You must recognize if the market is reversing, ranging or trending when using moving averages because this makes all the difference in how they should be utilized. The vast majority of traders treat them like one size fits all kind of tool which is why they consider them worthless or useless, which is obviously a product of ignorance.
============== Good points; i name them [1] UP-TREND, [2]SIDEWAYS-SLOP-Chop TREND,,[my least favorite trend, AKA range] [3]DOWN-TREND. 50 dma, 50 period ma/1 year chart; 200dma, 200 period ma/1 year chart, =quite helpful ==============================
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MA's smooth the price and show average direction. Had to say this obvious banal information, because it makes one ask the correct questions: do we need smoothed price action/average direction of the price? Yes, it can be useful. As for the particular settings, that's of secondary importance and depends on what is your analysis time horizon.
Cornix, You don't think the MA needs to start from a specific point on a chart, such as a bottom bar (beginning of potential trend) OR specific avg. duration of bottom to bottom bar if you are measuring PA? Otherwise the data can become arbitrary? Thanks. BD
BD, I don't think so, because the purpose of MA is smooth momentum/price action over a certain number of periods. Simple MA just returns average of X periods, EMA does the same but with more weight to last periods. So for me, EMA serves my purposes pretty well, it shows overall direction of the latest price action. And that's exactly what I want to know after a quick glance. Whatever happened before X periods is of lesser importance, because I am interested in the nearest future only (few next 5-min bars most of the time).