Different views of the 200 day SMA? | Forex Factory

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Different views of the 200 day SMA?

  • #1
  • First Post: Oct 10, 2012 6:35am Oct 10, 2012 6:35am
Hi there,

when a trader puts 200-day SMA indicator on his chart he is probably hoping to see that indicator that market has great respect for, but not all traders see the same exact thing. That is because some are using 40 week SMA, some have 6 trading days in a week... and readings obviously differ.

OK-ey, the difference isn't zillion pips, but still... it might be quit important for those who use daily MA's as possible entry/exit signals.

This issue is of course also related to trend lines, channels, etc. What I wanted to ask is how do you cope (if you have to) with issues like this? In other words.. do you consider only what you see or also things that others might see?!

http://s5.postimage.org/oqwcj0phv/200dma1.gif

http://s5.postimage.org/bo0pzqz9v/200dma2.gif
  • #2
  • Oct 10, 2012 7:22am Oct 10, 2012 7:22am
Quoting ARTjoMS
Hi there,

What I wanted to ask is how do you cope (if you have to) with issues like this? In other words.. do you consider only what you see or also things that others might see?!
Very interesting question and one that has kept me busy for long time. In my trading I am using MAs as areas of moving support/resistance although at smaller TFs than Daily. I have found that the best approach is to learn what most people use and focus on just a few of those, since there is always an MA that price will bounce from. Just choose your preferred timeframe and start testing different MAs until you are satisfied. There is no universal MA, but the most observed ones are the ones that increase the probability for price reaction on them.

P.S. If you are not planning to present a system using the 200SMA here, then this thread should be moved to trading discussion section.....
  • #3
  • Oct 10, 2012 7:52am Oct 10, 2012 7:52am
Indeed, only now mentioned it is in "Trading systems"... my bad.

What is 200sma equivalent on smaller TF's?! I tried to... but I couldn't find any with so much respect.
  • #4
  • Oct 10, 2012 1:34pm Oct 10, 2012 1:34pm
Quoting ARTjoMS
Hi there,

when a trader puts 200-day SMA indicator on his chart he is probably hoping to see that indicator that market has great respect for, but not all traders see the same exact thing. That is because some are using 40 week SMA, some have 6 trading days in a week... and readings obviously differ.

OK-ey, the difference isn't zillion pips, but still... it might be quit important for those who use daily MA's as possible entry/exit signals.

This issue is of course also related to trend lines, channels, etc. What I wanted to ask is how...
I think your view on the Moving Averages is flawed.

an average is just that.....an average whether arithmetic mean (SMA), weighted, exponential, or geometric mean, they all denote the mid, typical, or roughly an idea, it is a starting point.

it is a good idea to have a background or learn some statistics because basically a chart IS NOTHING MORE than statistics visually represented.

when you plot a SMA basically you are keeping a constant arithmetic mean of N periods. In my view this is done to get an idea of fair value in a system that the population varies or deviates aka volatile.

now the SMA is measuring the averages of N periods and in the case of a chart N periods = some sort of candle that indicates time.

an average of 24 in an hourly chart is the sum of all 24 previous candles divided by 24 to tell you about roughly what it has been trading for the past 24h.

a daily chart N represents a full trading day.

200 SMA is not a magic or even important SMA at all it averages the last 200 but 200 of what? days, hours, weeks, months depends on your candles. on a daily chart is roughly 9 months, on an hourly chart is 8 days, and so on.

indicators tell you what you want them to tell you, and every model is only as good as your assumptions.
AVT INVENIAM VIAM AVT FACIAM
  • #5
  • Oct 10, 2012 1:42pm Oct 10, 2012 1:42pm
nevertheless mean reversion is still a powerful concept.
  • #6
  • Oct 10, 2012 4:32pm Oct 10, 2012 4:32pm
Quoting the redlion
200 SMA is not a magic or even important SMA at all it averages the last 200 but 200 of what? days, hours, weeks, months depends on your candles. on a daily chart is roughly 9 months, on an hourly chart is 8 days, and so on.
It is not you who will decide what is "magic or important", but market. Besides, there is NO "magic or importance" behind 200 day simple moving average except so many people look at it and it amazingly often acts like support/resistance level.

Why it is 200? I don't know and I couldn't care less.

If you are saying there is no magic behind 200 day SMA you are also saying there is no magic of previous support levels, Fibonacci, trendlines, etc.

I find your post long, off topic and of no value. Please be kind and stay aside next time - you are ruining a thread.
  • #7
  • Oct 10, 2012 10:35pm Oct 10, 2012 10:35pm
Quoting ARTjoMS
It is not you who will decide what is "magic or important", but market. Besides, there is NO "magic or importance" behind 200 day simple moving average except so many people look at it and it amazingly often acts like support/resistance level.

Why it is 200? I don't know and I couldn't care less.

If you are saying there is no magic behind 200 day SMA you are also saying there is no magic of previous support levels, Fibonacci, trendlines, etc.

I find your post long, off topic and of no value. Please be kind and stay aside next time...
actually.... you need to understand what I posted, obviously you have your head up your ass. You will find out soon enough, and I could care less how much money you lose while you are at it.

I will leave your thread alone since you have no desire to learn.
AVT INVENIAM VIAM AVT FACIAM
  • #8
  • Oct 10, 2012 10:46pm Oct 10, 2012 10:46pm
Quoting the redlion
actually.... you have your head up your ass. You will find out soon enough, .
COOL !!! You're beginning to sound just like me.

I like it !!! Keep it up.

c... I cn teach !
When the Joker is in the deck.. fear not and play it well
  • #9
  • Last Post: Oct 10, 2012 11:32pm Oct 10, 2012 11:32pm
I use the golden cross mainly for confirmation that the move is over.
since it was voted the best indicator, it hasn't worked well ever since.

I think there is a law that says when something is closely observed the chances of it working are greatly diminished.
wo-yoy! wo-yoy! wo-yoy! wo-yoi! wo-yoy-yoy-yoy!
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