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When to avoid trading with moving average?


Stock market sometimes do not show any trend. Traders and investors find it difficult to analyze which way the market will move. There are several such scenario one example is that of sideways market

One such example is shown here of Reliance Industries: the time period is from June 2009 to May 2010.

We could clearly see there is no trend in the chart. Initially in the month of June start at point A there is support from 15 day Moving Average followed by support at point B and a sell signal at breach point C. After month of July start the price has been continuously up and down giving an example of sideways market.

Technical Analyst suggest us to be cautious in this type of movement, otherwise traders might suffer a loss. Even if traders gain by quick entry and exit for small profit, chances are they may end up paying more charges for brokerages than the the gain.

 When to avoid trading with Moving Average Example of sideways market Reliance Industries

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(All analysis is based on End of Trade day's Value. Expected time of update is between 5 to 5.30 PM exchange time Zone)

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