To use a moving average, you have to have confidence that the average will always be positive, or that the average is an “exception case.” The way I look at it, any time you need to trade with a negative moving average, you have to think about an exceptional pattern that’s unlikely to come into play.
So how does a moving average impact a swing trade?
Using a moving average has two advantages. Firstly, it means that while you are trying to identify a trend with your current positions, you can have your own trend lines that show your strengths and weaknesses, and they can be used as an indicator to identify which positions are most prone to moving.
Secondly, using a moving average means that you can use it to break out of losing positions, and this is where we are going to look at some swing trading tactics.
A quick primer on moving average
A moving average is a bar chart designed to show an index moving in a similar direction as one else. It is a moving average that shows that an index, in a range, has moved in step with another index, and is a moving average that has a “normal” curve.
A moving average can be calculated as:
m=a*T1 + a*T2
where T1=average closing price of index, T2=average closing price of one-day move. Since we are using a moving average to see how a position changes over a 24-hour period, the formula is:
m=a*(T1 – T2) *a *a *a
The following chart shows a sample of a moving average of a range which shows that the average closing price of the index over several days has oscillated between $11.50 and $14.00.
As you can see, there is a small upward slope over the first two days and then a short downward slope, which means that the average of the two averages is above $11.50 and below $14.00.
As you can see there are only 3 days in this sample where the index traded below $14.00. As the moving average moves in the same direction the index, it can be seen that this is not a one-day trend but a 24-hour trend.
The difference between the moving averages of the last 24 hours (the two “days closest to” the last) is important. If you want to break out of
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