Profitability under long-term exponential moving average indicator for trading in index: A technical analysis of bombay stock exchange

Fundamental and technical analyses are two methods used to analyse securities and make investment decisions. Technical analysis is interested in the price movements, predicting the future price, buying and selling signals in the market using different indicators. Moving average (MA) is one of the most common technical indicators used to reduce rattle in a time series, so that the underlying behaviour can be more clearly perceived. It is essentially a trend following mechanism focusing to recognise whether a new trend has begun or that an old trend has enabled or reversed. This article incorporates use of 100 days exponential moving average (100 DEMA) indicator on Bombay Stock Exchange (BSE) 30 Index to test its profitability. Success of indicator is studied with a strategy of Price Crossover Signal system. When 100 DEMA line crosses BSE Index line from its below, it generates Buy signal, whereas pierces BSE 30 Index line from its above, it raises Sale signal. After studying Buying and Selling signals generated by indicator, article concludes with testing of hypothesis and comment on profitability of use of 100 DEMA in long run. This article discerns the fact of applying MA technique in long run investment and embodies its fact sheet of employing it by long-term investors, investors having index portfolio. It is a guide to technical analysts, who use technical indicators for trend forecasting. Article also advices whether to invest with the help of MA or else.