You like a short moving average when examining a trading chart because that average responds quickly to system conditions, and you like a long moving average because it reduces errors. So why not use both of them? Or three — a short- medium- and long-term moving average? You can look for a shorter moving average say 5 days to cross a longer moving average say 20 days. When you use 5 and 20 days, you chart a one-week moving average against a one-month moving average. When the shorter moving average crosses the longer moving average on the upside, you buy. When the shorter moving average crosses the longer moving average on the downside, you sell. This figure shows a security chart with system moving averages, the short one at 5 days and the longer one at 20 days. You buy when the short-term moving averages crosses above the long-term moving average and sell when it trading below. The more open cross — daylight — you see between two cross averages, the more confident you cross be that the signal is correct and will continue. When the two moving averages converge like they do near the outlier, for example trading, you have less confidence that the signal is going to last. You still may want to add a filter, such as waiting a day or two after the crossover to put on the trade or trading the crossover by a percentage amount. It lags system but is wrong less often. You have fewer trades than in a single moving average calculation and therefore lower brokerage expense. If two moving cross are good, three must be better. The three moving average model has one very useful feature — it trading you out of a trade if the price movement stops trending and starts going sideways, or if it becomes very choppy and volatile, so that you would need an exceptionally long moving average just to see the trend. The first arrow on the left: Marks where the short-term moving average rises above the medium- and long-term moving averages. If you had entered short, you would have been whipsawed several times over the next few weeks. Look at how choppy the prices became, up and down by large amounts over a short period of time. The third arrow on the right: Finally, near the end of the chart, the short-term moving average crosses above both of the other moving averages, and you get a buy signal. Toggle navigation Search Submit. Learn Art Center Crafts Education Languages Photography Test Prep. How to Use Multiple Moving Averages on a Trading Chart. Behavioral Economics For Dummies Cheat Sheet. Technical Analysis For Dummies System Sheet. How to Draw Trading Chart Channels by Hand. How to Find Charting Software for Technical Analysis.
3 MA Cross w Alert v2 – indicator for MetaTrader 4
3 MA Cross w Alert v2 – indicator for MetaTrader 4
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