C.B.-- I understand the mechanics of it... but I guess I'm looking for a more "laymen" explanation behind it. In other words, why would I use an EMA over a SMA (or vice-versa) in a trading application? Or is it just a personal thing tailored to the individual trader? Thanks for the link and the kind words. Hopefully I'll be able to keep this journal going for a long time to come.
EMAs are, on balance, closer to the current price action when you need them to be... so they give a better picture of the trend than the SMA...
Thanks Candle, short and sweet. Can I take this to mean that a longer time frame SMA (within the same 3 min. chart), 20 or 40 for example, can be used more for support/resistance than overall trend direction?
Bronks, It a personal thing regarding the use of MA's. I use the 8 SMA for my trading and like the fact it smooths/filters out some of the noise (squigglies) created by the shorter time frames (3 & 5 SMA). Of course the 8 period MA is slower to react due to the longer time frame. If you have the ability to overlay both the EMA and SMA on a chart the difference is usually insignificant. The EMA will increase in slope at a greater rate if there is a violent rise or drop due to the current period price weighting. Play around with the time frames. You may possibly find a different MA that is consistent with your trading methodology. Of course watch out for paralysis by analysis. Have a great day!!!! Later, Cracked
Josh Lukeman wrote a book extolling the virtue of 8SMA http://www.elitetrader.com/bo/index.cfm?action=view&B_ID=12&CatID=1 , another guy swear by 89 MA in current SFO magazine, Don Miller, the QQQ day trader use 5MA and 15MA on 3m chart and charge mucho buck for it and everybody else use 20SMA so probl the diff is how strongly you believe in your MA.
I'm really, really, REALLY pissed at myself today. Everything I did turned to shit. I'll detail it more after I cool off and smoke a pack of cigarettes and jump off my balcony. -10 points / 10 RT's
Bronks, Those slowly grinding trends really suck your blood out. I made 10 trades today. Nearly everyone of them showed a profit at some moment between 1 and 4 points (ES). But nevertheless I was able to end up at the end of the day with a 1.5 point gain. Everything i did was wrong, I let bigger winners evaporate and closed out several trades just before the big move. You're not alone out there. But hang in man, you're close to it. It will not take long any more, before things start coming your way.
Thanks for the support guys, Ditch, Boyd. Everything from taking stops at the most ridiculous places, hitting the wrong keys (I've since moved the last sale quote in between the bid and ask quotes), and especially, bucking the trend. The kicker was not flipping the short I had in the 922-920 consolidation area after it broke to the upside. Then finally buying into the rally at around 932, then covering at 934! Also watching the new 8 EMA I implanted in my chart perform perfectly in the trend. Of course it wouldn't be complete w/out trying to short a few times at resistance areas, in what could quite arguably be the prettiest up-trend looking 3 min chart I have ever seen. Ai carumba! What got me the most upset though, is that I should know better. How long is it gonna take to sink in. Everything I did, I know not to do. OK, my rant is over. Mistake of the day: Bucking the trend, bucking the trend, bucking the trend, bucking the trend.......... just plain idiotic.
Bronks, I wasn't bucking the trend (cost me a lot to learn that), but after a 20 pt move up, I didn't have the guts to go long any more. Maybe a robot can do it, but not me. Don't be to hard on yourself. The human mind is the biggest enemy of the succesfull trader. It takes a hell of a time to overcome that and also bear in mind, that the market will do whatever it has to do, to do the most damage to the most people.