EMA or SMA

[Zero Cool]

Hi everyone, glad to see some reorganisation for newbies like me, I think it will benefit all present and future memebers, keep up the good work!


My first query (I say first because I have a feeling there will be many ) is about moving averages. I have heard rumours that EMA is better than SMA, but this depends on time frames. Please correct me if I am wrong. The CT manual says to use SMA (excluding intra-day trading) and I think with limited capital, say £800-1000, I would be best to focus on CFDs, Spread bets and USFs. Should I stick to using SMA or go for EMA?

Oh no I feel lots more queries

How long on average is spent in the markes using the 3 instruments mentioned above? (or is that impossible to answer)

I'll stop it there i think before I give everyone a headache

Thanks for your time everyone and happy trading

 

[Skimbleshanks]

Gosh, someone else on the boards at this time in the morning.

When I used moving averages, I used simple MAs for intraday charts, and exponential MAs for daily charts. But I do not know anything about the CT manual.

What you need to do is put on both types of MA onto a chart (using different colours) and see which refects the price bars or candles best, ie which ones the price bounces off from. So what you are doing is personalising the MA to the stock in that particular timeframe.

Then you also need to decide which length MAs to use - the popular ones for daily charts are the 50ma and the 200ma, and you will notice from ChartMan's postings that he is a particular fan of the 100ma on a 1 minute intraday chart of emini S&P or the Dow.

 

[Zero Cool]

Hi Skimbleshanks, lol at the time, I think I was looking at the Nikkei 225 at some stage last night wondering if there where any spread bet/CFD opportunities - found 2 as well Well we'll see if they work after my paper trades resolve. At the moment I am using deal4frees demo for CFDs.

Thanks for your relply, if seems a good idea to have them both on the charts for comparison. I did notice that the EMA reveals a better indication of the price of a stock compared to the SMA when looking for recent trends. I'm just dubious as to deviate from the CT-manal as it recommends SMA for both intraday/non-intraday trading.

Thanks once again for your help.

 

[Skimbleshanks]

No matter what anyone says, you need to make sure that your trading strategy 'fits' you. If that means you have to tweak a strategy, then you need to do that. After all, no-one trades in exactly the same way, even those who are following the CT way.

So, if you think something makes a better fit for you, then use it.

Give three people exactly the same instructions, and each will produce a different trade report at the end of the day.

 

[ChartMan]

I'd like to confirm Skim's comments. The issue of SMA/EMA is NOT cast in stone. The same goes for any other indicators. Whilst all the books will say use this value or the other, they are all "generalisms". In this game, data in = reward out. Play with SMA's and EMA's in your chosen trading timescale and with your favourite stocks and see if you can figure out some correlation that works. Taking this one step further, the values could be further optimised by having regard to the market in general- is it rallying, is it in decline? As a general guide, stocks fall faster than they rise, so it would be beneficial to use a shorter timescale on the MA's in downtrends to lock in more profits......
This is not a get rich quick game, but ocaisionally some people hit the jackpot on day one and they think they are a trading guru.

 

[Zero Cool]

Hi guys, thanks for the replys, i'll certainly give them some thought- infact i think i'll go and check big charts out and work on them now.

Thanks again people.