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Joseph E Granville made a vivid explanation on moving average. He outlines eight moving average rules–four buy and four sell. Granville also explains positional relation between the price and a 200-day moving average.

You can use moving averages in different ways. One popular way is using the 200-day moving average to identify buy or sell signals. Depending on its position relative to the current market price, the 200-day MA can project buy or sell signals (false or real).

4 Signals for Buying

① If the 200-day moving average flattens out following a previous decline, or is advancing, and the price penetrates the 200-day moving average on the upside, this comprises a major buying signal.

② If the price falls below the 200-day moving average while the moving average is still rising, this also is considered to be a buying opportunity.

③ If the price is above the 200-day moving average and falls toward moving average, and then again begins to rise without recording the figures below the moving average, this is a buying signal.

④ If the price becomes far below the downtrend moving average and it can be brought for this short-term technical rise.