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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 4- and 9-day moving averages, 9- 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 indicators, they 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 trends, 50-day for intermediate trends, and 200-day for major trends. Crossings of two moving averages also provide trading signals. Three popular combinations are 5-20 days, 20-50 days, and 50-200 days. Exponential moving averages (EMAs) are usually more suitable for |
+ | spotting moving average crossings. | ||
===== 7. Learn the Turns ===== | ===== 7. Learn the Turns ===== | ||