This is one question many new traders have.
There are so many places to look, where do i start and what are the best moving averages and indicators to use?
I am an active trader and I have learned all this the hard way. Many years ago.
Most of the time I don’t use any moving averages or indicators on my charts until the last stage of analysis.
I want to form my opinion first then use all the other tools to support or reject my thinking one step at a time.
The most common moving averages are 8, 20 , 50 , 200……….some like to use the 13 ema and 34 sma crossover as a buy sell signal . As far as the Indicators are concerned , the most used and reliable are the Macd , stocastic , and Rsi used together. However, these are not leading indicators and many traders make the mistake of trading solely on their movement.
There is an order of trade that most Professional traders follow .
First ……..decide what time frame you will be trading in…….30 min, 1 hr , day ….. the higher time will dictate the overall trend…….ie:.. if you want to trade the 30 mjn chart look at the 1 hr chart to make sure the overall trend is in the same direction. But once you enter the trade don’t switch times untill the trade is over. Because if you do ,you will get confused.
1. identify the trend …up or down.
2. Then look at the volume. Volume is relative. ….. like the gass peddle (volume) on a car…….if the car is going up a hill and you push (increase volume) on the gass what dose the car do? ….it gose up the hill faster…….the same thing happens when the car is going down the hill and you push (increase volume) on the gass ……..what dose it do? … it gose down the hill faster + gravity.) The markets and stock prices do the same thing.
3. Look to the left of your chart for previous price support or resistance zones ( this is where price reversed direction or spent time going sideways) Step 1, 2 and 3 are the most important things to learn in trading. This is also where you develop your decision when price gets to XXX spot , you may act. Here are a series of charts from my sight on support and resistance zones. click here
4. Then start looking at moving averages………..do they look like they may respond to the support/ resistance zones and support your thinking?
5. Last…….. look at the indicators ….. This is where new traders really miss up and get into the wrong side of the trade…… do not try to trade both sides of the indicators.
If the trend is up only trade signals from the bottom of the indicators …….if the trend is down only trade signals from the top of the indicators…..most of the time the opposite side will give multiple false signals…..
You can also visit my blog at neboxian.blogspot.com
[tags]Ema, Indicators, Iearn, Macd, Moving Average, New Traders, Resistance, Rsi, Sma, Stocastic, Support, Trend, Volume[/tags]