1. Home  » 
  2. Markets

Best Moving Average for Intraday Trading

Investors who are engaged in intraday trading will always leverage the best market tools to their advantage. One such tool is the moving average. Let's know the workings of the moving average here and become an expert in intraday trading.

by Damodharan N

Updated Apr 01, 2024

Article continues below advertisement
Best Moving Average for Intraday Trading

What is a Moving Average? 

A moving average is an indicator used for technical analysis. It provides an up-to-date average stock price, smoothing out the short-term volatility and price action of the market. Therefore, even when the actual stock price increases and decreases by a small amount over a short period of time, a moving average indicator can be used to measure the overall direction of the price movements. This is because a moving average eliminates all the noise in the price charts, providing a clear view of the primary price trend.

Article continues below advertisement
Article continues below advertisement

Best Moving Average for Intraday 

 The traders and investors who engage in the stock market on an intraday basis will always look to maximize the profit in their hands. To help them, they resort to various market tools and analyses.

One such tool is the moving average. This will help them get the average of the particular stock’s last five days ending price by adding a new date and removing the old one. Their average date range can be in any range, like 5, 10, 50, 100, or 200.

However, the best moving average range can be 5, 8, and 13; as they are the Fibonacci series, they might have better entry and exit points for a stock market trajectory in intraday trade. With this in mind, let's explore it further. 

Article continues below advertisement
Article continues below advertisement

Intraday Stock Trading

 In intraday stock trading, an investor will engage in the buying and selling of the stock in a single market day and earn its profit through price fluctuation. This type of trade is for a well-versed person who knows the stock market inside out.

If you are a novice, don't even engage, as it has a high-risk profit trajectory ratio if you do not use the right market analysis tool to understand how stocks behave in a single day.

Some of the tools people use to engage in effective analysis are moving averages, RSIs, stochastic oscillators, and pivot points. One such tool we are going to look at is the moving average. 

Article continues below advertisement
Article continues below advertisement

Types of Moving Average

There are three types of moving averages, but within the exponential moving average (EMA), there are two subdivisions. We will look at each of them and how they work. 

1. Simple Moving Average (SMA):The simple moving average is just like a plain average calculation with the moving of the new date price and the removal of the old price date, like the arithmetic mean.

2. Exponential Moving Average (EMA): The Exponential Moving Average adds weight to the latest prices. So this makes them highly sensitive to price changes and gives them a more accurate price prediction. This is sought after by short-term traders. They are sub-categorized into two categories. 

a. Double Exponential Moving Average

This is used to further the smoothness of the price of the stocks. 

b. Triple Exponential Moving Average

This is also used to smooth moving average prices and rapid responsiveness, but this has a downside as it may lead to false price predictions in volatile markets, so investors use it with caution.

3. Weighted Moving Average (WMA): In the weighted moving average, the price point is multiplied by a weighting factor of the stocks and their prices, just like in the exponential, but instead of adding weight, the multiplication factor plays a high role in predicting the price of the stock. 

Uses of Moving Average

The moving average is used to predict the price of the stock in a reliable manner. And tell the investors when to buy and sell the stock. 

  • When the stock price rises, it will show the interest of investors to buy that stock, which can be termed the support (floor) price. 
  • When the stock price decreases, it will show the interest of investors in selling that stock, which can be termed the support resistance (ceiling) level at which the capital investment in the stock decreases. 
  • It can also be used to set up a trading system to identify the entry or exit points of a particular stock. As we know, the average of the stock price. 

These are the basic use cases of the moving average by the investors. There might be other practical uses that many of the investors have found useful, so try this as well as others to maximize the profit. 

How to Choose the Moving Average? 

There are many factories one needs to look at when choosing the moving average. We have chosen the basic three; they are 

  • Volatility: The Daily Price fluctuation of the stock might give you a big loss if you do not take this factor into account when choosing the moving average range. 
  • Time Frame: The time frame of the trade will affect the price prediction and the range of the moving average, so it is highly effective if you know the time frame beforehand. 
  • Type of moving average: The choice of the moving average will affect the price of the stock at entry and exit points. So knowing the nuances of each of the moving average tools will help them gain the strength to navigate the stock market.

Best Moving Average for Intraday - FAQs

1. What is the moving average?  

The moving average is the addition of new price points, the removal of old price points, and getting the average for them.

2. What are the types of moving averages?  

The moving averages are of three types. Simple Moving Average (SMA), Exponential Moving Average (EMA), and Weighted Moving Average (WMA)

3. What is intraday?    

Intraday trading is buying and selling stocks in a single market session and making a profit.

4. What is the best moving average for intraday?  

The best moving average for intraday is 5, 8, and 13.

5. What tools do intraday people use to analyze the market?  

The intraday tools used are moving average, RSI, stochastic oscillator, and pivot points.

Disclaimer : The above information is for general informational purposes only. All information on the Site is provided in good faith, however we make no representation or warranty of any kind, express or implied, regarding the accuracy, adequacy, validity, reliability, availability or completeness of any information on the Site.