Contradictions in moving average crossovers

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Old Mar 21, 2014, 1:55pm   #1
 
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Joined Mar 2014
Contradictions in moving average crossovers

Hello all,

I just became a member and have my first technical analysis question.

What do you do when there are contradicting signals in moving average crossovers?

for example if on a 5 min chart you have the 100 SMA crossing the 50 SMA
and then almost at the same time the 20 SMA is crossing them both?

bearish and bullish together?!?
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Old Mar 21, 2014, 2:40pm   #2
 
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I'm not a fan of moving averages and crossovers.

However, if your getting mixed signal then don't trade it. Wait for those perfect signals that you feel confident trading.
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Old Mar 21, 2014, 7:09pm   #3
Joined Sep 2011
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Originally Posted by devar View Post
Hello all,

I just became a member and have my first technical analysis question.

What do you do when there are contradicting signals in moving average crossovers?

for example if on a 5 min chart you have the 100 SMA crossing the 50 SMA
and then almost at the same time the 20 SMA is crossing them both?

bearish and bullish together?!?
I have a simple spreadsheet that gives you the lengths of each ma from other timeframes adjusted to the timeframe you want. You may have a copy if u wish. I would however, familiarize yourself with the arguments surrounding such a thing. Wait a little and you might get some answers about it after i have posted this
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Old Mar 22, 2014, 4:26pm   #4
Joined Feb 2014
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Originally Posted by MajorMagnuM View Post
I have a simple spreadsheet that gives you the lengths of each ma from other timeframes adjusted to the timeframe you want.
As helpful as that may seem at first blush, the idea that you can approximate a higher timeframe's moving average in a lower one by using multiples of the given period required is sloppy thinking which needs to challenged whenever and wherever it arises. Somebody recently on another thread suggested you could use a 240 period average on a 15 minute chart to provide the value of the 60 period on the hourly. You cannot. You get a bare approximation, at best.

While the difference between the two may be marginal in many instances. sometimes it is not.

What is more of a problem is that this sort of sloppy thinking spills over into other areas when accuracy takes a backseat to convenience. You either take trading seriously or it is a hobby.
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Old Mar 22, 2014, 4:29pm   #5
Joined Feb 2014
My point above being that devar is already struggling with same very basic concepts and to suggest quick and easy shortcuts and this stage of their education could have a far-reaching and detrimental impact on their efficacy as a trader. It is the duty of experienced traders to help in the best way we can, even if it isn't the easiest.
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Old Mar 22, 2014, 5:26pm   #6
Joined Feb 2014
devar - don't let anyone persuade you that moving averages aren't a useful tool; in the technical analyst's armory they are probably the most useful tool; primarily because they are simple and the least cluttered of all indicators.

As ffsear has suggested, if you're getting mixed signals - don't trade it.

When each of your moving averages is in the 'correct' place on your chart (the 20 above the 50 the 50 above the 100 for a long position or the 20 below the 50 and the 50 below the 100 for a short position) your probabilities of a successful trade - pending a suitable exit strategy of course, will be significantly higher than when they are incorrectly ordered.

Don't forget price itself is your ultimate moving average and should play a leading role in conjunction with whatever other averages you choose to use. In my view, the fewer the better.
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Old Mar 24, 2014, 9:28am   #7
 
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wouldn't mind you posting a chart of the crossover, but if they tangle there is usually a higher chance of a consolidation
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Old Mar 24, 2014, 10:04am   #8
 
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Joined Mar 2014
devar started this thread Hi everyone,

Thank you for the replies. And you are right - the answer should have been obvious to me "just dont trade when there are not clear signals, this is not a race, wait"

Thank you again
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