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Be Careful When A Stock Is Between The 50 And 200 Day EMAs

Here's a quick tip to help guide your decision on whether or not "now" is the time to buy a stock.

Is the stock price between the stock's 50 day and 200 day exponential moving averages (EMAs)? If yes, be careful. Why? Well, we like to think of this zone as a "no man's land." What we mean by this is that is is very hard to predict the next major move of price direction and/or the momentum of any move while the stock price is trending between these two major averages.

The 50 day EMA gives you a moving trend on the stock price over the past 2 and half months while the 200 day EMA provides similar for the past year.

We use the exponential moving averages as we find them to be more useful given they give more weight to the more recent past. A simple moving average treats all days in the calculation the same. What matter more to you, what happening last week or 2 months ago?

Like most traders, we went through our period of more technical indicators being better and found that to be a myth.

Over time, it is much better to have a simple system for how you analyze and approach each stock trade. Using the 50 day and 200 day EMAs are an essential part of our system.

Treating a stock carefully when it's price is between the 50 day and 200 day EMAs is an easy mental checkpoint before you put your money at risk in the stock market game.

More tips on how to use the 50 day and 200 day EMAs to follow soon.

Safe trading!