Why a 200 day moving average as opposed to 190 or 210?
Moving averages are chosen as a compromise between being too late to catch much move after a change in trend, and getting whipsawed. The shorter the moving average, the more fluctuations it has. There are considerations regarding cyclic stock patterns and which of those are filtered out by the moving average filter. A discussion of filters is far beyond the scope of this FAQ. See Hurst’s book on stock transactions for some discussion. • Explain support and resistance levels, and how to use them. Suppose a stock drops to a price, say 35, and rebounds. And that this happens a few more times. Then 35 is considered a “support” level. The concept is that there are buyers waiting to buy at that price. Imagine someone who had planned to purchase and his broker talked him out of it. After seeing the price rise, he swears he’s not going to let the stock get away from him again. Similarly, an advance to a price, say 45, which is repeatedly followed by a pullback to lower prices because a “resist
