kapilricha1's Blog : time interval for moving avg

Howdy, kapilricha1!

If I am a 2 weeks to 3 months holding kind of investor then should i choose 14 days and 90 days?

Your blog post raises a slew of interesting issues about moving averages and their utility in identifying short-, intermediate-, and long-term trends. However, I am a bit pressed for time, so I will simply note that I count two weeks as 10 trading days and three months as 60 trading days. (Of course, the latter figure should be 63 trading days, but I would have to change about a zillion charts, which I created in a less-enlightened age. Still, I will make these changes. Eventually.)

Good luck!

MackTheKnife

Thanks MackTheKnife for your inputs.

Does it mean that instead of of default 21 and 50 it is good to use 10 and 60 days?
Yesterday someone attended "the market guys" seminar and told me that they suggest to use 10 and 90.

You are also suggesting the lower number to be as 10 so I am little confused how to decide which numbers to use.

Once again to the original question: Does it have anything to do with the number of days one wants to hold the stock?

Thanks again for your inputs.

Kapilricha1, here is my input to your question. I use Simple Moving Average of 4 days and 19 days. I track the momentum of the stock. I use the Bollinger bars for my upper and lower control points and watch the 4,19 days. Within this, I watch to ensure that each close price is moving higher, and that any lower closing price is not lower then the previous low. If the price goes above the Bollinger bar this indicates a sell point and profit taking. If you are trading between weeks and a couple months a 90 day moving average isn't really telling you anything that will change immediate results. I think a 90 day moving averge would be better suited for trading before and after earnings periods. Happy Trading.

Thanks Sportunter for your inputs. Could you please also share what interval I should use for bollinger bands.

Bollinger recommends using a 20-day simple moving average for the center band and 2 standard deviations for the outer bands.

I am in general trying to hold a stock for 2-3 weeks to max 2 months at this moment.

Thanks again for the tip of using 90 day moving average in and around earning period.

Hello Kapil,

An excellent book on Technical Analysis is:

Trading for a Living by Dr Alexander.

http://books.google.com/books?id=dHMU10tHN2cC&printsec=frontcover&dq=trading+for+a+living&ei=m970SsTvJJPyNJ3B1YoF&client=firefox-a#v=onepage&q=ma&f=false

He recommends a 13 day exponential moving average (EMA)

Good Trading,
MAGE

Hi kapilricha1,

I use a 150 day EMA and a 30 week EMA in my screener. Then I chart my results using a 50 and 150 day EMAs on daily charts and 10 and 30 week EMAs on weekly charts. The most popular moving averages are the 50 day and 200 day, you will see them quoted on TV and used as the default on charting programs. You can also see volume spikes that relate directly to these 2 moving averages in almost any ticker you chart.

It sounds like you are trying to tune your trades with a MA, but a longer moving average will (should) remove some risk. For example I've had stretches were over 70% of my 150 day EMA screening results went up 5-10 % in one week, only to fall the next week. Which brings me to my blog last week about keeping a jounal. Looking back at my notes and re-charting those results I can see that I just happened to get in front of the people buying the 200 day MA and just happened to be in the right sector and had good general market direction (almost everything was moving up).

Howdy, kapilricha1!

Thanks MackTheKnife for your inputs.

My pleasure.

Does it mean that instead of of default 21 and 50 it is good to use 10 and 60 days?

To help identify the intermediate-term trend in either an equity or an index, I personally employ 20- and 60-day simple moving averages at present. For the same purpose, however, I plan to use 21- and 63-day SMAs in the future. Basically, the shorter SMA in each case describes the movement in my target issue during the past trading month, and the longer SMA in each case describes the movement in my target issue during the past three trading months. In the context of my work, therefore, the 10-day SMA has limited utility. Still, there is nothing wrong with this metric in and of itself, as long as one has a good handle on its meaning.

You are also suggesting the lower number to be as 10 so I am little confused how to decide which numbers to use.

Actually, I meant to suggest your passage -- "If I am a 2 weeks to 3 months holding kind of investor then should i choose 14 days and 90 days?" -- appeared to conflate calendar time with trading time: In charting, two weeks is not 14 but 10 days, and three months is not 90 but 60 (or 63) days. I apologize should I have misinterpreted this passage.

Once again to the original question: Does it have anything to do with the number of days one wants to hold the stock?

In some cases: Maybe. In other cases: No. With respect to the former, I note there are equity-market operators who have developed mechanical trading systems that employ crossovers of moving averages to generate "Buy" and "Sell" signals, so the period settings may -- or may not -- have a high correlation with the number of days one wants to hold the stock depending on a given system developer's crackpot theory. With respect to the latter, I note there are stock-market operators who (like me) use moving averages to identify short-, intermediate-, and long-term trends -- as well as potential areas of support and resistance -- in the context of multivariate analyses. Example: A purchase of call options on the SPDR S&P 500 Exchange-Traded Fund (SPY) appeared pretty irresistible to me on Oct 30 when it banged into both its 60-day SMA and its lower Bollinger band (http://tinyurl.com/y9558z6). Woo-hoo!

Good luck!

MackTheKnife

Sporthunter wrote: "Within this, I watch to ensure that each close price is moving higher, and that any lower closing price is not lower then the previous low."

Guys study this well. And as you do ponder the question of what it means to let profits run and cut losses short.

Well done Sporthunter.

Also TB, when price is moving lower in a gapdown move like with STEC it is impotent to note that in "most" cases the low that is set will be taken out in short order. Therefore, it is not advisible to be "quadrupling my position at 14.92" like you did with STEC only to bail at "substantialy lower" prices. Let price movement settle out for a day er 2 *-) BTW, you still holding this POS right cheeeya? >>> GS ....just wonderin ifn ya actually take yer own advice....or just give it. :-) 3J

kapilricha1- the last few days has been an excellant example of using the moving average. Like I said, I use the upper and lower Bollinger band and internally use 4,19 SMA. The intent is to have the stock price move up and watch the daily trend so that a down day is never lower then the previous low. Take a look at CKSW for this trend. While there were days when it pulled back the low was not lower then the previous indicating that momentum had not changed. Today it rebounded an went to a newer high. Happy Trading