John Murphy's Ten Laws of Technical Trading

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overview:john_murphy_ten_laws_of_technical_trading [2019/06/24 19:38]
127.0.0.1 external edit
overview:john_murphy_ten_laws_of_technical_trading [2020/03/11 18:49] (current)
betseyp [6. Follow that Average]
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 ===== 6. Follow that Average ===== ===== 6. Follow that Average =====
  
-**Follow moving averages.** ​Moving ​averages provide objective buy and sell signals. They tell you if the existing trend is still in motion and they help confirm trend changes. Moving averages do not tell you in advance, however, that a trend change is imminent. ​A combination chart of two moving averages is the most popular way of finding trading signals. Some popular futures combinations ​are 4and 9-day moving averages9- and 18-day, 5- and 20-day. Signals are given when the shorter average line crosses the longer. Price crossings above and below a 40-day ​moving ​average ​also provide ​good trading signals. ​Since moving average chart lines are trend-following indicatorsthey work best in a trending market+**Follow moving averages.** ​Price moves above or below moving ​averages provide objective buy and sell signals. They tell you if the existing trend is still in motion and they help confirm trend changes. Moving averages do not tell you in advance, however, that a trend change is imminent. ​In stock trading, ​the three most important ones are the 20-day average for short-term trends50-day for intermediate trends, and 200-day for major trendsCrossings of two moving ​averages ​also provide trading signals. ​Three popular combinations ​are 5-20 days20-50 days, and 50-200 daysExponential moving averages (EMAs) are usually more suitable for 
 +spotting moving average crossings.
 ===== 7. Learn the Turns ===== ===== 7. Learn the Turns =====