Moving Averages

[colin848926]

Hi

realtively new to all of this.

I understand the basics of risk/reward, fundamentals and some basic technical analysis including support resistance.

Now trying to work on my entry and exit timing.

Would using moving averages help me?

Colin

 

[Rhody Trader]

Might do. Test it out.

 

[shadowninja]

Personally (and this only means that this is my experience), I find MAs useful for giving you a direction to trade in but using support and resistance is better for finding levels to enter a market at.

 

[TAjammy]

MAs are good to filter trades so that you only trade in the direction of the momentum...
don't try crossovers lol they suck

 

[rharmelink]

How about a simple crossover signal based on the closing price against the 200-day SMA with a 5% tolerance? For SPY, a little slow to respond, but only one wrong signal:

Market From To Start End Return
Bull 2009-06-12 2009-09-15 $94.55 $105.72 11.8%
Bear 2008-01-08 2009-06-11 $133.92 $94.29 -29.6%
Bull 2003-04-23 2008-01-07 $82.07 $136.12 65.9%
Bear 2000-10-11 2003-04-22 $117.76 $81.32 -30.9%
Bull 1998-11-05 2000-10-10 $96.11 $118.76 23.6%
Bear 1998-08-31 1998-11-04 $80.82 $94.82 17.3%
Bull 1994-01-10 1998-08-28 $36.63 $87.02 137.6%

The tolerance on the crossover reduces the amount of whipsaw. A 0% tolerance would have generated 119 trades instead of just the 7.

 

[Splitlink]

Hi

realtively new to all of this.

I understand the basics of risk/reward, fundamentals and some basic technical analysis including support resistance.

Now trying to work on my entry and exit timing.

Would using moving averages help me?

Colin

I use moving averages for trendfollowing. You have to find the ones that suit you best and different instuments will work better with some averages than others.

The big snag is the valid argument that it is certain to involve whipsaws that can involve a lot of uneconomical trades.

That said, I, personally, set more store on average and trendline testing than I do with other lines.

Have a read of Mr Charts first posts in his thread (the first dozen pages and he specialises in US stocks) and Cornflower on Forex Factory.

Split

 

[pedro01]

This is probably worth a read.

The FREE original turtles rules : The Free Turtles Rules

If nothing else, it will get you thinking about other aspects of trading than just the entry.

 

[joe4422]

Intraday the 8 ema and 21 emas are priceless. On a daily chart I always use the 8 and 21 emas, and the 20,50 and 200 smas. Markets will use the 8 ema 20 sma all the time.

 

[pedro01]

That seems like a lot of EMA's Joe - do you actually use both the 20 & the 21 ?

 

[rathcoole_exile]

I use moving averages for trendfollowing. You have to find the ones that suit you best

how about my favourite, the 1-period ?


doh !

 

[pseudo straddle]

how about my favourite, the 1-period ?


doh !

Would that be a 1ema and (H+L)/2 ?

 

[TAjammy]

intraday and on any timeframe i use150 200 50 EMA...it puts into perspective what the overall trend is, rather than the las few days', whipsaws will always happen so i personally dont trust anything under 50

 

[colin848926]

Hi guys and girls

Thanks for the replies.

I am looking to enter trades when there has been a dip down to a support level, then starts to rise.

I have been finding that the share price often dips back to this support level when I was planning to exit around an area of resistance.

Am I right in thinking that moving averages can be used to help me take some profits before the price drops back to the support level?

If so, should I use simple or exponential?

How can I avoid the whipsaws?


Thanks for your help
Coli

 

[TAjammy]

to avoid the whipsaws and focus on the overall trend use bigger MAs - 150, 200 and not 21 amd 50 but whipsaws happen a lot as long as there is S/R clear then you are okay

 

[clorets]

Price often bounces off MAs, but you have to experiment with them and observe how the price moves around them. I personally never use them as trading signals. I only use them as additional tools to support other signals. I agree with joe about the 21 EMA on the daily.