Strategy 7: Single Moving Average

The single moving average stock trading strategy is a simple yet commonly used technical analysis technique in the world of stock trading. It involves calculating the average price of a stock over a specified period of time and using that moving average to make trading decisions. The primary objective of this strategy is to identify trends and potential entry or exit points in the stock's price movement.

Here's how the strategy works:

1. Calculate the Moving Average: Choose a specific time period, such as 50 days or 200 days, and calculate the average closing price of the stock over that period. This average is referred to as the moving average.
2. Identify Trend Signals: When the current price of the stock crosses above the moving average, it can signal a potential uptrend or buying opportunity. Conversely, when the current price crosses below the moving average, it can signal a potential downtrend or selling opportunity.
3. Entry and Exit Points: Traders typically consider buying when the stock's current price crosses above the moving average (a bullish crossover) and selling when the current price crosses below the moving average (a bearish crossover).

Now, let's create a fictional example using a company traded on the Nairobi Securities Exchange (NSE):

Company: Liberty Holdings Ltd. Stock Symbol: LBTY Exchange: Nairobi Securities Exchange (NSE) Trading Strategy: 50-day Simple Moving Average (SMA)

Assuming the current date is August 29, 2023, and we're interested in using a 50-day SMA, here's how the strategy might play out:

1. Calculate the 50-day Moving Average: Calculate the average closing price of Liberty's stock over the past 50 trading days. This is normally provided for by financial information providers e.g Morningstar, Bloomberg, Factset and Markflair.
2. Monitor Crossovers:
• On July 15, 2023, Liberty's stock price crosses above the 50-day SMA, indicating a potential bullish trend.
• On September 5, 2023, Liberty's stock price crosses below the 50-day SMA, suggesting a potential bearish trend.
3. Trading Actions:
• July 15: Traders who follow this strategy might consider buying Liberty's stock on July 15 when the stock price crosses above the 50-day SMA.
• September 5: Traders might consider selling or shorting Liberty's stock on September 5 when the stock price crosses below the 50-day SMA.