It is usually advantageous to employ more than one moving average. Double and triple MAs often provide useful signals.

With two MAs the double crossover is used. When the short term moving average crosses the long term moving average to the downside, then a sell signal would be triggered and visa versa. For example, two popular combinations are the 5 and 20-day averages and the 20 and 100-day averages. The technique of using two averages together lags the market a bit more than a single moving average but produces fewer whipsaws.

Many investors use the triple moving average crossover system to buy and sell stock. The most widely used triple crossover system is the popular 4-9-18-day MA combination. A buy signal is generated when the shortest (and most sensitive) average – the 4 day – crosses first the 9-day and then the 18-day averages, each crossover confirming the change in trend.

Additional points

• The 200-day MA (or 40-week MA), should be carefully watched as a pivotal level of support or resistance for the long-term trend. Many people watch carefully when the
200-day MA is approached by the price. The relationship between the price and its 200- day MA can often provide excellent buy or sell signals.

• The 200-day MA is also particularly significant for the various indexes, such as the Nifty, Sensex or NASDAQ. A crossover of this MA has often signaled a correction or period of consolidation.

• Moving averages can also be calculated and plotted for other indicators, not just the price. A continued upward movement by the indicator is signified by the indicator rising above its moving average. A continued downward movement is signified by the indicator falling below its moving average.