Trading Tip: 35

Moving Averages

Moving averages (M/A's) are something every trader should be using to help monitor the trend. Which of the 1000's of possibilities you should use depends on which ones you feel comfortable with.

As some of you know, Normally trade off the daily charts and drop down to a 4 hour chart when you are looking for an entry opportunity. Just to be clear on this... the signal comes from the daily chart, but watch for a pull back on the 4 hour chart to make a move.

Monitoring the trend, Watch for signs of exhaustion. When this happens, the exponential M/A tends to flatten out, and you use this as a signal. First the 20 period will flatten and once the 40 period has also done the same, it's likely time to get out.

Prefer an exponential M/A over a simple M/A because it is a little more in tune with the current market situation, as it places more value on the most recent price action.

The important thing to remember is you need to find the right combination of signals to suit your style. Trading is about building a system which gives you edges in the probability game.