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Posted by domingo hunter on November 2, 2007, 7:55 am
Just about every trader at one time or another has used some form of
moving averages. Some common ones are the 8, 13, 20, 21, 34, 50, 89,
100 and 200 period averages. There are also many types such as,
simple, exponential, weighted, displaced etc... Traders use moving
averages in two ways. First it helps them identify the trend so that
they can be trading in the right direction. Second, many traders will
look for two moving averages to cross over each other as this gives
them a entry and exit strategy.
I spent my first year in the markets studying moving averages and
initially thought I found the keys to the vault until...
I found a lot of holes in using them! I eventually gave up on them
as they were just not reliable enough for me. The bottom-line is they
only seemed to work in markets that trended very strongly and
smoothly. And as you may know the markets only move this way about
30% of the time. This means that the other 70% of the time they
either missed trades or took a beating.
Well flash forward 15 years and just out of a whim, I threw up a
particular moving average combination and couldn't believe what I was
seeing. For some reason I was able to see a particular trade setup
happen over and over again that had alluded me years before. As they
say there is no substitute for experience and I think all my years
spent staring at charts allowed me to see this opportunity clearly for
the first time.
http://forexbt.reallyrules.com/trade.htm
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