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BEST Moving Averages That Will Make You Tons Of Cash (For Day Trading Forex & Stocks) - YouTube
Channel: The Secret Mindset
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Hey guys, let me ask you a quick question.
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Take a look at this chart with a 200 exponential
moving average and try to find out what determined
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the price to reverse right in this area and
was unable to move higher?
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What hides there and what is so important
in that area that made the price reverse and
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go the other way?
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You could say that this is an area of resistance
from the previous swing, and you would not
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be wrong.
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But there also something else hiding around
that area.
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And that’s another variation of a 200 moving
average, and more specifically the 200 Hull
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moving average.
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And here it is, a perfect short opportunity,
at an area of confluence, with the previous
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swing and the 200 Hull moving average.
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I‘m sure that many of you don’t use other
types of moving averages besides the simple
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and exponential ones, but in this video, we’ll
discuss about the other moving averages you
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should start paying attention to if you want
to spot this kind of areas on your charts.
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So, the moving average is probably the most
well-known and heavily used indicator in technical
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analysis because it effectively captures the
trend in an easily identifiable manner.
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Moving averages are used to calculate the
average value of the price over a determined
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period of time and are extremely popular among
trend following traders.
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Here are the main moving averages used by
traders:
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Simple moving average – SMA
The simple moving average (SMA), the most
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common one, represents an average of the closing
price over a specified number of periods.
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The simple moving average is more stable and
signals the changes in price movements in
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slow fashion.
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For you to see the differences between the
moving averages, we’ll plot these averages
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on the same chart and we’ll use a 50 period
in our analysis.
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Exponential moving average (EMA)
Then we have the exponential moving average
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(EMA).
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EMA gives a higher weighting to recent prices.
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The shorter the EMA’s period, the more weight
that will be applied to the most recent price.
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The calculation method of an exponential moving
average is much more complicated compared
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to a simple moving average.
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The most important thing to remember is that
the exponential moving average is more sensitive
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to the recent price dynamics.
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Triple exponential moving average – TEMA
Now, things begin to get interesting.
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Here we have the triple exponential moving
average – TEMA.
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The triple exponential moving average (TEMA)
seeks to reduce the lag of a typical exponential
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moving average by tripling the weighting of
recent prices.
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TEMA responds to market movements quicker
than the SMA or EMA.
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Then, we have the adaptive moving average
– AMA
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The adaptive moving average (AMA) was created
to improve the original exponential moving
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average.
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The adaptive moving average multiplies the
weighting of an EMA by a volatility factor.
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Thus, AMA adapts more quickly to the market
by signaling when volatility conditions change.
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Its main advantage over other moving averages
is the fact that filters the noise in the
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trend and automatically changes its speed
considering the market volatility.
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Then, we have the Hull moving average – HMA
Hull moving average (HMA), was developed by
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Alan Hull, is a fast moving average, responsive
and with reduced lag.
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Hull used several weighted averages in calculating
this moving average and claimed that this
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formula reduces market lag and increase smoothness
at the same time.
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Another type of moving average is the weighted
moving average – WMA
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The weighted moving average (WMA) was designed
to find trends faster but without whipsaws.
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The weighted moving average offers more relevance
on recent price moves and reacts more quickly
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to price movements than the simple moving
average or exponential moving average.
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And finally, the Jurik moving average – JMA
Jurik moving average (JMA) is used by some
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institutional traders.
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Jurik claims that the jma is a powerful adaptive
tracker that can smooth time series data with
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very a small lag, no overshoots and no oscillations.
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Traders use different settings of moving averages
for different reasons.
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Some are interested in the long-term trend,
others want to trade based on the short-term
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trend.
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The length input of a moving average depends
on the objectives of the trader.
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Shorter moving averages are used for short-term
trading while longer-term moving averages
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are used by long-term investors.
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Taking into account the length of a moving
average followed by traders, there are 3 categories
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of moving averages:
First is the long-term moving averages – 200EMA,
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365 EMA
The most common exponential moving average
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is the 200 EMA and many traders apply it on
daily charts.
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It is believed that many institutions like
banks, hedge funds, forex dealers are following
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this indicator.
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If we take a look at this indicator on any
currency pair, commodity, market index or
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even cryptocurrencies, we can immediately
see its value.
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Then, the medium-term moving averages – 50EMA,
100EMA
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Many traders prefer to use the 50-period moving
average (50EMA).
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This is considered a faster moving average
as fewer input periods are used.
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The primary effect is that this moving average
will react more to medium-term movements.
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50 EMA is considered one of the most effective
trend indicators, offering also dynamic support
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and resistance levels on a chart.
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Also we have short-term moving averages – 10EMA,
20EMA
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Short term mas are preferred by traders that
want to trade with current market momentum.
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The most common short term exponential moving
averages are 10EMA and 20EMA.
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These EMAs react the fastest to price movements.
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Fibonacci moving averages – 5,8,13,21,34,55,89,144
EMAs.
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Some traders often take their input values
for EMAs from the Fibonacci sequence.
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Most common Fibonacci-based exponential moving
averages are 5EMA, 8EMA, 21EMA, 55EMA, 144EMA
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and so on.
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Traders must keep in mind that exponential
moving averages are lagging indicators as
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they are based on past information.
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200MA will have a much greater lag compared
to a 50MA because it includes market prices
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for the past 200 periods.
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The short-term EMAs respond more quickly to
new price changes, but at the same time offer
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more false signals.
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So, a trader must find a balance when using
exponential moving averages.
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Choosing one of the types of moving averages
depends directly on the style and preferences
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of each market participant.
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A simple moving average responds more slowly
to new price changes, while exponential moving
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averages or weighted moving averages provide
a larger number of trading signals, many of
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which may be false.
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So, it all depends on your trading style and
your trading objectives.
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If you got any value from this, please consider
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this video, as it would help us a lot in the
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Until next time
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