In this video, I'm taking a look at how to treat it, exponential moving averages.
So moving averages one of the most common indicators that you will see in technical analysis and a moving
average looks basically like this.
It's a squiggly line that goes up and down.
And what it is, is a mathematical equation that's being figured out for you, it's plotting every time
there's a candlestick formed and then it connects it also it just looks like a line.
And the idea is gives you the trend.
It shows you if.
Perhaps momentum's picking up that type of thing.
So in order to do this, you need to click on indicators and strategies.
And you can type in e m a which moving average exponential, I'm going to put four.
On the chart, for the purposes of this video, I want to go ahead and click these eyeballs.
And on this one, on the INMA exponential moving average, nine period, based on the clothes going
to change the color to blue.
OK, and you can see that the moving average does, in fact, go up and down with the average price
of the clothes at the candlestick, obviously prices are rising here.
So you would expect the nine.
Emma to rise right along with it.
You can also put other moving averages on, so, for example, let's go to this next one, click settings.
Changed color to red, make it a little bit more easy to see, input's will change to 20.
So this would measure.
The last 20 candlesticks.
It's a little slower and therefore it gives you a little bit of a longer term outlook.
Now, there are a multitude of ways to use.
Moving averages, so, for example.
Notice that the 20 seems to be offering selling pressure, and then once the market breaks above it,
it seems to be offering support that's known as dynamic support resistance.
And you'll see it time and time again.
The 20 day in this case, moving average is one that a lot of people pay attention to.
There's also a.
Crossover system, and this is probably one of the oldest trading systems out there.
And what happens is one of these moving averages will cross over the other, you know, obviously the
nine, the faster moving one of the two does the crossing, it drops below the 20.
And that's a cell signal.
And what that tells you is that momentum for the short term is starting to accelerate to the downside
in the longer term kind of goes right along with it.
The idea is that if the faster moving of the two moving averages.
Breaks down below the longer term one, then it is a cell signal, just as this would be a busy signal.
Now, it's entirely up to you whether or not you do it in the classic sense where people would literally
sell, buy and then if it crosses again sell, they were always in the market.
There are some ways that you can filter some of the noise.
So, for example, this cross here.
Some traders wouldn't have taken that until the two moving averages spread further apart.
That shows a divergence, if you will, of speed because the moving averages are relatively flat there.
That shows that the market is not really going anywhere.
But once it did accelerate to the upside, you can see that the moving averages spread out apart.
There are a couple of special moving average crossovers, and I'll go ahead and show you those now in
order to see these, we will need the 50.
They Emma.
OK, go ahead and paint that orange, let's go ahead and put that on, and then this one will need to
be the two hundred make this black.
So this is 200 days.
So they have something known as the Golden Cross and the Death Cross.
The Death Cross is very, very golden cross, as you would expect, would be bullish, and that is a
moving average crossover when the 50 crosses over the 200 daily moving average.
Specifically, it's just this time frame and just these numbers, just as the death cross.
Is 50 crossing below the 200, so if you hear those terms, those are exactly what they mean.
They don't it doesn't happen on the hourly.
It doesn't happen on a weekly.
It only happens on the daily.
The problem with this, of course, is that it is such a high time frame.
They are such large numbers that as you can see, you may get whipped around in this case.
But when it does work, it tends to work for a very long period of time.
You would have gotten in back here and you wouldn't have gotten the exit signal until here.
So pretty long amount of time to get involved.
Quite often what people will do is they'll use something like this to confirm maybe like a breakout
or something, in this case, some type of candlestick formation, which, of course, will cover those
later to validate that type of setup from a longer term perspective.
There are a multitude of.
Different ways you can use this, so let's go ahead and put a couple on this like coin chart.
So this is a daily chart, so let's use a little higher time frame one.
Let's go with 50.
We'll make that red.
Let's go with.
Black on the two hundred on the daily, and this sets up an obvious up and down trend type of situation,
you can see that we got a death cross there.
And certainly that was a selling opportunity.
Again, though, not a big fan of these, just simply because for the most part, they don't work,
to be honest with you.
You get massive gains or you get stopped out with a loss.
It's kind of nowhere in between.
That being said, though, when you look at this, you can see that the 200 day Emma did offer a certain
amount of resistance and then support a lot of traders will simply only buy or sell depending on which
side of the two hundred day Emma Price is, or in this case, we've had the Golden Cross.
So that tells you that the 50 day Yemane is letting you know that shorter term momentum is to the upside.
So then you start to look for buying opportunities.
An example might be to use, you know, like a Fibonacci retracement.
We've broken to the upside, we've come back to the 50 day ima go ahead and put a fib there and you
can see it's right at the 50 percent.
It's between the two moving averages.
Price has been caught and it extends its way higher.
We break significantly below the 50 day M.A on this particular day.
Could give you a little bit of a heads up as to time to get out.
In the next video, we'll take a look at how to trade something called McGeady or moving average convergence
divergence.