I've recently had a few traders tell me about price moving average strategies their currently exploring. Some even ask how or if I use price moving averages. Here's my question to traders (Equities or Futures)...how do you use price moving averages in your intraday trade setups? Also...lets leave out the "I've heard or I've read or BackTesting" stuff. Simply...what does the price needs to do in their relationship to the moving average or the relationship of the price moving average to another indicator or the price moving averages among themselves... to merit a position entry or position exit for you? Before you reply...remember this...if it works for you (makes you consistent money)...keep using it and don't assume if somebody else is using price moving averages...differently...is doing something wrong...especially if they are making money.... because the road to profits has many paths. Note: Exponential Price Moving Averages are a part of my trade setup...an equal part. To get this started...here's the basics of my price moving average setup: I use exponential moving averages. I've played around with simple and weighted...but just felt more comfortable with exponential numbers. My numbers for trading are 5eMA, 10eMA, 50eMA and 200eMA. The 5eMA and 10eMA will often (not always) decide upon the entry if confirmed by other indicators. The 50eMA and 200eM will often decide upon my exit if confirmed by other indicators. In addition, I use the 50eMA and 200eMA as profit-targets along with Bollinger Bands. They also have a say-so in a particular sit-on-the-sidelines situation...more info below. Now...why did I bring up Bollinger Bands when this discussion is about finding out how other traders use or value Price Moving Averages? You see...the middle line of the Bollinger Bands is a simple moving average often called the basis line. Thus, I actually use 4 price exponential moving averages and 1 simple moving average based on the number 20 in Bollinger Bands...the basis line. To try and keep this post simple as possible. I have a trade setup that catches my eye when I see my 10eMA crossing the BBand Basis Line (that 20MA I spoke about earlier). I have another trade setup that catches my eye when I see a crossover among 2 or more of the above averages...if the follow thru continues...some call it a Bow Tie. I have a trade setup that catches my eye when I see a strong candlestick peaking in a counter-thrust that crosses over a eMA or BBand Basis Line and suddenly in the next candlestick...it reverses to continue the original direction. (strong candle closes on one side then the following candle closes on the opposite side of the eMA or Basis Line). I have a few trade setups that keeps me out of trouble trades.... I don't take positions near the 50eMA in tight-trading ranges. Weird stuff happens. Also...more often than not...I won't take a position between the 50eMA-n-200eMA. Weird stuff happens. Simply...it didn't take me long to realize where most of my losses were occurring at...during those trade setups when weird stuff happens. Now during such periods when the price is between the 50eMA-n-200eMA...more often than not...I'm on the sidelines watching. With all that is said above...I trade the Emini Futures. I trade via the ALL SESSION settings because I'm not a big fan of gap strategies (between yesterday's close and today's open). I have side by side the 1min, 3min, 15min and daily charts on my monitors. Most trade decisions are via the 1min and 3min charts and I usually switch to the 15min chart if its a very strong parabolic trend. The daily chart is often used as my overall trend indicator. Don't ask me for any specific criteria about the trade setups briefly mentioned above. You won't get an answer nor charts. I think we are smart enough to review any trade setup and develop our own specific criterias for integration into our own style of trading. Remember...I and many others really want to hear the basics of your Price Moving Average strategies. If you want to provide in-depth details (criterias) to your trade setups...go for it. Good luck and good trading. P.S. Lots of I's in this post...I'm too lazy to fix that. NihabaAshi
I use three MA for intra day signal on high volume stock. The MA used are 4, 9 and 18 . I look for triple crossover on 15 minute chart. I also use bollinger band . The system works well on certain stocks.
I'm using them today and having a blast. It's amazing how much fun you can have when you only trade one contract. All I was doing was trading a simple 10 over 30 crossover on the 1 min chart. But instead of taking the trade, I would try to enter at a discount. Now all I need is a scarf and a big old shopping bag, cause this is little old lady trading at it's finest. Well, gotta go before the averages catch up with me.
The trick with moving averages is to avoid the choppy days, which is, of course, tough. Today it was fabuloso. This summer it was a slow bleed.
bone, take a look at this. By the time you get a crossover, it's too late and prices are at bad levels. But if you hang in there tough at a limit at the crossover or better, you can often get filled and still be on the right side of the trade. Of course this methods risk is that you will miss the big move which is the crossovers claim to fame. I chart the crossover as support or resistance, and then you still need to read the market and trade smart. When it's all said and done, the statement should reflect the actual crossover values instead of where prices were when the crossover occured. Just an idea. Let me know what you think.
I use a 4,9 and 20 on a 5min chart with a 15 and 30 min chart to look for support and resistance levels to use as targets for my intraday trading. My so called filter to try and keep the chop to a minimum is entering only when range expansion takes place either through the 20 or off the 20 . I love to see that long candle. I use sma only because I feel more comfortable with them.
right shaq, I blew up a pretty serious account trading a straight by the rules crossover system. (That was when it was $500 a point and you had to wait for someone to pick up the phone.) But when I was looking for a better way to peg support and resistance, I started using ma and just using any cross, price or another ma as support or resistance, and found those to be reliable guides to trade off of. Do you use stops? If so, money or other? Or once you are in do you just stay with it? Do you take profits or wait for a crossover?
I use stops for initial protection...(since I trade mainly NYSE with a minimum ATR of 1.5)...i use trade sizes divisible by 3 and immediately put in my stop along with a limit order for a gain on 1/3 position equal to my stop...so if my initial stop is say 30cents i put in a limit to sell 1/3 at a 30 cent gain, then I move the stop on another 1/3 to breakeven..this in effect gives me a free trade with 2/3 of my original position...I pretty much then just play it by feel.....using the 20 as my support...since I'm using the 5 for entries and exits ...still working on a more mechanical exit strategy but at least its in trades where psychologically my mind is less stressed because the feeling of a free trade is there....using expansion of range as a guide mostly.
One other thing is that I use the slope of the 20sma as a sort of filter also..for a long I need to see it turned up and to short I want to see it heading down...when its pretty flat I sit on my hands. For my exits I am always looking for range expansion ...if I get a spike and then a ledge holding until the 20 catches up then I feel real comfortable holding longer and looking for a move off the 20 again...If I get a spike(range expansion) where price moves far above the 4, I usually take 1/3 then but will add the 1/3 back on a move back to the 20. I should mention that volume has to occur with the range expansion... I like to see the volume for the 5 min expansion candle be easily identifiable as the most volume since the contraction started. I'm kinda using Tony Crabels stuff on contraction and expansion and the trading it similar to his opening range breakout methods. The reason for the 15 and 30 min charts is to see where the trend has been ...I run all my charts for a 5 day period.
I think someone did a long study on the S&P which showed over time all straight crossover systems were net losers. You can try to make them profitable by making everything complicated, or sounds like you have the right idea. Use them with a little common sense and skill. I liked what I was trying today. Wait for a crossover and try to enter on a pullback. We'll see if it has any future, or if it is just another case of trading under a favorable slope of the bell curve.