Question About Moving Averages

OddTrader · Oct 28, 2003

Quote from hoodooman:

try this swing trade

Two moving averages. 20 and 40 ema's, price channel and slow stochastic.

Buy only stocks where these moving averages parallel each other.
If the moving averages cross, forget about that stock.

Buy when the stock moves below the 20 ema or even the 40 ema (but the ema's never cross) and the slow stochastic bottoms out and then starts up. That is your buy signal.

Sell for a loss if the price moves down and penetrates the lower price channel or for a profit when the price penetrates the upper price channel.

regards

Another step closer to your Holy Grail!

dbTrader · Oct 28, 2003

Hi,

Here's my opinion on the use of MAs -- always use 2, try to use something other than close (ie. (High + Low)/2), and use something better than Simple (ie. exponential or volume weighted).

In my experience with intraday MAs - those on the Chat have heard this - you need penetration of the MAs to signal a buy/sell.
In so many cases, the price will bounce off the MAs ,and in a few cases, you will have to stop out trades and the MA and reverse.

Okay, the short answer -- lose the equal sign.

Best of luck,

dB

hoodooman · Oct 29, 2003

NKNY

I want the moving averages to stay in close proximity to each other, without crossing for the intermediate term trend. If the moving averages cross, I abandon the stock. The price channel is the technical indicator by that name, that you can find on Big charts.com.

I daytrade breakouts but I use this system to trade the rydex funds. Its as close to the holy grail as I have ever been able to find.

regards

murray t turtle · Oct 29, 2003

Quote from caplan8293:

Hi All,

Lets say that I had a simple trading system in place using moving averages (the length does not matter). If the price was above the moving average, I would buy. If the price was below the moving average, I would sell. I know this is not the best system, but I am starting out simple.

My question is this: Would it be better to sell if the current price <= (less than or equals) the MA or would it be better to sell if the current price is < (less than) the MA. I have been looking at lots of charts and have a good case for each. However, I want to choose the best one and am having trouble making the decision.

So, in closing, which do you TA gurus think is better:

if (curPrice <= MA) { sell() }

or

if (curPrice < MA) { sell() }

Thanks in advance for any responses.

c

===============

Caplan8293;

In closing , in a uptrending bull market ,I generally wouldn't sell if MA =current price .

Generaly wouldnt sell if closing price = MA either.

In a downtrending bear market, which we are NOT in, may not wait until a current price =a closing price.

In this uptrending, bull market would not wait to sell
until closing price = OR closes below 200 day MA also.
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Make hay while the sun shines.

lindq · Oct 29, 2003

Quote from caplan8293:

Hi All,

Lets say that I had a simple trading system in place using moving averages (the length does not matter). If the price was above the moving average, I would buy. If the price was below the moving average, I would sell.

c

Where you should be buying is when price is significantly below the MA, not above. Think about what an MA is. It is a picture of where price has historically lived. It is the "gravity" that a stock price will typically revert to. Going long above that level is not going to generally provide you consistent gains.

hoodooman · Oct 29, 2003

You couldn't make it any simpler than that.

dbTrader · Oct 29, 2003

Quote from lindq:

Where you should be buying is when price is significantly below the MA, not above. Think about what an MA is. It is a picture of where price has historically lived. It is the "gravity" that a stock price will typically revert to. Going long above that level is not going to generally provide you consistent gains.

While you speak wisdom here -- buying significantly below a moving average -- it is not part of a moving average crossover system.

The MA system is a lagging trend following system. It will sacrifice profits to ensure that the entry is in the direction of a confirmed trend. Your quote above is probably the best argument against using MAs as a system but doesn't answer the thread originator's problem. If one has decided on a MA system due to its simplistic nature, going beyond this scope would be overwhelming and possibly more determental.

Peace.

Kap · Oct 29, 2003

Quote from hoodooman:

try this swing trade

Two moving averages. 20 and 40 ema's, price channel and slow stochastic.

Buy only stocks where these moving averages parallel each other.
If the moving averages cross, forget about that stock.

Buy when the stock moves below the 20 ema or even the 40 ema (but the ema's never cross) and the slow stochastic bottoms out and then starts up. That is your buy signal.

Sell for a loss if the price moves down and penetrates the lower price channel or for a profit when the price penetrates the upper price channel.

regards

;-)

hoodooman · Oct 29, 2003

better try that again.

hwaxen · Oct 29, 2003

Moving averages are very investment specific. Certain lenghts work better for certain vehicles. First find the best average for your vehicle and in your back testing you can see what works best.