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Attachments: The 100 and 200 Simple Moving Average
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The 100 and 200 Simple Moving Average

  • #21
  • May 13, 2007 1:38am May 13, 2007 1:38am
Basically MA works because a lot of traders use them. It's self-fulfilling.

But I believe we should be cautious when using them, and use them in the right way. For instance, when prices go through an MA, for instance, the 100 SMA, and you already have a long bias, that should give you more confidence. But you shouldn't try to gamble on whether an MA would reject prices or not. No matter what you do with MA, you have to have a bias first, and then use the MA to justify your bias.
  • #22
  • May 13, 2007 1:40am May 13, 2007 1:40am
Quoting james16
example chart

ahh the power
  • #23
  • May 13, 2007 1:41am May 13, 2007 1:41am
example chart
Attached Image (click to enlarge)
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  • #24
  • May 13, 2007 1:48am May 13, 2007 1:48am
thats what the first time back trade is. a confirmation of the current bias. oh and it almost always works. been doing it for over 20 years.

Quoting JodyOng
Basically MA works because a lot of traders use them. It's self-fulfilling.

But I believe we should be cautious when using them, and use them in the right way. For instance, when prices go through an MA, for instance, the 100 SMA, and you already have a long bias, that should give you more confidence. But you shouldn't try to gamble on whether an MA would reject prices or not. No matter what you do with MA, you have to have a bias first, and then use the MA to justify your bias.
  • #25
  • May 13, 2007 2:45am May 13, 2007 2:45am
perhaps that is to general. on larger time frames it is excellent even on its own. if combined with a good understanding of s/r, basic price action knowledge and practice it is exceptional.

jim

Quoting james16
thats what the first time back trade is. a confirmation of the current bias. oh and it almost always works. been doing it for over 20 years.
  • #26
  • May 13, 2007 6:00am May 13, 2007 6:00am
Does it work on the 4H equally?
  • #27
  • May 13, 2007 6:14am May 13, 2007 6:14am
Quoting SunTrader
Any MA length providing Support/resistance is purely coincidental.
So can be applied to Fibonacci levels or Round Numbers or Trendlines.

You got your approach wrong in my opinion. It's not about whether the 100 SMA or the 50% Fib level acting or not as support/resistance. It's about what is price doing at that precise level. If upon hitting a level of *possible* support/resistance price action shows signals of a reversal, then it's definitely a setup I will be following closely for an entry opportunity.

So like I say, it's not about whether one (any) level works as support/resistance. It's about whether price reacts to that level, and if so, react yourself along.
  • #28
  • May 13, 2007 8:39am May 13, 2007 8:39am
Quoting WTB
So can be applied to Fibonacci levels or Round Numbers or Trendlines.

You got your approach wrong in my opinion. It's not about whether the 100 SMA or the 50% Fib level acting or not as support/resistance. It's about what is price doing at that precise level. If upon hitting a level of *possible* support/resistance price action shows signals of a reversal, then it's definitely a setup I will be following closely for an entry opportunity.

So like I say, it's not about whether one (any) level works as support/resistance. It's about whether price reacts to that level, and if so, react yourself along.
You might know where a MA sits. Price doesn't. MA's work to a certain degree like anything else. But like someone said already it is a little self-fulfilling due to their popularity. MA are probabily the first and most widely used form of TA.
  • #29
  • May 13, 2007 8:50am May 13, 2007 8:50am
Quoting james16
perhaps that is to general. on larger time frames it is excellent even on its own. if combined with a good understanding of s/r, basic price action knowledge and practice it is exceptional.

jim
The problem I see with some (not yourself) who mention 100, 200, 365 period MA's is that there are daytrading or even just shooting for 10/20 pips. Unusually long length ma's have no bearing on their trade.

I agree in the use you advocate it is a higher probability trade but if EURUSD overshots a 365 ema by 25 pips and I am only looking to make that much, in my book that is way too much risk. Not if I am position trading to make 100 or more though.

It is always come down to trading timeframe and the proper use of whatever indicator. In my experience the most misunderstood indicator is also the most popular - MA's.
  • #30
  • May 13, 2007 10:59am May 13, 2007 10:59am
I started the thread and I would like to clarify that I am not a day trader. I trade the 4 hour charts exclusively. I look for minimum 100 pips on my trade and my typical trades are 100-300 pips, 300 being max. Here is a chart of how I use the MA for S&R. I am quoting this chart specifically because I took part.

I had a buy stop just above the 200 SMA at 236.50. I didnot expect it to trigger. It wasn't the perfect Buy stop, but I placed it in between the 200 SMA and the Monthly pivot. Luckily it triggered yesterday while I was away. When I came back, I read the news and realised something had happened in the market. I have mentioned it in another post of mine. I took my profits when price hit the 100 SMA (not exactly). The point is, they worked flawlessly here.

Bottomline, price doesn't behave that way because of the MAs, but it does because of the market belief and psychology, making these lines a self fulfilling prophecy.
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  • #31
  • May 14, 2007 12:14pm May 14, 2007 12:14pm
i dont have near the time to post on the public side like i did a couple of years ago but im trying to get plugged back in. everything i tell people is from 25 years of hard experience. i try to keep a low profile and the last thing i ever want to do is seem like i know it all. I DONT. all i can do is tell you the truth as i see it. this is a business and if you dont treat it like one you will regret it. if you want to treat it like a business then you need a business plan and use some common sense. for example.

1. if you cant trade weekly charts profitably you have no business trading daily. you demo weekly until you can do it then you go weekly real money. you dont go daily until you prove you can build a weekly account.

2. if you cant trade daily charts profitably you should not be trading 4 hour.
follow same process from #1

3. if you cant trade 4 hour profitably you have no business trading 1 hour.
follow same process from #1.

4. etc...etc...

how long does the process take? years of course. it took me 8. that was before the internet but that was not the main reason. i was trying like most of you to strike it rich in 6 months. i get hundreds of emails a month. you would be amazed how many go like this.

" please help me!! i have blown all our savings, loans from family members etc..etc.., i thought i could do this. half my account is gone in under a month and now im betting the farm trying to get it back"

i feel for these people because ive been there. i never took loans to trade with but those 8 years were brutal. it did not have to be that way. in every area of my life i work hard and think straight. common sense is my middle name. why is it this business sucks the common sense right out of us? simple. supposed easy money. 30 minutes with a calculator after discovering margin/leverage and your heart races with the possibilities. the road to disaster has now officially begun.

demo first large time frames then go real money. never drop down a time frame until the prior one has been proven. if you ever suffer the loss of 30 to 40 percent of your account you stop trading. period. you go back to demo and figure out what went wrong. in the meantime you refund you account back to where it started from.

jim
  • #32
  • May 14, 2007 2:13pm May 14, 2007 2:13pm
Quoting Stuartesque
I had a buy stop just above the 200 SMA at 236.50.
You mean a Buy Limit?

I am personally not fond of Limit orders because you are not able to read price action at that level. Basically, Limit orders are wishful thinking, hoping that a particular level of support/resistance will hold the bounce. I myself wait for price action to verify, in the shorter time frames, that the bounce is indeed taking place before placing my entry.
  • #33
  • May 14, 2007 2:22pm May 14, 2007 2:22pm
Quoting WTB
Basically, Limit orders are wishful thinking, hoping that a particular level of support/resistance will hold the bounce.
While I understand you wait for a confirmation for YOU and your trading. That doesn't mean Using a limit order is wishful thinking. It is by no means wishful thinking if it fits under ones trading plan.

Best,
Mike
  • #34
  • May 14, 2007 3:40pm May 14, 2007 3:40pm
Quoting mbqb11
While I understand you wait for a confirmation for YOU and your trading. That doesn't mean Using a limit order is wishful thinking. It is by no means wishful thinking if it fits under ones trading plan.

Best,
Mike
Which is why I began my post with "I am personally not fond of...". Every trader should use the tools that work best for him.
  • #35
  • May 15, 2007 2:18am May 15, 2007 2:18am
Yes, it was a buy limit. Sorry for the error. Well, It was a risk and I guess there is no reward without risk.
  • #36
  • May 16, 2007 3:01pm May 16, 2007 3:01pm
Quoting bluebuddha
The big institutional guys typically use 50 and 200 period SMAs on daily and weekly time frames for S/R. Sometimes the 20 SMA is used for shorter term S/R, and I don't think they even bother with smaller time frames.

Bluebuddha:

I would like to know where you got this information.

Thank you
  • #37
  • May 16, 2007 4:02pm May 16, 2007 4:02pm
Quoting winterwhite
Bluebuddha:

I would like to know where you got this information.

Thank you
Me too
  • #38
  • May 17, 2007 4:32am May 17, 2007 4:32am
I know for a fact that they do use the 50, 100 and 200 SMA.
  • #39
  • May 17, 2007 6:42am May 17, 2007 6:42am
What FACT. Some probably do and some probably don't. What kind of fact is that.

Big instititional money is no different then us "little" money. There are all kinds of approaches to trading the markets.
  • #40
  • May 17, 2007 10:11am May 17, 2007 10:11am
SunTrader, I know you are against MAs, but if the institutional thing about 5,100 and 200 mentioned above is not a fact, then why do you think price bounces off these lines? You, the little guy does that?
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