Article The Four Most Commonly Used Indicators In Trend Trading

[T2W Bot]

Traders attempt to isolate and extract profit from trends. There are multiple ways to do this.  No single indicator will punch your ticket to market riches, as trading involves other factors such as risk management and trading psychology as well. But certain indicators have stood the test of time and remain popular amongst trend traders. Here we provide general guidelines and prospective strategies are provided for each; use these or tweak them to create your own personal strategy.
Moving AveragesMoving averages “smooth” price data by creating a single flowing line. The line represents the average price over a period of time. Which moving average the trader decides to use is determined by the time frame on which he/she trades. For investors and long-term trend followers, the 200-day, 100-day and 50-day simple moving average are popular choices.
There are several ways to utilize the moving average. The first is to look at the angle of the moving average. If it is mostly...

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[timsk]

"Moving averages can also provide support or resistance to the price. The chart below shows a 100-day moving average acting as support (price bounces off of it)."

Oh dear oh dear - this ol' chestnut!
It's a bit depressing that the myth of moving averages providing S&R is being perpetuated by someone who is a member of the Market Technicians Association and the Canadian Society of Technical Analysts. I'd concede that the one exception would be the 50MA, 100MA and 200MA on a daily chart (as in this example) as they are so widely viewed that it becomes self-fulfilling. However, on almost all other timeframes and all other MAs - it makes no sense at all for reasons covered in this post.
Tim.

 

[Trader333]

The point is not whether MA work or do not work but that they are used extensively by trand traders and how they may be used when they do use them. One of the people you most revere in trading also uses them and whilst there is no logical reason why they may work the fact is that combined with other approaches they can provide an "indication" of whether a market is moving consistently in one direction or not in my view.

 

[timsk]

The point is not whether MA work or do not work but that they are used extensively by trand traders and how they may be used when they do use them. One of the people you most revere in trading also uses them and whilst there is no logical reason why they may work the fact is that combined with other approaches they can provide an "indication" of whether a market is moving consistently in one direction or not in my view.

Hi Paul,
No argument with anything you say here and, indeed, I've nothing against moving averages per se. On the contrary, I use them myself. It's simply the notion of a MA providing support and resistance that I'm questioning. Nothing more, nothing less.
Tim.

 

[Forexmospherian]

When will the so called "industry" realise moving averages are far inferior to Linear regression indicators ( averages)

When I started it was all the 20 /50 /100 /200 MA ( take your pick on which type) and of course the golden cross and the "death cross". OK they serve a purpose - but are just so lagging on all charts over 5 mins - you end up having to use silly size stops - meaning you need large targets - so inefficient

It's a great example for me of how the "old school" traders - and of course the MTA- are so out of touch - and no wonder algo's and bots have replaced them.

Glad this site has the "guts" to point out mediocrity - and challenge everything - even me - Keep it up ;-)

Regards


F

 

[prst]

Is it useful to use both MACD and MA?

Since MACD is also based on MA, is it feasible to use it , alongside MAs?

 

[NVP]

ma's are part of the markets historical infrastructure and will always be taught.......some move on and some don't..........

such is life

N