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Predicting a stock’s next move is not easy. Still, there are some tools that can help investors see the bigger picture in the market. One such popular tool—moving averages—helps investors ignore daily price ups and downs and cut through the noise. Traders commonly track them across several timeframes, including 20-day, 50-day, 100-day, and 200-day windows. The 100-day moving average sits in the middle of this range, making it a useful gauge for investors who want a medium-term read on a stock's direction.
This article explains how to trade using the 100-day moving average, benefits, and limitations.
Key Takeaways
- The 100-day moving average tracks the average closing price of a stock over the last 100 trading days.
- It smooths out daily price volatility to highlight the prevailing medium-term trend.
- Prices remaining above the line typically signal an uptrend, while prices below it signal a downtrend.
- As a lagging indicator, it relies entirely on historical data rather than predicting future prices.
- It performs best when paired with complementary tools like volume indicators and shorter moving averages.
What is the 100-Day Moving Average?
The 100-day moving average (100-DMA) helps traders identify an asset’s medium-term price trend by reducing the impact of short-term price movements. It is calculated by taking the average closing price over the last 100 trading days, covering roughly 20 weeks of market activity.
How to Calculate the 100-Day Moving Average Using Formula?
The calculation is simple. You add up the closing prices of the last 100 trading days and divide the total by 100.
100-Day Moving Average = Sum of Closing Prices for the Last 100 Trading Days divided by 100
Example:
A stock had an average closing price of ₹250 over the last 100 trading days. This means its 100-day moving average today is ₹250.
100-Day Moving Average = ₹25,000 ÷ 100 = ₹250
Tomorrow, the oldest day's price drops out of the count, the newest day's price is added, and the average is recalculated. If the new closing price is higher than the one that dropped off, the moving average will rise slightly. If it is lower, it will fall slightly.
The table below shows how the 100-day moving average can shift over a few weeks as new prices come in and old ones drop off.
| Date / Period | Closing Price (₹) | 100 Day Moving Average (₹) |
| Week 1 | 248 | 245 |
| Week 2 | 252 | 246 |
| Week 3 | 255 | 247 |
| Week 4 | 250 | 248 |
| Week 5 | 258 | 249 |
Step 1: Set the 100-Day Window
A 100-day moving average always looks at the last 100 trading days (excluding weekends and market holidays), which translates to roughly 20 weeks of continuous market data.
Step 2: Gather the Closing Prices
At the end of your starting day (let's call it Day 100), you collect the final closing price of the asset for each of those 100 individual trading sessions.
Step 3: Calculate the Initial Average
Add all 100 closing prices together to get a grand total sum, then divide that total by 100.
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Example: If the sum of 100 closing prices is ₹25,000, you divide ₹25,000 by 100 to get a starting 100-day moving average of ₹250.
Step 4: Shift the Window Tomorrow
When a new trading day finishes (Day 101), the 100-day window shifts forward by one day:
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The newest closing price from today is added to your dataset.
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The oldest closing price (from Day 1, which is now 101 days in the past) is permanently dropped.
Step 5: Recalculate the Average
You don't need to add up all 100 numbers from scratch. Instead, you update yesterday's sum: take yesterday's total sum, subtract the single old price that dropped off, add the single new price, and divide the new total by 100.
Step 6: Watch the Direction Change
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If today's new incoming price is higher than the old price that dropped off, the total sum goes up, making the 100-day moving average rise slightly.
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If today's new incoming price is lower than the old price, the total drops, making the moving average fall slightly.
How to Trade Using the 100-day Moving Average?
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Identify trend: Trading above the line indicates a medium-term uptrend, while trading below suggests a downtrend.
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Support and resistance: During pullbacks, the line frequently acts as a dynamic support level in bull markets or resistance in bear markets.
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Crossover signals: Analysts track when short-term averages cross above or below the 100-day average to identify potential momentum shifts.
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Confirm a trend: Sustained positioning relative to the line provides higher conviction than single-day price spikes.
Benefits of the 100-day Moving Average
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It is simple to understand and calculate, which makes it useful even for beginner investors.
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Smooths out daily price noise, making the medium-term trend easier to see on a chart.
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Can act as a visual reference for support and resistance levels, helping with entry and exit decisions.
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Works across most stocks, indices, and other assets because the calculation method is the same everywhere.
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It can be used alongside other moving averages, such as the 50-day or 200-day, to identify short, mid, and long-term trends.
While the 100-day moving average is useful for analysing medium-term price trends, the 50-day and 200-day moving averages are more widely tracked, with the 100-day average sitting between these two commonly used timeframes.
| Moving Average | No.of Trading Days | Typical Use |
| 20 Day | 20 | Very short-term trend, used by active traders |
| 50 Day | 50 | Short to medium term trend |
| 100 Day | 100 | Medium term trend |
| 200 Day | 200 | Long term trend, widely tracked by investors |
Limitations of the 100-day Moving Average
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Lags behind live market action because it depends entirely on historical data.
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Produces false or conflicting signals during sideways or range-bound markets.
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Does not factor in fundamental catalysts such as corporate earnings or macroeconomic announcements.
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Since it covers 100 days of data, it requires sufficient price history to calculate, which makes it less useful for stocks that have only recently listed.
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Relying only on this single indicator, without checking volume, fundamentals or other signals, can lead to misleading conclusions about a stock's direction.
Conclusion
The 100-day moving average helps investors see a stock's medium-term trend by smoothing daily price swings. It can act as a guide for spotting trend direction, support and resistance levels, and crossovers with other moving averages. At the same time, it is a lagging indicator based on past prices, so it works best when used alongside other tools rather than on its own.
