|By Nathan Young|
May 16, 2017
Taking a look at price movement is important because it can begin to give you direction on where an equity may be headed. Average price is the price of your chosen equity averaged out for the day. Average price is great in determining trends and other price movements to help you determine where the market is headed.
If you are a trader or short term investor, you are not going to need a lot of price data because you are looking in the hear and now. Even with short term investing, it may not benefit you knowing the average daily price because you want to know smaller details and what is going to force the price to move.
For long term investors, average price is something you can use because you may total the average price for a certain stock or equity, giving you an average of where the price could be. This could go hand in hand with moving averages and it could be tied in with mean reversion. Many people disagree or are unfamiliar with mean reversion, and it is as simple as the price going back towards the mean.
Average price alone will not give you the whole story, which means you should certainly add more technical indicators to help guide you, or take a look under the hood and see how the company or product is doing fundamentally. Be sure to ease into using new data points as it may not fit your current situation. Test it on a demo account and learn from there. If you have any questions, reach out to an investing community and allow them to give you real time feedback. If all else fails, just keep it in your back pocket for future use. Average price is great at helping you start your research, but it lacks the specifics of other indicators and data points.