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Why Moving Average?

  • #61
  • Jul 31, 2010 9:32am Jul 31, 2010 9:32am
You can identify ranging/trending markets without MAs. MAs are lagging. On the other hand , If you are trading long enough , you can observe patterns that are created relatively to your MAs , just like you can identify patterns without the MAs. IMHO a person should identify the method that suites him and stick with it. As long as you have good money management and discipline ,it doesn't matter what are your tools.
  • #62
  • Jul 31, 2010 9:57am Jul 31, 2010 9:57am
Quoting lac_raz
You can identify ranging/trending markets without MAs. MAs are lagging.
What makes MAs work is the fact that they ARE lagging....lol. Whenever price action suddenly overtakes a MA to the upside or downside, it can be an indication of a sudden change in sentiment. When there is a sudden change in price, the MAs are an excellent reference for support/resistance. If the MAs moved instantaneously (no lag), you wouldn't have a reliable reference point to target support/resistance. An experienced chartist can predict price movement when prices are converging or diverging away from MAs.
  • #63
  • Jul 31, 2010 10:13am Jul 31, 2010 10:13am
Quoting Troikaone1
What makes MAs work is the fact that they ARE lagging....lol.
This is exactly what i wrote , It is a matter of perspective.
There are traders that don't need MAs to detect a sudden change in a sentiment . S/R you can detect without MAs .
  • #64
  • Jul 31, 2010 10:36am Jul 31, 2010 10:36am
Quoting lac_raz
This is exactly what i wrote , It is a matter of perspective.
I see your point; I simply wanted to address the concept of "lagging". People abuse this term quite a bit.....this concept only applies to novice traders who think they can use MA xovers as an entry. In this regard, you will get smoked because 99% of the time, the move will have already finished by the time the MA xover occurs. But, again, an experienced chartist doesn't enter on a MA xover....it is how prices regress to the mean or MA, that chartist pay attention to. I use simple supply/demand concepts with the assistance of MAs to guide my optimum entry points
  • #65
  • Feb 2, 2011 5:53am Feb 2, 2011 5:53am
Great thread - pity it seems to have died off as Moving Averages are such a powerful but easily dismissed tool. Maybe it it is their simplicity that makes them poorly understood and ignored. All MAs are smoothing functions. That is there purpose, to smooth out the variations in the observed data - in this case forex prices. The greater the number of data points or candles the greater the smoothing function and the lower the influence of each candle on the calculated average. Graphically, of course a MA60 is going to be flatter and smoother and respond slower to price changes than a MA5. Graph a SMA1, you will see it is equal to a line chart of prices.

With a SMA every candle has the same weighting, regardless of where it is located. For example, with a SMA60 each candle has an equal weighting of 1/60. On a M1 chart, this means that the candle that closed one hour or 60 minutes ago has the same weighting as the most recently closed candle. Is this a reasonable assumption to make?

Isn't it intuitively appealing for us to place more emphasis and hence a greater weighting on more recent prices than those that occurred some time ago. This is the logic of EMAs and WMAs and it makes sense. These moving averages will respond more to recent price action than a SMA - if that is what is desired.

What price should be used to calculate the various MAs available on forex charting programs; open, high, low, close..... ? The median price ((H+L)/2)for a time period (candle) is itself an average or mean of the price action that happened from open to close. Calculating an average using averages would keep even a statistician happy.

Anyone interested in measuring price volatility is going to have to understand MAs as the mean is central to the calculation of variation and hence standard deviation. So the position of price relative to the MA is very important. MAs rule!
Audentes Fortuna Juvat
  • #66
  • Sep 25, 2011 12:25am Sep 25, 2011 12:25am
just my 2 cents opinion.

i noticed a no. of professional traders use 20/21 MA on their Daily chart analysts. btw the BB inventor uses 20 MA.

i also noticed prices would eventually return to 20 MA to resume its trend or counter trend.

i use 20 MA as a spring board (like SL and RL) to identify PA for entries.
recently after comparing SMA, EMA vs LWMA, i chose to practice with 20 LWMA.
http://www.forexfactory.com/showthre...73#post4971673

maybe it is just an individual preference, as there is no right or wrong in fx trading, more importantly it is his trading plan to make good



cheers
  • #67
  • Sep 25, 2011 6:35am Sep 25, 2011 6:35am
Wow,

The last time I posted on this board concerning MAs was 7/31/10. At the time, I THOUGHT I knew just about all there was to know about MAs. On 4/22/11, I had a quantam leap in my understanding of MAs; which goes to show that you never stop learning when it comes to trading. MAs are much more complicated than you can ever imagine. They communicate things that take years to interpret.
  • #68
  • Sep 25, 2011 6:59am Sep 25, 2011 6:59am
Quoting Troikaone1
On 4/22/11, I had a quantam leap in my understanding of MAs; which goes to show that you never stop learning when it comes to trading. MAs are much more complicated than you can ever imagine. They communicate things that take years to interpret.
Well, this sounds like an interesting discovery then. Would you care to explain???
  • #69
  • Sep 25, 2011 7:06am Sep 25, 2011 7:06am
Quoting Troikaone1
Wow,

The last time I posted on this board concerning MAs was 7/31/10. At the time, I THOUGHT I knew just about all there was to know about MAs. On 4/22/11, I had a quantam leap in my understanding of MAs; which goes to show that you never stop learning when it comes to trading. MAs are much more complicated than you can ever imagine. They communicate things that take years to interpret.
agreed with u, troi. i one never stop learning. i also learnt to be patience and simplify in my trading... as we all know fx is even more complicated than just ma. let all share experience to improve our trading and make

cheers
  • #70
  • Sep 25, 2011 8:10am Sep 25, 2011 8:10am
Quoting tradpat
agreed with u, troi. i one never stop learning. i also learnt to be patience and simplify in my trading... as we all know fx is even more complicated than just ma. let all share experience to improve our trading and make

cheers
Yes,

My main purpose on the boards is to hopefully inspire traders to keep pushing and keep learning. Challenge conventional thinking (think outside the box always).
  • #71
  • Sep 25, 2011 8:12am Sep 25, 2011 8:12am
Quoting kostas1
Well, this sounds like an interesting discovery then. Would you care to explain???
All I can say is to think outside the box and follow the money!!!!
  • #72
  • Sep 25, 2011 8:51am Sep 25, 2011 8:51am
if everyone uses a certain tool to decide to get in and out of a trade, then it becomes an important tool

if everyone would decide to long or short eurusd based on the price on corn, then the price of corn becomes an indicator etc etc
  • #73
  • Sep 25, 2011 9:49am Sep 25, 2011 9:49am
We do follow price action through compare & contrast of present to the past or possible future to the present , whatever all in a imaginary relation to the some point /level to now or very immediate past. In that sense everything seems lagging , past is no any warrenty of future & possible future levels like limits, trendline or linear support-resistances etc also in that sense , can take one of only from many possibilities .

Moving average is one scientific relationship trackings of the evolving present & so even talking as lagging still one good way to view the price action ,the less the tf the more nearer the present though past. In higher tf , yes , one may see a change long after it happened but lower tf sees it much earlier as started earlier before happen in higher one and can minimise any wrong doing in terms of exit or entry .
I am not any fan of moving average or any indicator particularly or can do follow pa without any bias of them , but they certainly help in decision making in trading .

see relation between different moving averages MTF_LWMA with levels with possible ranges here used H1 tf in contrast with daily tf & simple ma .

sorry another indicator on this chart , TDSC , ignore to see .
hope it be usefull .
fontu
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Not understand?better not follow my analyses!doubt clearer first, risks ++
  • #74
  • Sep 26, 2011 1:08am Sep 26, 2011 1:08am
Quoting Troikaone1
All I can say is to think outside the box and follow the money!!!!
I am not trying to get a top secret out....
I am interested in MAs and how they apply to how the market moves in advance. In fact, I trust my system well enough to trade it in a decent live account. But I am always looking for new ideas related to MAs. So if you have some wisdom to share I will gladly listen. Otherwise, have fun with your trading.
  • #75
  • Sep 26, 2011 3:22am Sep 26, 2011 3:22am
Quoting kostas1
I am not trying to get a top secret out....
I am interested in MAs and how they apply to how the market moves in advance. In fact, I trust my system well enough to trade it in a decent live account. But I am always looking for new ideas related to MAs. So if you have some wisdom to share I will gladly listen. Otherwise, have fun with your trading.

What exactly is your system?
  • #76
  • Sep 26, 2011 3:25am Sep 26, 2011 3:25am
Quoting Troikaone1
What exactly is your system?
CHOROS:

http://www.forexfactory.com/showthread.php?t=236210

http://www.forexfactory.com/showthread.php?t=303258
  • #77
  • Last Post: Nov 21, 2016 3:54am Nov 21, 2016 3:54am
Quoting CrucialPoint
{quote} To gauge the shift from one market condition to another, depending on price deviation from the moving average.
I know, your post is quite old. Nevertheless, would you be kind enough to tell me how that works? Do you consider a market to be ranging whenever your chosen MA crosses the prize line?
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