If You Trade Using Moving Averages, How?

[GrowleyMonster]

I sometimes trade by 3VWMA and 6VWMA crossing except I don't wait for the actual crossing. Lags too much for a good entry. I look for them to begin closing up together, with an up trend in both averages and increased volume. The shorter should be below the longer but they should be merging toward each other. For bottom reversal I also look for doji type candles, i.e. open and close within a couple of cents, prefarably equal. I see that and I am buying but remember I want to see an up trend and also if possible see the market as a whole moving up so sometimes I superimpose TQQQ for quick reference since I spend 3/4 my time on NASDAQ. But I also look at the Bollinger, 9EMA and 2 StdDev. I wanna see that middle line going up and the candle fully in the upper band or else bouncing off the lower limit. Coming up out of a dip? Beautiful.

I always verify on other timeframes. If a longer time frame agrees on the general trend and a shorter time frame agrees that the stock has reversed or is reversing, I feel a lot better about buying.

When there is no obvious line of support I will place my stop below the longer moving average initially, or else just under the lower Bollinger limit or sometimes below the mid line. Once the stock has moved well above break even, I start walking that stop up. Ideally I keep 2/3 of my profit locked in but with more choppy movement I might back off to half. For a hit and run attack I might lock in 3/4 or even 90% of profit and at any rate not set the stop below the bollinger mid-line.

 

[murray t turtle]

In my opinion moving averages work best as an objective exit tool.

On the other hand they generate tons of false signals if used for entry after a cross over.

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Mostly true;
50 dma/200 dma almost never give false signal, especially 200dma. But another good thing about 200 dma even if it gives a false signal/almost never happens. PSAR[parabolic stop + reverse] helps with something like tqqq, a 50/200 cross is too slow for an exit on tqqq. So a non cash market etf differs from 3x.
KenCalhoun does fine with a weighted ma, some times,but I seldom use those I weight volume with a regular moving average

 

[murray t turtle]

Pretty simple. Directly taken from Investopedia:

- Plot three exponential moving averages—a five-period EMA, a 20-period EMA, and 50-period EMA—on a 15-minute chart
- Buy when the five-period EMA crosses from below to above the 20-period EMA, and the price, five, and 20-period EMAs are above the 50 EMA

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Most any work well in a trending market; all those except50 day ma can chop profits to zero in a chop slop sideways trend= most summer trends slop/chop.
Sept may differ/not a prediction.

 

[Tradex]

50 dma/200 dma almost never give false signal

Almost is the key word here, because when they do fail, get ready for some seriously serious drawdown...

 

[Real Money]

I like Kaufman's, Wilder's, Least Squares, and VWAP with deviation estimates. Ehlers stuff is cool, though.

You should remember that every market is different. The long bond doesn't trade like an index, and a futures spread won't trade like a stock. That can depend on many things - liquidity, short interest, size of the underlying market, vol, among others.

In the modern era, prices are often differenced against something, before other estimates are derived, like momentum, trend ect. Trends and momentum can be relative to other assets, and are not so simple to monitor. Risks on relative trades are reduced, so those trades are levered up and can have an outsized effect on the underlying markets involved.

After all, the whole idea is to figure out how the participants are positioning themselves so that you can anticipate what the net effect will be. These are just tools to aid you in that objective.

Traders use price, spreads, and volume. Averages are useful, but not without care.

 

[Tradex]

I like Kaufman's

If I remember correctly, Perry Kaufman himself admitted that his KAMA average (an "adaptive" moving aveage) is no better than a simple moving average or a Donchian breakout system.

 

[murray t turtle]

Almost is the key word here, because when they do fail, get ready for some seriously serious drawdown...

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LOL/thats one reason a 200 dma works so well/ the market tends to avoid it.

 

[Tradex]

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LOL/thats one reason a 200 dma works so well/ the market tends to avoid it.

 

[Real Money]

If I remember correctly, Perry Kaufman himself admitted that his KAMA average (an "adaptive" moving aveage) is no better than a simple moving average or a Donchian breakout system.

I'm not talking about making a trading system using it. Whether it's "better" than anything else is an opinion. I find it useful for what it's designed to do.

 

[Tradex]

Whether it's "better" than anything else is an opinion.

This is not an opinion, this was revealed after a backtest (it's in one of the Perry Kaufman books, I will try to find the exact chapter).

Anyway it was just a side note, my post was not related to your particular style of trading.