The primary purpose of the moving average is to define the direction of the trend. As the 30 day moving average is the average of what has been happening for the last few weeks, it is considered the “home” position.

If the price is greater than the 30 day moving average, then the price is stronger than what it has been on average for the last month. This is an ideal method for identifying a stock that has moved from the Accumulation into the Ascending phase. This can be seen with UNI in early 2003.

Conversely, if the price is less than the 30 day moving average, then the price is weaker than what it has been on average for the last month. This is an ideal method for identifying a stock that may have moved into the Descending phase.

The easiest way to trade shares is on a moving average. The advantages of this is that it is easy to understand and find the buy and sell points for any stock. If the price moves above the 30 day moving average, it is a BUY signal. If the price moves below the 30 day moving average, it is a SELL signal. The 30 day moving average is the most popular for a medium term trend. However, you can change the moving averages in the charts to suit your style of analysis.
A moving average is a simple indicator that is called a lagging indicator. It lags because it takes 30 days of data to get today’s result. The disadvantage to using a moving average is that it can be slow to react to a trend change. Later in this section you will learn about oscillating indicators that react faster but are more complex in their construction.