Steve Burns, Holly Burns
A moving average will be the average price for a trading instrument over a set time frame. They help smooth out the price action, and focus on where the current price is trending in relation to an average price, over the trader’s time frame. (Location 96)
Moving averages are one of the building blocks for other technical indicators like Bollinger Bands, MACD, and the McClennan Ocillator. (Location 100)
An exponential moving average (EMA) gives greater weight to recent prices, to make it more reactive and faster to adjust to price action. An EMA changes faster to account for recent price action, and gives traders faster entry and exit signals than a simple moving average. (Location 107)
Don’t get caught up in the differences or importance of these types of moving averages. In the long run, it will be the principles of your trading and the quality of your trading signals that create profitability, more than which type of moving average is the ‘best’. (Location 114)
Moving averages are an unbiased trend indicator. Trend lines are subjective, moving averages are quantifiable facts. (Location 119)
In uptrends, price tends to stay above a key moving average. In downtrends, price typically stays below the key moving average. (Location 128)
This line is one of the biggest signals in the market telling you which side to be on. Bull above, Bear below. Bad things happen to stocks and markets when this line is lost. (Location 151)
Moving averages work best in low volatility markets. The more volatile the market the less respect moving averages will be given as emotions take over market participants. (Location 155)
I use moving averages on the daily chart: the 5 day EMA, 10 day EMA, the 21 day EMA, the 50 day SMA, 100 day SMA, and the 200 day SMA. (Location 165)
“I have one strong rule and that is when it comes to a stock if it’s above the 200 day moving average, I’m gonna be long it, and if it’s below it, I’m either not gonna own it or I’m gonna be short it, period end of story and I just let that govern every single thing that I do.” (Location 172)
While fundamental analysis is the study of a market’s potential value, technical analysis is the study of the behaviors of the participants trading in that market. (Location 180)
Moving averages is a price filter for traders to get a wider view of trends than just price alone. (Location 184)
Your goal as a trader is to develop ways to capture trends inside your time frame, through quantified methods based on proven principles and backtested market studies. (Location 186)
Moving averages are not very useful tools for swing trading tightly range bound markets. They are primarily for trading trends or deep swings inside of long term trends. (Location 224)
High volatility is the biggest enemy of trading with short term moving averages on a daily chart, because they are not respected during price range expansion and can cause multiple losing trades before catching a winning trade. Using moving averages of longer time frames like the 50 day, 100 day, and 200 day is a way to filter out much of the noise on the intraday and daily charts, but the trader will have to accept larger drawdowns in account capital during the volatile price moves, even in stronger long term trends. (Location 233)
The 5 day exponential moving average is a tool for capturing strong momentum over a 5-10 day trading period. It is best used in conjunction with a strong bullish candle, a breakout over a key long term moving average, or a breakout of a trading range. (Location 275)
Profitability from this moving average is by riding trends over multiple days for large wins, and taking small losses quickly when the line is breached. (Location 334)
The 10 day EMA can be used as a long signal only if the long term trend is up as measured by the 200 day SMA, (Location 340)
The probability of catching a trend increases when a combination of moving averages are broken, like the 10 day EMA and the 50 day SMA, or the 10 day EMA and 200 day SMA. (Location 343)
When using the 10day EMA, it is good to lock in profits using oscillators when price gets far extended beyond the 10 day EMA. The 30 RSI is a great place to lock in short trades, and the 70 RSI is a great place to lock in long trades. (Location 345)
Most good trends start with some type of momentum: a gap in prices, a break over a longer term moving average, or a large candlestick at the beginning of a trend. There is generally a momentum ignition signal before a long run in a stock or market that has enough strength to stay on one side of a short term moving average. (Location 349)
The 70 RSI is a great place to exit to maximize profits with stock indexes and big cap stocks. (Location 358)