The MA question comes up pretty often. So one has to ask, what exactly are people looking to INDICATE. Seriously, this is such a basic question but gets skipped almost every time by the newbies. Newbies think some aspect* of a MA will, for instance, INDICATE a time to buy or sell. INDICATE a change of direction * MA penetrating, or combinations of MA crossing over, etc. So they fiddle with the parameters, time frames, sampling, smoothing etc. Then these things don't work reliably enough (<70%), then say they don't work or think they need to adjust the parameters or maybe use some more complex derivatives such as MACD. Looking for the secret sauce, the right alchemy. So I will throw this out, what if your basic assumption on what they indicate is wrong. One does not go into a fast food restaurant looking for a high end steak or fish. No matter what you order, or how many modifications you make to your order, you will not get it. PS: It is almost as if newbies want to jump to the conclusion with INDICATORS, they just want them, to tell them when to buy and sell.
%% Good coffee @ MCD+ Tacos @ Taco Bell. I tend to like my fish a bit more simple/LOL 50 dma is working well today as of 12;12 CST, they are selling based on yesterdays close\50dma . BUT i dont have an opinion on SPY right now+ buying some tech etfs, fewer inverse tech ETFs; most of what im buying is above 200 dma, so they can pay well sometimes. NOT a newbie , not bank insured/ but i did learn to read with Dr Suess......../LOL,
%% LOL\ FOX in SOXS?? ANTI Fox network?? LOL, NO wonder that marxist mob hopes every body gets illiterate + easy to command/LOL.....................................................WE could put a moving average on that mob+ slam them down like a polar bear/brown bear slams down its food.
MA helps me daytrade. Place MA on a range-bar chart and have fun!! For swing trading MA helps me manage risk. When I have a long position for example and the market trends against me (below MA) I wait for pullbacks close to MA to reduce my position. When the market still trends against me I usually buy back when it falls far enough from MA. When it pulls back I sell again. When 2 MAs cross into the bullish regime I wait for pullbacks to load up again. It's just trading around "core position". No magic. Works 100 %? No, because nothing does
MA is useful in giving a rough idea of where the price is going based on how it's been behaving over the time periods indicated. How you use it to trade is a different story. Just because it wasn't useful or helpful in one's trading endeavour doesn't mean that the indicator itself is bad. A car is extremely useful in getting us from point A to point B but if you don't know how to drive it, it's completely useless if not dangerous. Does it mean the basic assumption of the car is wrong? An indicator is not something you consume; it's something that you use. It's a tool. You have to know how to use a tool in order to enjoy what it can offer. MA is no different.
For newbies, use an invisible indicator as an indicator. Better to start trading with the mind free from contamination from the indicators. the market moves in various shapes/sizes/forms/speed .... There is no such thing as one-size-fits-all MA thing.
From my experience, observations, the following are how MAs are interpreted: 1. Newbs who just read a book or 2 on "how to make money trading...": They think buying/selling when prices cross MA will be good enough to quit their day jobs and make money, as long as they find the magic parameters. 2. Trading "Educators": "MAs are only useful if you use a shitload of them," e.g. have at least 6 of them so that you can create a kickass backtest curve to entice the above mentioned newbs into paying subscription fees. 3. Quants with PhD's, and maybe a year or 2 of losses: MAs alone are useless, the KEY is their slopes! Also, backtesting MA "strategies" is only useful if you optimize with "machine learning". 4. From the few seasoned traders I know, something I agree with: MAs are an OK, rough method for quantitative risk management. E.g. if you're bullish something, you could reduce exposure if it drops below MA, and put-it-back-on if it crosses back above. This way you reduce your chance of significant draw-downs, while minimizing opportunity cost.