How many days should you use in your moving average?

The length of the moving average has a great impact on trading activity and, therefore, profitability. Some traders use 5-day moving averages, whereas some use 10-day or 20-day, and many funds use 50, and so on. For longer-term traders, particularly stock market investors, the 100- and 200-day moving averages are popular. The length is an arbitrary decision that depends on the type of trader, but the sensitivity of any moving average is determined directly by its length. The length determines how much time a moving average has to respond to a change in price. It is a matter of “lag time.” This is a simple, but important concept—shorter moving averages are more sensitive than longer moving averages. ...

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