{"id":15779,"date":"2010-11-23T16:30:53","date_gmt":"2010-11-23T21:30:53","guid":{"rendered":"http:\/\/countingpips.com\/fx\/?p=15779"},"modified":"2010-11-23T16:30:53","modified_gmt":"2010-11-23T21:30:53","slug":"discover-the-dynamics-of-using-moving-averages","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/fx\/2010\/11\/23\/discover-the-dynamics-of-using-moving-averages\/","title":{"rendered":"Discover the Dynamics of Using Moving Averages"},"content":{"rendered":"

How to Spot High-Probability Trading Opportunities <\/span><\/h3>\n

By Elliott Wave International<\/span><\/h3>\n

The “moving average” is a technical indicator which has stood the test of time. Nearly 25 years ago, Robert Prechter described this indicator in his famous essay, “What a Trader Really Needs to be Successful.”<\/em> What he said then remains true today:<\/p>\n

“…a simple 10-day moving average of the daily advance-decline net, probably the first indicator a stock market technician learns, can be used as a trading tool, if objectively defined rules are created for its use.”<\/em><\/p><\/blockquote>\n

Indeed, “objectively defined rules” are vital to the successful use of moving averages. And as you might imagine, advanced rules and guidelines work to the benefit of more advanced technicians.<\/p>\n

What is<\/em> a moving average? As EWI’s Jeffrey Kennedy puts it, “A moving average is simply the average value of data over a specified time period, and it is used to figure out whether the price of a stock or commodity is trending up or down.”<\/em><\/p>\n

Jeffrey also says, “One way to think of a moving average is that it’s an automated trend line.”<\/em><\/p><\/blockquote>\n

A 15-year veteran of technical analysis, \u00a0Jeffrey wrote “How You Can Find High-Probability Trading Opportunities Using Moving Averages.”<\/strong><\/em>
\n[Descriptions of the following charts are summaries from that eBook]:<\/p>\n

Let’s begin with the most commonly-used moving averages among market technicians: the 50- and 200-day simple moving averages. These two trend lines often serve as areas of resistance or support.<\/p>\n

For example, the chart below shows the circled areas where the 200-period SMA provided resistance<\/strong> in an April-to-May upward move in the DJIA (top circle on the heavy black line), and the 50-period SMA provided support<\/strong> (lower circle on the blue line).<\/p>\n

\"Popular<\/p>\n

Let’s look at another widely used simple moving average which works equally well in commodities, currencies, and stocks: the 13-period SMA.<\/p>\n

In the sugar chart below, prices crossed the line (marked by the short, red vertical line), and that cross led to a substantial rally. This chart also shows a whipsaw in the market, which is circled.<\/p>\n

\"\"<\/p>\n

Jeffrey’s 33-page eBook also reveals a useful tool to help you avoid “whipsaws.”<\/p>\n

You can read the first two chapters for FREE for a limited time, once you become a Club EWI member.<\/p>\n

The first two chapters reveal:<\/p>\n