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Why Moving Average?

  • #41
  • Edited 12:56pm Apr 17, 2010 8:51am | Edited 12:56pm
Quoting hefhem911

I know MOVING AVERAGES are basically used to average x numbers of candles, I believe there's still more. I will be happy IF those with vast indicator knowledge data base can help answer my questions.

Am onto something.

 

  1. To gauge whether there are more buyers than sellers (and vice versa) in the market at a given time span (number of moving average). If price is higher than the MA, then there are more buyers. If price is lower than MA, then there are more sellers in the market.

  1. To gauge the increase and decrease of momentum of buyers and sellers. the greater the deviation from the moving average the greater the momentum. Momentum plays a role in assessing the level of risks you are taking.

  1. To gauge the shift from one market condition to another, depending on price deviation from the moving average.

  1. To identify the beginning phase, the middle phase and the exhaustion phase of the market condition.

  1. (More advance uses) To gauge or simplify multi-timeframe into a single and lower time frame. A 120 moving average in a 1 minute chart is equivalent as placing a 2 moving average on an hourly chart. Or a 360 moving average on a 5 min chart is equivalent to placing 30 moving average on an hourly chart.


Cheers

  • #42
  • Apr 17, 2010 8:54am Apr 17, 2010 8:54am
I'd be completely lost w/o MAs. When you have used them for "years and years", you pick up certain nuances about them. The only reason I was able to pick up those nuances is because I used the same MAs for years and I never took them off my charts. I picked up certain nuances a little at a time over the years. I'm amazed at how folks can trade w/ a naked chart with no MAs. All other indicators suck as far as I'm concerned. But it takes years (at least for me) to figure out how to properly use MAs.
  • #43
  • Apr 17, 2010 10:03am Apr 17, 2010 10:03am

  1. To identify the beginning phase, the middle phase and the exhaustion phase of the market condition.


I will like to know more about this if you don't mind.

  • #44
  • Apr 17, 2010 12:42pm Apr 17, 2010 12:42pm
Quoting hefhem911

  1. To identify the beginning phase, the middle phase and the exhaustion phase of the market condition.


I will like to know more about this if you don't mind.

Beginning phase always offers the best positioning, greater opportunity to capture more and offer less risk.

Mid phase, lesser opportunity but not always the case. It is just a cautious sign to keep on your toes.

Exhaustion phase is diminishing opportunity, higher risk, lost of momentum. It is a sign of a phase ending and shifting into a new phase.

For your convenience, instead of chart-picking, I picked a side-way market. Picking a trending chart would have been too easy .

Attached Image (click to enlarge)
Click to Enlarge Name: phases.png Size: 57 KB

  • #45
  • Apr 19, 2010 1:09am Apr 19, 2010 1:09am
Quoting hefhem911
By what evaluating criteria?

why is MACD fast EMA slow EMA and MACD SMA? why not fast(SMA,WMA or SMMA) slow(SMA,WMA or SMMA) e.t.c....? do you know the answer?
Some info on the math behind MACD here.
Links to many free Technical Analysis resources here.
FWIW, my thoughts on S/R vs MAs and other technical tools here.
  • #46
  • Apr 19, 2010 1:41am Apr 19, 2010 1:41am
@hefhem

EMAs are very simple to use thats why I use them, they work like moving fibo,
The power of EMA50/200 is priceless if u know how to apply them on the chart.



@Crucial

If u see ranging market, switch to higher TF u will see why its ranging..
in this example price has ranged because was between daily EMA34/50 and minor support at 1.48 which will be broken within 2-3 weeks.




Quoting CrucialPoint

For your convenience, instead of chart-picking, I picked a side-way market. Picking a trending chart would have been too easy .

Attachment

  • #47
  • Apr 19, 2010 2:09am Apr 19, 2010 2:09am
Moving average strategies are reversion to mean methods, mathematically speaking. Such observation can be found on random data too. Whether an individual sees that as opportunity or not, that is subjective. I remember in two of Market Wizards books, 2 individuals interviewed mentioned the usefulness of MAs.
  • #48
  • Apr 19, 2010 3:12am Apr 19, 2010 3:12am
Any moving average of a trending market can be replaced by a trend line which acts as support or resistance. This kind of line is a leading indicator, i.e. it shows where the price probably will go, while a moving average only shows where the price has been.
During consolidation the moving average is a nuissance because it is usually flat and follows closely the last price. It makes sense to replace it with horizontal S/R lines.
  • #49
  • Apr 19, 2010 3:17am Apr 19, 2010 3:17am
Quoting CrucialPoint
Beginning phase always offers the best positioning, greater opportunity to capture more and offer less risk.

Mid phase, lesser opportunity but not always the case. It is just a cautious sign to keep on your toes.

Exhaustion phase is diminishing opportunity, higher risk, lost of momentum. It is a sign of a phase ending and shifting into a new phase.

For your convenience, instead of chart-picking, I picked a side-way market. Picking a trending chart would have been too easy .

Attachment

From you chart, do you take a first crossover in the other direction as an exhaustion?
  • #50
  • Apr 19, 2010 4:52am Apr 19, 2010 4:52am
Anytime the smallest MA is in between the other 2 greater MA is a sign of weakness of the current phase. Even in a trending market, when dips occur, you will find the smallest MA in between the 2 greater MA. It is a sign of weakness. When it continues to move out again and proceed with the trend, it just means momentum is continuing to build again within the trend.
  • #51
  • Apr 21, 2010 3:46am Apr 21, 2010 3:46am
Quoting CrucialPoint
Anytime the smallest MA is in between the other 2 greater MA is a sign of weakness of the current phase. Even in a trending market, when dips occur, you will find the smallest MA in between the 2 greater MA. It is a sign of weakness. When it continues to move out again and proceed with the trend, it just means momentum is continuing to build again within the trend.
Thanks for the clarification.
  • #52
  • Apr 21, 2010 11:13am Apr 21, 2010 11:13am
MA's of any kind are used to determine slope. Slope or angle, gives you a visual look at
the direction and momentum of price action. When you combine two MA's... i.e. one that looks back further with one that looks back shorter, the longer MA sets a slope and
direction that the shorter MA or more current price action can be measured against. So when current price action bounces or crosses thru the longer MA you can easily deter-
mine the start of new trend or the continuation of an established trend.

Some traders don't like MA's because they lag behind real time price...others of us like them because they give us a good look at buying/selling pressure.

I use them all the time.

dlh
  • #53
  • May 4, 2010 8:42am May 4, 2010 8:42am
Quoting charlyher
What is your IQ level?
What is your current Grade Point in school? 4.0? I doubt it.

MACD is convergence divergence.
You can play your reverse psychology on me.

HOwever, you are a loser and praying for answer.

And here it is.
MACD is use for comparing moving averages.
You take actions base upon moving averages converging or diverging.
If you still don't know that, then you need real education.
oh man! I don't come here that often and when I do, what do you know? someone talking out of his ass. (nod). Disappointing but is good entertaining anyway.
  • #54
  • Edited 10:22am May 4, 2010 9:58am | Edited 10:22am
I was thinking about this myself. I believe MAs, especially crosses, are one of the clearest pictures of market sentiment we have at our disposal. And paying attention to the convergence and divergence of MAs is also an aid in studying price action. Analysis of both of these-i.e. Watching price action after/at a cross or as it forms, allows us to enter in the direction of market sentiment. The price action determines how quickly we can run into profitability however.

I've just reiterated pretty much what everyone before me said, I realize lol. Sentiment, pressure, etc. Same stuff.
Thank you Lux!
  • #55
  • May 5, 2010 1:47am May 5, 2010 1:47am
ma let you easy to see the trend
but that is just one of it's function
you can use ma to get in the trade ,set your stoploss .protect your profit.etc..
it is a simple tool but useful and powerful.
but maybe some one will say
1."ma would fail in the sideway market"
yes,that is true.but most system will fail in sideway market.
use macd will keep you out of sideway market.
and why there are sideway market
becos trends are different than each other in different tf
you can easliy see it with ma
the sideway market would end when price level are "almost the same" in
different tf.it may time to reversal to another direction.
2.ma is lagging
yes ,it is lagging.but why so hurry to get in the trade???
why not wait confirm signal
why not let your ma friend to tell you "hey mate,this is a safe time to get in
the trade,but if fails,use your small stoploss and wait another signal next
time,trust me,i won't let you down .
many people believe if they don't buy the lowest price and sell the highest
price,they would not be not good traders.and if they miss the lowest price
they will think "damn ,i miss it ,even price only up 20 pips.
they will miss the protential long trade or short trade ,again and again.
that is why many people feel pain and panic when they are trading.
becos they can't do the thing what only "God" can do.(buy lowest and sell
highest)
i was there many years ago.
find your won ma ,know it ,trust it,and trade it right way.
you can stay in this game for a long long time.

my english is not good to describe it clearly.
but hope it help.
  • #56
  • Edited 3:56am Jul 31, 2010 12:43am | Edited 3:56am
A lot of function i discover about Moving Average & also a lot of other function i aint discover yet.

http://i937.photobucket.com/albums/a...MAFUNCTION.jpg

http://i937.photobucket.com/albums/a...UNCTION3-1.jpg

http://i937.photobucket.com/albums/a...AFUNCTION4.jpg

http://i937.photobucket.com/albums/a...AFUNCTION6.jpg

http://i937.photobucket.com/albums/a...AFUNCTION2.jpg
  • #57
  • Jul 31, 2010 2:13am Jul 31, 2010 2:13am
I am no expert but i like simple things so heres my thoughts
I just use them as designed.
heres what i do.
If am on m5 chart and want to know the past hour,days moving average price to help me see how fast price is moving .
For the last hours ma, I would divide 1hr by 5minutes that would give me 12. I would put this line on the graph.If price moves away from this line sharply it will return to it at some point. Use the historic information to average the time price spends away from the line.Use this to assist my entries an exits.Also calculate a days ma the same way and use this for trend direction.
hr ma for speed of move (any price moves fast up soon move down just as quick)
day ma for trend (and at least touch if not pass through this line)
put this information in my tool box to help pipfarming.
If there is a more complicated scientific use please let me know because i will never stop learning.
SIMPLE.
just call me simpleton lol .
making green pips large and red pips small this is my goal.
  • #58
  • Edited 4:15am Jul 31, 2010 2:49am | Edited 4:15am
http://i937.photobucket.com/albums/a...AFUNCTION9.jpghttp://i937.photobucket.com/albums/a...AFUNCTION8.jpghttp://i937.photobucket.com/albums/a...AFUNCTION7.jpg
http://i937.photobucket.com/albums/a...FUNCTION10.jpg
  • #59
  • Jul 31, 2010 6:23am Jul 31, 2010 6:23am
I have found that EMA is fantastic for entry, but using same one is terrible for exit. I added JMA (orange line) to attached chart and is great for exiting, which would have resulted in profit, but if used EMA, would have been loss. However, using JMA sometimes cuts off trend before completed, but if so, can re-enter accordingly or wait for next signal. It's more important to cut losers quick than to let winners run.
Attached Image (click to enlarge)
Click to Enlarge Name: eurusd_1hr_ema_jma.gif Size: 40 KB
  • #60
  • Jul 31, 2010 8:37am Jul 31, 2010 8:37am
Moving averages are pure mathematics folks. As far as I know it is the only indicator (besides a trendline) that does not bear someone's name as the inventor. I can't think of an older indicator known to trading. Because it is so ancient and so pure, I don't think it is in the best interests of a trader to ignore it. I am amazed at the traders that trade w/o them; you have my upmost respect that you are able to trade that way.
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