What is better: using a simple moving average or price action?

[padutrader]

No, moving averages and price action are not shouting the same thing in that example. Moving averages are all saying downtrend, but price action shows that we may be hitting a support level. Maybe price continues downward, but in that particular example, I would not follow the moving averages and go short.

If it was possible to build a consistently profitable trading system based only off of moving averages, that would be nice. Goldman and other banks could fire all their quant Ph. D's and just setup some basic moving average crossover signals in ThinkorSwim.

in the markets there is no one side;there is always the need that the other side of the transaction be taken.it does not mean the other side is 'wrong'[ there is a fool in every transaction,as the saying goes, i do not agree with this saying] it just means that the other side has a different time frame than you have
so i appreciate you putting your foot forward.

 

[padutrader]

No, moving averages and price action are not shouting the same thing in that example. Moving averages are all saying downtrend, but price action shows that we may be hitting a support level. Maybe price continues downward, but in that particular example, I would not follow the moving averages and go short.

If it was possible to build a consistently profitable trading system based only off of moving averages, that would be nice. Goldman and other banks could fire all their quant Ph. D's and just setup some basic moving average crossover signals in ThinkorSwim.

i do not use crossovers
Traders have dismissed the use of moving averages but it does help in interpretation of certain market conditions just like price action does.
I use both and perhaps if you are interested in how i use both, you could visit my journal where i explain in depth with charts the reasons for each trade and leave your impressions, insights and advice. i am sure both of us will benefit and i know that i will benefit

 

[padutrader]

My first exposure to market timing and TA was through a study of moving average.

But with experiece comes understanding (well, at leased it's supposed to).

The ONLY objective in trading is to have your risk position "in tune" with the market's buying/selling.... as defined by "price".

Moving Averages are "1st derivatives of price". Is knowing that better than knowing "price"?

MACD is a 2nd derivative of price. Is that better still?

What about a "moving average of MACD"? That would be a 3rd derivative of price. Is that nirvana... the best that can be?

Maybe not... how about a "moving average of the moving average of MACD"?

Yadayadayada.

See where this is going?

Not saying "moving averages are worthless"... they do indeed have some worth. But considering their limitations should one try to build a trading system around them?

yes it is a crutch; it does not tell you anything new; you could just eyeball the chart.
But i need a crutch so i use the averages; it helps give me confidence and confidence commitment is critical in trading
If you need a walking stick or a crutch you had better use it and not feel ashamed

 

[pipeguy]

The problem with averages and most technical indicators is that they lag. Essentially, averages are all filters. When you filter data, you're throwing out information. So therefore, a system based only on moving averages loses a lot of information compared to someone who is looking at the raw price data. A better reason though is that because it's so simple to use a moving average, just about anyone can do it. If you're doing what everyone else does, you have no edge. That said, there are some moving averages that have some significance. For example, the 200 day simple moving average on the SPX has provided support a few times this year.

Well in contrast it adds new data, not market absolute data but subjective trader's views. Just look at S&P 500 now - 200-MA works good as a resistance level, there we and other traders can conclude that history works and perceive this indicator as working. Subjective traders views is also information and it becomes a kind of self-fulfilling prophecy when too many traders use it. The data which explains irrational behavior of investors is also important part of trading information to consider

 

[SunTrader]

The shortest distance between two points is a straight line - think a drag strip. That would be price.

Moving averages on the other hand would be an undulating piece of asphalt. Much slooooower going.

I prefer fast. Slow is good for Warren Buffett and Buffett wannabe's of the world.

 

[userque]

 

[eurusdzn]

Holes like that will never happen , at least not in a hundred rivers

 

[padutrader]

i think definitely price action is the way to go while moving averages are use ful to see tghe context or past...
if using only one then price action should be used. the past also may be seen by checking past PA so there may be no benefit in cluttering the mind with dupicate information

This is the opinion of every trader here

 

[userque]

i think definitely price action is the way to go while moving averages are use ful to see tghe context or past...
if using only one then price action should be used. the past also may be seen by checking past PA so there may be no benefit in cluttering the mind with dupicate information

This is the opinion of every trader here

There is no 'general' better choice. Which is better, a hammer, or a screwdriver? Answer: It depends.

 

[tomorton]

The shortest distance between two points is a straight line - think a drag strip. That would be price.

Moving averages on the other hand would be an undulating piece of asphalt. Much slooooower going.

I prefer fast. Slow is good for Warren Buffett and Buffett wannabe's of the world.

Not just Buffett, the wannabe trader.

MA cross-overs are a poor entry signal if you trade reversals because, yes, they lag. But I like to see short, medium and long MA's in the correct sequence before taking a trend-following position. This demands a delay between the price reversal and the correct stacking of the MA's, but in this case the delay is necessary and adds confirmation. I was happy to hear a well known hedge fund manager expounding this advantage of MA lag at an event 2mths ago.