Download the Schwab app from iTunes®Get the AppClose

  • Find a branch
To expand the menu panel use the down arrow key. Use Tab to navigate through submenu items.

Trader Q&A: What are Indicators for Buying and Selling?

Schwab’s Trading Services team covers how to use market movement as an indicator for buying and selling.

Click to show the transcript

 

[Lou] Our next one, Adrian from Texas: "What are some major market indicators for buying and selling?"

[Randy] That's a very broad question so I think we've all got three different answers probably on that one, right? The simplest one is the market's going up; that means people are buying.

[Lou] So an easy way to do it might be to look at a 50-day moving average crossing over at 200-day moving average. A lot of people might make a rule, and they say if the 50 is below the 200-day simple moving average do not buy stocks to trade, that intermediate to longer-term trend is going down, not up. You want to buy stocks when that 50-day simple moving average is above the 200-day simple moving average. That will give you the green light. Still do the research, but at least that's part of your plan on yes or no.

[Christophe] I think one thing to include in that is that the longer, the more tenure that a moving average has, so 200 versus 100 versus 50, really the more authority it possesses, the more authoritative the move will be where it actually breaks that specific moving average. So it's something to keep in mind.

[Randy] The important thing to note on those crossovers--and I do think there's some value there is that they're not going to catch the top of the bottom; there's no way. They can't because of how they work; they're lagging indicators. So when you do have those crossovers you're already in a down market and when you have it to cross over to the upside you're already in an up market so--but that's okay because as you said, Lou, you don't have to catch the entire trend. You're not going to buy at the bottom and sell at the top. If you can buy after the bottom is reached, which is what happens when you get that crossover, or after the top is already happened you can still catch the bulk of the trend and still be okay and still make money.
 

Schwab has tools to help you mentally prepare for trading

Learn more >

Talk trading with a Schwab specialist anytime.
 
Call 888-245-6864
M-F, 8:30am - 9:00pm EST

Get 500 Commission-Free Online Equity and Options Trades for Two Years

Learn More >

Important Disclosures

Options carry a high level of risk and are not suitable for all investors. Certain requirements must be met to trade options through Schwab. Covered calls provide downside protection only to the extent of the premium received and limit upside potential to the strike price plus premium received. With long options, investors may lose 100% of funds invested. Multiple-leg options strategies will involve multiple commissions. Please read the Options Disclosure Document titled Characteristics and Risks of Standardized Options .

Investing involves risks, including potential loss of principal invested. Past performance is no guarantee of future results. Schwab does not recommend the use of technical analysis as a sole means of investment research.

This material is provided for general informational purposes only, and should not be considered an individualized recommendation or personalized investment advice. All expressions of opinion are subject to changes without notice.

Any opinions expressed herein are subject to change without notice at any time.

Past performance data should not be construed as indicative of future results.

(0216-CXJX)

Thumbs up / down votes are submitted voluntarily by readers and are not meant to suggest the future performance or suitability of any account type, product or service for any particular reader and may not be representative of the experience of other readers. When displayed, thumbs up / down vote counts represent whether people found the content helpful or not helpful and are not intended as a testimonial. Any written feedback or comments collected on this page will not be published. Charles Schwab & Co., Inc. may in its sole discretion re-set the vote count to zero, remove votes appearing to be generated by robots or scripts, or remove the modules used to collect feedback and votes.