Some cut and paste reading on moving averages �?lt;o:p></o:p>
Moving averages can become more powerful when multiple moving averages are plotted on the same chart. One combination that I use is to plot a 10 day moving average and a 30 day moving average on the same chart. A valid buy signal is given when the 10 day moving average crosses above the 30 day moving average and both moving averages are in an upward direction. A valid sell signal is given when the 10 day moving average crosses below the 30 day moving average and both moving averages are directed downward. <o:p></o:p>
Because false signals can be given when using moving averages, technicians always use other indicators to confirm the direction of price. This generally occurs when price fluctuates in a broad sideways pattern.<o:p></o:p>
---------<o:p></o:p>
The average itself can act as an area of support and resistance. The more times a moving average is touched, the greater the significance of a violation. A violation of the moving average is a warning that a change in trend may have or may be taking place. Confirmations of trend changes should be sought from alternative technical sources. Generally, the longer the time frame of the moving average, the greater the significance of a violation. Reversals in the direction of a moving average are usually more reliable than a moving average crossover.
<o:p></o:p>
It is best to use a moving average that is half the length of the cycle that you are tracking. If the peak-to-peak cycle length is roughly 30 days then a 15 day MA is appropriate. If 20 days, then a 10 day MA is appropriate. You will, however, often find traders using 14 and 9 day MA's for the above cycles in the hope that they will generate signals slightly ahead of the market.<o:p></o:p>
- 200 Day (40 Week) moving averages are popular for tracking longer cycles; <o:p></o:p>
- 20 to 65 Day ( 4 to 13 Week) moving averages are useful for intermediate cycles; and <o:p></o:p>
- 5 to 20 Days for short cycles. <o:p></o:p>
Cycles vary in length over time - always check that the moving average you are using is still appropriate.<o:p></o:p>
<o:p></o:p>
<o:p></o:p>
Go long when:<o:p></o:p>
- middle Moving Average crosses to above slow MA from below; AND <o:p></o:p>
- fast MA is above middle MA. <o:p></o:p>
Close long when fast Moving Average crosses to below middle MA from above.<o:p></o:p>
Go short when:<o:p></o:p>
<o:p></o:p>
Moving averages are reactive, as they are based on the historical price action of the security or index. They are plotted based on the selected frequency (minutes/hours/days/weeks/months). If a stock is trading above its 50-day moving average, then investors are more bullish (positive) about that stock now than they have been, on average, during the last 50 trading days. Similarly, if the stock is trading below its 50-day moving average, then investors are more bearish (negative) about that stock now than they have been, on average, during the last 50 trading days.<o:p></o:p>
Intersection points are also important when viewing moving averages. If a stock crosses its 50-day moving average trending downward, for example, this could be interpreted as a signal to sell. Similarly, if the stock crosses its 50-day moving average trending upward, this could be interpreted as a signal to buy.<o:p></o:p>
Ten-day and 20-day moving averages are considered useful for pinpointing very short-term price trends. Fifty-day averages are considered useful for showing intermediate-term price trends. And 100-day and 200-day moving averages are considered useful for interpreting longer-term price trends. 
Free Forum Hosting
Important Announcement
0 recommendations 
First 
Return to Heavy Metal