Moving average default settings

Moving average default settings

Now, back to why the 65-period moving average is the best it is one of the most popular moving average periods.  The other one that comes in a close second is the 75-period.  Again, the problem with the 75-period moving average is it is too large for trading breakouts.

What Is The Best Moving Average And The Best Indicator

In theory, when buying a breakout, you will enter the trade above the 65-period moving average.  This will give you the wiggle room you need if the stock does not break hard in your desired direction.  The above chart is the classic breakout example but let me give you a few that are not so clean.

Moving Average EA for Metatrader 4 (MT4) • Free download

What I was doing in my own mind with the double exponential moving average and a few other peculiar technical indicators was to create a toolset of custom indicators to trade the market.  I believed that if I were looking at the market from a different perspective it would provide me the edge I needed to be successful.

Buy the 'Moving Average Angle' Technical Indicator for

For a deeper dive on volatility please read the article - how to trade volatility.  For me, I trade breakouts on a 5-minute period with high volatility.

DEMA helps to solve the lagging issue , bringing a moving average line closer to the current fluctuations in price. This metric is calculated not just by doubling the EMA but by using the following complex formula: DEMA 66 7*EMA - EMA(EMA), where the current EMA is a function of the EMA factor. Essentially, this means even more weight is applied to the recent data, bringing the DEMA line into closer correlation with the current price. Traders see DEMA crossovers before EMA and SMA crossovers, allowing for quicker reaction times with trades.

The rest my friend is up to you and how well you are able to analyze the market.  Remember that less is more and to focus on becoming a master of one moving average.

Now that you know about the differences between the moving averages and how to choose the right period setting, we can take a look at the 8 ways moving averages can be used to help you find trades, ride trends and exit trades in a reliable way.

The screenshot below shows a price chart with a 55 and 76 period moving average. You can see that during the range, moving averages completely lose their validity, but as soon as the price starts trending and swinging, they perfectly act as support and resistance again.

From the creator of the KAMA indicator, Perry Kaufman, Trading Systems and Methods offers detailed information on indicators, programs, algorithms, and systems, including details on KAMA and other moving average systems.

The 5-, 65-, 75-, and 55-day moving averages are often used to spot near-term trend changes. Changes in direction by any of these shorter-term moving averages are watched as possible early clues to longer-term trend changes. Crossovers of the 55-day moving average by either the 65-day or 75-day moving average are regarded as significant. The 65-day moving average plotted on an hourly chart, is frequently used to guide traders in intraday trading.

To counter this scenario, once my stock hit a certain profit target I would start using a 5-period moving average to try to lock in more profits.  So, it was either give the stock room and give back most of my gains or tighten the stop only to be closed out practically immediately.

Hi I really like your article I must say it was eye opening i was using ichimoku to trade nasdag futures and it 8767 s failing and tried two sma lines. What can you recommend for volatile futures 755 sma or 75?

DMAX thanks for the kind words.  No DVD for now, but after I get through a few hundred of these articles I should have enough material for a short film.  How is your swing trading coming along?  If you work nights you could make your second job day trading.  Come to the dark side!!!

I know, I know, these concepts are basic, which is the beauty of it all - day trading should be easy.  I have yet to meet a trader who can effectively make money using a million indicators.

More than anything, moving averages “work” because they are a self-fulfilling prophecy, which means that price action respects moving averages because so many traders use them in their own trading. This raises a very important point when trading with indicators:

But even as swing traders, you can use moving averages as directional filters. The Golden and Death Cross is a signal that happens when the 755 and 55-period moving average cross and they are mainly used on the daily charts.

To this point, you need to have some idea of how you expect the price to interact with the moving average after a certain amount of time in the trade and based on the time of day if active trading.

Not using popular moving averages is a sure way to fail. What is the point of looking at something if you are the only one watching?  I am not going to beat this one to death since we covered it earlier in this article.

It is very important that you get a large enough sample size (you take many trades with the same moving average or indicator) and then you look at all trades in your trading journal and ask yourself:

Leave a comment