Technical Analysis Course Describes Moving Averages The majority of models are founded on a moving averages system. Some are quite complicated and include many unknowns. Essentially all models draw a bead on the direction of a trend after it ocurrs and will keep you in the market as long as the trend is unchanged . A few moving averages attempt to anticipate changes in trend . These types are profitable to the properly capitalized trader who is able to start a position that is recommended and may be beneath more losing trades. A technical analysis course will teach that the idea behind a moving average ( MA ) is in determining when price direction deviates from recent average prices . As long as the price average is lower than the current price of say the last ten, twenty or one hundred days the trend spins onwards . Most often observed is the 10 day MA of the closing prices. The advantage to this method is that it gives equal weight to each day's price . The MA assumes that the trader bestows as much importance on last week's prices as he does on yesterday's . This doesn't stick to reality . A short term trader's horizon is extremely limited . Commodity prices do vibrate more rapidly than the prices of most other investment forms , so, shorter series usually will do the best. A great MA should: 1) immediately observe a price trend turn and not several days after the turn 2) ensure that the MA plot is not too close to the daily price plots that we get lashed into consolidation or minor swings. 3) the moving MA plot has to be adjustable to the commodities volatility . 4) the MA plot should be response if the limit of the commodity is locked. This approaches problem is that MA lines can be too lazy to use as an indication of reversal. Most of the time, the trading decisions of moving average technicians by price market changes in relation to the line of moving averages . The more sensitivity there is with the MA the smaller the degree and amount of the advance differential and the greater will be the number of buy and sell points , resulting in much whipsaw and consequent small losses as taught by a technical analysis course. Of course , the shorter the time span , the more sensitive is the moving average to a trend termination of a reversal . The action on new trends is quicker and getting established doesn't take as much time. Of course, the trader pays for this sensitivity more often than not due to the fact that, the shorter the MA the larger the trades that are made with greater commissions added to whipsaw losses . This means, moving averages has a delay in showing price trend turns. The delay is usually great than that which occurs when using P&L charting, simple charts, or point and figure charting . This position's main benefit is that users are automatically put on board for each trend with substance ( as all trend following systems do.) More information like this can be obtained from a technical analysis course.
Author:
Charles Drummond is a Canadian trader who has written nine books about trading and has created a technical analysis course called “Drummond Geometry.” His biography and further information about his work can be found at the technical analysis course website.