Home/Blogs/All You Should Know About 100-Day Moving Average

All You Should Know About 100-Day Moving Average

18 Aug 2023

Traders employ the 100-day moving average (100 DMA) to identify price trends. Let's study it in detail - 

What is the 100-Day Moving Average?

The 100 DMA calculates the average price of a security over the last hundred trading sessions. This value is then plotted on a chart to draw a trend line to determine the direction of the stock's price over the medium term.

How to Calculate the 100-Day Moving Average?

To calculate the 100-Day Moving Average, 

  • Sum up the closing prices of the last 100 trading days
  • Divide the total by 100

This simple calculation identifies support and resistance levels and assesses the health of a stock's price movement.

Open Trading Account and Start Trading!

What is the importance of the 100-Day Moving Average?

 

  • Clear View of Price Action -

The 100 DMA filters out daily price noise, allowing you to identify the general direction in which a stock's prices are headed. Therefore, it acts as a realistic assessment of price movements when making trading strategies.

  • Medium-Term Analysis -

The 100 DMA gives traders a complete picture of the stock's performance over the medium term, which is approximately 20 weeks. A sharp upward trend line indicates bullish market sentiment, while a downward trend line suggests bearish sentiment.

  • Market Sentiment -

Traders use the 100 DMA to examine market sentiment. Prices trading above the moving average signal a bullish market, and vice versa.

Using the 100-Day Moving Average in Trading Strategies

 

  •  Following Trend -

When the price is above the 100 DMA, it signifies an uptrend and promotes buying opportunities. Conversely, when the price retraces toward the moving average or other support levels, look for bullish entry triggers to enter long positions.

  • Entry and Exit Points -

Investors use the 100 DMA as support and resistance levels. Setting limit orders to buy when prices breach the support level on the moving average and setting sell-limit orders when prices approach the resistance level.

The Takeaway: Using the 100-Day Moving Average Effectively

While the 100-Day Moving Average is a key indicator for analyzing price trends and market sentiment, avoid relying solely on it for trading decisions. Also, combine it with other indicators, including the 50-day and 200-day SMAs, for a more comprehensive analysis.

 

Related articles - What Is a 7-Day Moving Average How It Helps Traders | What Are The Types Of Moving Average | What Is Moving Average And Formula To Calculate Moving Average | What Is the 200-Day Moving Average and How Does It Work | All You Should Know Aboutv 50 Day Moving Average

Checkout more Blogs

You may also like…

Get Exclusive Updates

Be the first to read our new blogs

Intelligent investment insights delivered to your inbox, for Free, daily!

Open Demat Account
I wish to talk in South Indian language
By proceeding you’re agree to our T&C