Moving Average Indicator and Trade Set-up as Correlates to Investment Trading in Stock Market: Basis for e Predictability Primer

Abstract

Moving average (MA) is one of the many indicators that retail investors can be used when trading their investment in the stock market or any financial market. The inclusion of moving average to trade set-up serves as the guidelines of the retail investors to properly execute the trades. The trade set-up with moving average includes different time frames, numbers of MA and MA with combination to other indicators. The 21 Day MA, 3 different timeframes of MA, 21 MA, and 50 MA for the crossover, and indicators like MACD are the most preferred by the retail investors to add in the trade set-up. The retail investor agrees that the moving average indicator is useful when entering and exiting the trades, when finding the Support and Resistance (SAR) area, predicting new trends, a combination of moving average crossover, MA in combination with other technical indicators. The quantitative method is used to emphasize how MA indicators help the investment trading of retail investors and the statistical result shows the significant relationship between the number of time periods or frames like 9, 21, 50, 100, and 200 Moving Average in entering and exiting the trades. Part of the results shows how Moving Average Convergence and Divergence (MACD) in combining to MA results in an insignificant relationship when exiting and entering the trades. Another result about MACD or Volume Analysis in combining to MA when predicting new trends shows an insignificant relationship. This means that moving average indicators and the trade setup with a proper understanding of each can combine and deliver a better investment result to retail investors.