when ussing SMA what time frame for charts ?

Aug 29, 2009
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#1
Hi all when i am looking at a companies chart before placing a trade i use the method of following trend and SMA , but the part im too sure on is what time frame should i be looking at on the charts 5 years 1 year 6months 3 months or 1 month ? any additional advice would be great !


thanks .
 

Black Swan

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Nov 24, 2008
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#2
Hi all when i am looking at a companies chart before placing a trade i use the method of following trend and SMA , but the part im too sure on is what time frame should i be looking at on the charts 5 years 1 year 6months 3 months or 1 month ? any additional advice would be great !


thanks .
I'm so tempted to say "dump the SMA as follow on milk and just stick to breast feeding"...oops...
 

oiltanker

Active member
Mar 26, 2007
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#3
Hi all when i am looking at a companies chart before placing a trade i use the method of following trend and SMA , but the part im too sure on is what time frame should i be looking at on the charts 5 years 1 year 6months 3 months or 1 month ? any additional advice would be great !


thanks .
smas can be used to show the health of a trend. some use 3 smas and only trade off setups when all three are parallel and in order. as in hectors 3 sma method. [he does a course but the ytube vids are enough to see what is going on.]
 

tomorton

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Feb 28, 2002
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#4
Hi all when i am looking at a companies chart before placing a trade i use the method of following trend and SMA , but the part im too sure on is what time frame should i be looking at on the charts 5 years 1 year 6months 3 months or 1 month ? any additional advice would be great !


thanks .

The MA period length is determined by your trading style andf time-frame. if you plan to trade over 3-10 days, a 5 year daily MA will be irrelevant. Likewise for a long-term buy-and-hold investor who wants dividend income, a 14 day MA is just noise.

There is value in using multiple MAs - a short MA to help highlight entry points (though price action gives the real entry signal, not an indicator) and a longer MA to confirm trend direction and strength so you can be more sure you are following the majority of market players. Adding more MAs should mean you are following more distinct groups of market participants who have different time horizons. If they're all buying, you should probably be long (for which, read 'already long').

In all cases, the MA is a lagging indicator - it depicts what people used to be doing in this market: if that's not too much of a disadvantage to your style, that's fine, they have their uses.
 
Aug 29, 2009
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#5
The MA period length is determined by your trading style andf time-frame. if you plan to trade over 3-10 days, a 5 year daily MA will be irrelevant. Likewise for a long-term buy-and-hold investor who wants dividend income, a 14 day MA is just noise.

There is value in using multiple MAs - a short MA to help highlight entry points (though price action gives the real entry signal, not an indicator) and a longer MA to confirm trend direction and strength so you can be more sure you are following the majority of market players. Adding more MAs should mean you are following more distinct groups of market participants who have different time horizons. If they're all buying, you should probably be long (for which, read 'already long').

In all cases, the MA is a lagging indicator - it depicts what people used to be doing in this market: if that's not too much of a disadvantage to your style, that's fine, they have their uses.

Thanks for the reply , what i have been using is the 20day sma 50day sma 100day sma and 200day sma on the same chart using the price chart for the last year does this seem ok ?
 

tomorton

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Feb 28, 2002
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#6
Well, its not right or wrong as such, these are the tools - now it depends on what you do with them.

Most traders will look at the 200 - the majority of the market does this and if a million people are buying, it would be risky to be a seller that week. The 50 and 100 might just both be telling you pretty much the same thing, the medium-term trend: maybe there is no need for both. But maybe you don't need either if you hold positions for less than 10 days or more than 200. What is your usual holding period?
 
Aug 29, 2009
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#7
Well, its not right or wrong as such, these are the tools - now it depends on what you do with them.

Most traders will look at the 200 - the majority of the market does this and if a million people are buying, it would be risky to be a seller that week. The 50 and 100 might just both be telling you pretty much the same thing, the medium-term trend: maybe there is no need for both. But maybe you don't need either if you hold positions for less than 10 days or more than 200. What is your usual holding period?
Hi Tomorton i don't like the idea of day trading so i try too stay in for the big moves so on average 3 to 5 months but if i get a big move in a week i take the profit :D . How far back do you look at the history of the price i look at 1 year with my moving averages on the chart does that sound ok ?
 

tomorton

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Feb 28, 2002
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#8
Again, price history is relative to your holding time horizon, but for 3-5 months I would think 2 years would be good as a routine but don't neglect to look back a bit further now and then - for example significant support and resistance can recur long after the pattern set up.
 
Aug 29, 2009
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#9
Hi Tomorton thanks very much i will do that makes sense to control for support and resistances i will keep you posted :)
 

Splitlink

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Nov 18, 2001
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#10
Hi Tomorton i don't like the idea of day trading so i try too stay in for the big moves so on average 3 to 5 months but if i get a big move in a week i take the profit :D . How far back do you look at the history of the price i look at 1 year with my moving averages on the chart does that sound ok ?
Decide before you enter what your pain level is, so that you are not worried by setbacks. Are you going to sit through a 23% or 50% loss while watching a Fibs pattern ( I don't, but lots swear by it)? Look at your time frame panorama. Daily and weekly chart prices can fall hundreds of points and can, nowhere near, be said to have altered their trend pattern on that frame- Are you prepared to sit through all that loss and, perhaps, at the end, be stopped out wih a big dent in the account? If you can--fine-- but you should work it out, beforehand, and trade with that potential loss in mind from the start.