200 DMA Defined: "What is the the 200 dma?"

200 DMA Definition


The 200 dma or 200 day moving average is one of the most important indicators available to many longer term investors. The 200 dma can be used to assist investor decisions for the stock market, individual stocks, oil, gold or other tradeable securities

  • 200 DMA is used by investors to signal for changes in direction of stock markets, individual stocks, oil, gold or other tradeable securities
  • 200 dma or 200 Day Moving Average represents a longer term view of the trend of a tradeable security
  • Stock Market investors could have avoided major losses by following the 200 dma during major stock market crashes of 1929 and the stock market crash of 1987 and many other stock market crashes
  • 200 dma is considered technical analysis
  • Stock Market Technicians use tools like the 200 dma to help them decide whether they should invest in individual stocks, gold, oil or other tradeable commodities

200 DMA, Why is the 200 DMA important?

200 DMA, Why is the 200 DMA Important?

The 200 dma or 200 day moving average has proved to be a successful tool to avoid long term losses in the stock market. Investors using a technique of selling out of stock portfolios when the major stock market index moves below the 200 dma or 200 day moving average would have avoided major losses in the past bear markets.
For example, the of the Nasdaq Stock Market Index chart on the right shows that investors selling when trading drops below the 200 day moving average beginning in September 2000 would avoid avoiding 24 more months of agonizing losses.

  • Investors use technical indicators like the 200 dma as a trade signal
  • Nasdaq is a popular Stock Market Exchange
  • The Nasdaq Composite is a index that generalizes the prices of approximately 4000 individual stocks traded on the Nasdaq Exchange
200 dma, 200 day moving average

November 12, 2016
Facebook (FB) prices are testing the 200 day moving average. The FB chart shows the green line which is the 200 day moving average. FB has previously found support on the 200 dma in 2015 and early 2016 as indicated with the black circles on the image.

Facebook Stock Chart

November 11, 2016
Oil prices have been testing the support of the 200 dma or 200 day moving average. The Chart shows the green line which is the 200 day moving average. Early in week, prices held above the 200 dma, however, on November 11, prices plunged below the 200 dma with a lower low.

Oil-Price-Chart

November 12, 2016
Why is the 200 dma important?
In this example chart, the chart displayed is of Gold prices during 2015. As can been seen, each time the price of gold crossed or approached the 200 dma, prices resisted from rising to higher levels. The resistance at the 200 dma gave gold traders a clue as to the future direction of gold prices.

why is the 200 dma important

November 12, 2016
The chart below is an ETF that is used by traders to take positions in the direction of oil prices. The chart provides a good example of why paying attention to the 200 dma is important. Prices in oil fell for over a year after crossing below the 200 dma.

200 dma oil

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