How does the 4H timeframe impact the smoothing effect of moving averages and the ability to capture medium-term trends?
moving average
- Thread starter eleanorK80
- Start date
Look up the work of John Ehlers if you want to learn more about moving averages (lowpass digital filters.) Financial data is fractal in nature, so 4 hours does not necessarily mean anything more than 3 hours or 5 hours, or daily, or monthly. However, you should read Ehlers work on aliasing and oversampling.
Moving averages are just that averages of prices over set parameters. A 10 day SMA measures the closing prices of XYZ stock over 10 days. It adjusts to the time period you choose. Does not make it less or more effective as a smoothing tool. It is a lagging indicator, meaning prices have already moved a great deal before you get one moving average price point. If you are trying to capture price trends, a confluence of support or resistance levels, candlestick patterns, trendlines gives you a better way to latch onto the start or end of trends.
The 50 and 200 SMAs look really smooth.
The impact is same as for 1H or 15M I don't see any difference except that 100 or 200-period SMA become really smooth and very slow to react to the price changes. I would rather experiment with EMA choosing different weights.
All filters exhibit this behavior - shorter period responsive but noisy and longer period has the opposite effect. Take ADV, AAPL and NVDA as examples and plot 50, 100, 150 and 200MA. This will give a clear picture of up and down trend for short term trader. As a rule of thumb, 80% will not stay above 50MA for more the 20 days.
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THAT helps;
mainly because its mid point + for sure of the day.
BUT a BIG dis-advantage is most charts only do [240 or so minutes ] 4hours on 60 days or 120 days.
And 8;30-12;30CST is a great measure.
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LOL4 hours means so little little compared to monthly or semi monthly;
one time it would be better, if stop loss is hit, 4 hour charts maybe better than monthly.
Its not rocket science; even though mr J Ehlers wrote a book named that LOL
omg. how do you read it I can not even look at it. great!