Are MAs Like 50/100/200 Important In Trading? | Forex Factory

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Are MAs Like 50/100/200 Important In Trading?

  • #1
  • First Post: Feb 2, 2010 7:50am Feb 2, 2010 7:50am
Dear Senior Traders

I am still considering myself a novice in fx trading, thou I am doing it in mainly in part time basis for the past 2 years.

I recently have formulated my own trading method like many of you by focusing on using as fewer indicators as possible. Basically I am on candlestick formations (PA), TL, SL, RL on H4 & Daily TFs. Maybe or maybe not to include BB and/or MA.

About MA, I have read a number of articles mentioning the popular use of 50, 100 and 200 MAs. Would some of you explain WHY these MAs are chosen (popular)?

Is it good to incorporate MAs? Why?

All inputs are welcome. Thank you for your time.
  • #2
  • Feb 2, 2010 8:19am Feb 2, 2010 8:19am
In a longterm scenario, MA are good but because of their nature to lag, short term time frames are not ideal though if used in a long term investment style of trading, you just may have a chance of being profitable.

MA's may be used as a trend indicator and/or Support & Resistance levels. Do you have any idea as to how you are planning to use MA's in your trading? Give us a better idea of your trading plan will help us determine if using MA's are the proper way to go.

A lot of traders uses MA's and I have found out that MA's are used most by equity traders. FX trades don't use MA's as much, instead we tend to focus on oscillators and price action trading. Take a look at Chart.ly and get an idea as to how some professional traders trade using MA's
  • #3
  • Edited 8:56am Feb 2, 2010 8:41am | Edited 8:56am
Quoting Jhig
MA's may be used as a trend indicator and/or Support & Resistance levels. Do you have any idea as to how you are planning to use MA's in your trading? Give us a better idea of your trading plan will help us determine if using MA's are the proper way to go.

A lot of traders uses MA's and I have found out that MA's are used most by equity traders. FX trades don't use MA's as much, instead we tend to focus on oscillators and price action trading. Take a look at Chart.ly and get an idea as to how some professional traders...
Hi Jhig & Senior Traders

The image is attached.
In addition to PA, here I have BBs and MAs (5 & 34). Both can be used to sense the directions of trends and retracements (SL & RL). I am still practicing candlestick charts/formations under the ebooks written by Steven Nison.

All comments are welcome.
Again thank you.
Attached Image (click to enlarge)
Click to Enlarge Name: eu.gif Size: 27 KB
  • #4
  • Feb 2, 2010 9:54am Feb 2, 2010 9:54am
I use crossovers quite a bit in my trading and find them very important.

PS By crossovers I mean price crossing through the sma50 for instance not one ma crossing another (Those are fairly useless for trading)
The trend always ends.
  • #5
  • Feb 2, 2010 10:34am Feb 2, 2010 10:34am
Quoting Shamus
I use crossovers quite a bit in my trading and find them very important.

PS By crossovers I mean price crossing through the sma50 for instance not one ma crossing another (Those are fairly useless for trading)
As Shamus said, MA crossovers are effective as well over the longer periods. Looking at your chart, you have three ways to use the MA's. As Shamus said, MA crossovers, which is where two MA cross each other ... many traders use crossovers as a trading signals. In addition, you could use the MA's for lagging trend observation and use the MA's for S/R levels.

Keep studying the candlestick/bar chart price action continuations and reversals. When all said and done, I believe once you master price action you will only refer the MA's for additional assistance .... assistance from what you will have already have figured out using price action. Thats what happened to me. I was a huge fan of MACD and MA's until I realized that adding price action to my trading tool kit wouldn't hurt. After learning price action, I realized that price reversal signals were way faster than MACD reversal signals by a few candle bars. By allowing me to "get in early" I was able to capitalize off what I knew was happening before may technical focused traders.

So, good luck and keep up with your practice!
  • #6
  • Feb 2, 2010 1:01pm Feb 2, 2010 1:01pm
Anything that the overall market can easily see to use as benchmarks and goal posts will be important. It's not about MA's, S/R, PA, ect, the question simply is, which PRICE will the market use and find value at?

The MA's you mention are very common. Using them as reference points will be helpful. Especially when the market is trending. Sell/buy off of them as price is moving along.

Remember, price price price! Use the prices that are easy for the broad market place to meet at.
  • #7
  • Feb 2, 2010 6:26pm Feb 2, 2010 6:26pm
Quoting Shamus
I use crossovers quite a bit in my trading and find them very important.

PS By crossovers I mean price crossing through the sma50 for instance not one ma crossing another (Those are fairly useless for trading)
Hi Shamus

Thanks for the input.
Pls. refer the attached image.
Do you mean those "crossovers" indicated by no. 1, 2 and 4?
For no. 3, is it also a "crossover?"

P.S. Sorry, English is not my main language. I am also learning to master the trading terms.
P.S.2. If you may, you can post some charts to illustrate the crossovers.
Attached Image (click to enlarge)
Click to Enlarge Name: gu cross.gif Size: 21 KB
  • #8
  • Feb 2, 2010 6:40pm Feb 2, 2010 6:40pm
Quoting Jhig
As Shamus said, MA crossovers are effective as well over the longer periods. Looking at your chart, you have three ways to use the MA's. As Shamus said, MA crossovers, which is where two MA cross each other ... many traders use crossovers as a trading signals. In addition, you could use the MA's for lagging trend observation and use the MA's for S/R levels.
Thanks for writing again, Jhig.
Yes, I use MA's for S/R signals. Also one MA retrace on the other MA for signals (when riding on the trend).
Sorry, I do not get the meaning: "use MA's for lagging trend observation."
Pls. elaborate further?
Thanks in advance for your time.

Quoting Jhig
Keep studying the candlestick/bar chart price action continuations and reversals. When all said and done, I believe once you master price action you will only refer the MA's for additional assistance .... assistance from what you...
Yes, Jhig.
I can feel it too when applying PA recently.
I think one key factor is the patience to wait for the candlestick formations.
Do you have any good ebooks on PA to recommend?
Again thanks.
  • #9
  • Feb 2, 2010 6:49pm Feb 2, 2010 6:49pm
Quoting Scotty B
Anything that the overall market can easily see to use as benchmarks and goal posts will be important. It's not about MA's, S/R, PA, ect, the question simply is, which PRICE will the market use and find value at?

The MA's you mention are very common. Using them as reference points will be helpful. Especially when the market is trending. Sell/buy off of them as price is moving along.

Remember, price price price! Use the prices that are easy for the broad market place to meet at.
Hello Scotty B

I am a novice in fx trading, with very little financial knowledge. Just pick up all these recent year.

I enjoy your reply. However I do not quite get what your said especially on
"which PRICE will the market use and find value at?" and " price price price!"

If you may, can you illustrate in simple terms, with some charts/diagrams?

Thank you for your time.
  • #10
  • Feb 2, 2010 7:42pm Feb 2, 2010 7:42pm
50/100 sma's are definitely looked at by bigger players on the 5min and 60min timeframes (the latter esp.). Sometimes 15mins too. Price can react at these levels.

See:

http://forex.fxdd.com/category/forex-trading

NB: I'm not associated with these folks or any other co's at all
  • #11
  • Feb 2, 2010 8:12pm Feb 2, 2010 8:12pm
For a long time I was a fan of the 100 and 200 sma. I had it on every chart on every tf. But I was never able to really make it work for me because I found that they were leaving me out of some good trades, and it was just one more thing that I had to consider when taking a trade.

I trade mainly with forks and fibs, and price action, so thats three forms of s/r right there.....do i really need a 4th?...I decided no. But I do use a momentum indicator still, and even then its probably just a matter of time before that one is gone as well.

Big
Keep it pipin, pimpin
  • #12
  • Feb 2, 2010 8:21pm Feb 2, 2010 8:21pm
About MA, I have read a number of articles mentioning the popular use of 50, 100 and 200 MAs. Would some of you explain WHY these MAs are chosen (popular)?

Is it good to incorporate MAs? Why?

-----------

To help answer your question, I think the 100 and 200 sma's are popular is because 100 is 1/3rd of a year and 200 is 2/3rds of a year (out of 365 days), so if price crosses that number, that says that now price is on average over the last 100 days higher than it was the previous 100 days. Same with the 200. Not sure about the 50. I used to use a 30sma, because there are 30 days in a month.

The way I would trade is, basically I would short anything below 200 and buy anything that crossed above it, but it was clouding my judement so I let it go.

In my opinion you will either be an indicator trader or a price action indicator....mixing the two just doesn't work well. I'm speaking from 5yrs experience.

I have developed an indicator system (still in testing) if you want to check it out, pm me.

Big
  • #13
  • Feb 2, 2010 8:58pm Feb 2, 2010 8:58pm
Quoting big_pipin
About MA, I have read a number of articles mentioning the popular use of 50, 100 and 200 MAs. Would some of you explain WHY these MAs are chosen (popular)?

Is it good to incorporate MAs? Why?

-----------

To help answer your question, I think the 100 and 200 sma's are popular is because 100 is 1/3rd of a year and 200 is 2/3rds of a year (out of 365 days), so if price crosses that number, that says that now price is on average over the last 100 days higher than it was the previous 100 days. Same with the 200. Not sure about the 50. I used to...
From what I know, those MA setting are popular because they work great as Support and Resistance levels. Its said that if price touches those levels, price will either break or bounce off those levels. Now I can't tell you if that is true as I don't trade MA's but there are many traders that do believe.
  • #14
  • Feb 2, 2010 10:08pm Feb 2, 2010 10:08pm
I use MA crossovers. I know a lot of people don't like it. People think it is useless... It probably is. But MA crossovers have been around since the stock markets were opened. Up to you to decide if it works or not.

All I can tell you is... if you use MA crossover, you are trading the trend. This is a trend trading style. You will always miss the first 30-40% of the trend. You will have a win rate of around/less than 50%. But all it takes is 1 strong trend and you will lock in profits that will cover your whole month of losses and pay the rest of the month's bills.

Works well on daily charts. Works just ok on hour and 4hour charts. Never use for anything less than 1 hour
  • #15
  • Feb 3, 2010 12:15am Feb 3, 2010 12:15am
Quoting thelws
I use MA crossovers. I know a lot of people don't like it. People think it is useless... It probably is. But MA crossovers have been around since the stock markets were opened.

All I can tell you is... if you use MA crossover, you are trading the trend. This is a trend trading style.
Hi Thelws
Thanks for your inputs. I do aware the mix comments among traders on MA's. All feedbacks will help me in consolidating my trading whether or not to incorporate MA's and/or BB's. I wish to have charts that are as "clean" as possible. IMHO MA's retracements following the trends would give good traders like the posting no. 3.

Quoting Jhig
From what I know, those MA setting are popular because they work great as Support and Resistance levels.
Thanks again for confirming my finding. You have been a great input.
  • #16
  • Feb 3, 2010 12:35am Feb 3, 2010 12:35am
Quoting big_pipin
To help answer your question, I think the 100 and 200 sma's are popular is because 100 is 1/3rd of a year and 200 is 2/3rds of a year (out of 365 days), so if price crosses that number, that says that now price is on average over the last 100 days higher than it was the previous 100 days. Same with the 200. Not sure about the 50. I used to use a 30sma, because there are 30 days in a month.

The way I would trade is, basically I would short anything below 200 and buy anything that crossed above it, but it was clouding my judement so I let it go....
Hi Big Pipin

Thanks. Interesting on 1/3 and 2/3 of the year and same goes to 30SMA.
BTW 5 & 34 are the fibo numbers used in my MA's.

I have the same feeling as you. Hate to see my charts being "crowded."

I welcome your new development of indicator. You can email me pj dot waterloo at gmail dot com.

Quoting big_pipin
I trade mainly with forks and fibs, and price action, so thats three forms of s/r right there.....do i really need a 4th?...I decided no.
Big
If you may, pls. post images showing the meeting on "three forms of s/r." Thanks.


Quoting bit9ret
50/100 sma's are definitely looked at by bigger players on the 5min and 60min timeframes (the latter esp.). Sometimes 15mins too. Price can react at these levels.

See:
http://forex.fxdd.com/category/forex-trading
Hi Bit9ret
Thanks for the link. It helps.
  • #17
  • Feb 3, 2010 2:12am Feb 3, 2010 2:12am
My opinion is that the moving averages, as any other fancy function which deals exclusively with old prices, are completely meaningless. I can't prove it but it is hard to find a system which is mechanically profitable using them.
Regarding of their behaviour as future targets or S/R, it is also hard to prove that you they are more than mathematical "touches" between a series of numbers and its averages.
It is not enough to see that SMA200 acted once or twice as S/R on a chart. You must check at least 1000 occurences on different pairs for a valid conclusion.
  • #18
  • Feb 3, 2010 3:52am Feb 3, 2010 3:52am
Here is what I ment by three types of s/r.

1. 100 and 200sma's
2. Fib retracement showing s/r levels
3. Andrews Pitchfork showing s/r levels
Attached Image (click to enlarge)
Click to Enlarge Name: three_sr.jpg Size: 240 KB
  • #19
  • Feb 3, 2010 6:11am Feb 3, 2010 6:11am
Quoting big_pipin
Here is what I ment by three types of s/r.

1. 100 and 200sma's
2. Fib retracement showing s/r levels
3. Andrews Pitchfork showing s/r levels
Nice
Thanks for it.

--------------------------------------------------------------------------------

Hi Sauron
Points taken and thanks.
  • #20
  • Feb 3, 2010 9:29am Feb 3, 2010 9:29am
Quoting pj.waterloo
Hello Scotty B

I am a novice in fx trading, with very little financial knowledge. Just pick up all these recent year.

I enjoy your reply. However I do not quite get what your said especially on
"which PRICE will the market use and find value at?" and " price price price!"

If you may, can you illustrate in simple terms, with some charts/diagrams?

Thank you for your time.
There's no need for me to post any charts. All I'm saying is that MA's, especially the ones you mention will be on the radar of most traders. Their only purpose is to give you a point of reference, or better stated, a price referance. The same is true for any price derived study. If price is moving up and approaching the 100 ema for example, the possibility exists that traders will take interest in that price level for selling purposes. Of course it's not cut and dried, you have to know whats going on in the market at present. If the market is overbought or more importantly, overvalued ,then offering to sell at the 100 ema could be very profitable.

Trading is a highly dynamic thing. To be profitable you need to be able to think about several things at once. Having things like these standard MA's will help you do that. Don't think of them as abstract lines flowing across your chart, but as possible 'special' price points that the market will use.
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