Also, when the 200 MA is below 50-MA, and when this cross over takes place it gives a signal for buy.

The cross-over of moving averages helps you to analyze the market direction and trend.

Use Moving Average for Trailing Stop-loss

Intraday trading with the help of the Moving average is a good approach for identifying intraday trends. But it is also, a good trading tool for applying trailing stop-loss.

If you are very confused and unable to decide where to adjust your stop-loss, then here is a very useful technique where you can place your stop-loss order along with the moving average.  

The moving average level is your stop-loss level.

Use Moving Average for Trailing Stop-loss
Image By, Trading Fuel

With the above example, you can easily understand the whole concept.

  • You can adjust your stop-loss order along with the EMA this manually, or if you can use the technology and programme the trailing SL automatically in your trading platform.
  • In powerful intraday trends, you can trail the stop-loss with 20-MA in a smaller time frame than a daily time frame and it performs very well.
  • As you can see, in this example, it captured most of the trends, so you can book the maximum profit.

About Us

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Author

Prashant Raut is a successful professional stock market trader. He is an expert in understanding and analyzing technical charts. With his 8 years of experience and expertise, he delivers webinars on stock market concepts. He also bags the ‘Golden Book of World Record’ for having the highest number of people attending his webinar on share trading.