All language subtitles for 5. Moving Average Rule For Decision Making

Another rule that you could use with moving average lines is the I guess the moving average rule is

what is called it's an alternative to the more popular crossover rule.

So you're not looking for when it crosses over, you're basically looking for one the the moving average

starts to bend or change.

So you would look at it to call column into a trend when you have changes in actually the moving average

line.

So uptrend or downtrend is starting to make that change either way.

So if there's an uptrend, if the moving average is less than today, today's moving average is less

than yesterday's, you could start calling an end to an uptrend with that.

And the opposite, of course, would be a downtrend that's been down trending.

The moving average today is higher than yesterday.

So you're basically your most recent data point and then looking at your overall trend.

And so the advantage of this is you're not looking at crossovers, you're just strictly looking at the

moving average line over the period of time.

And that helps, as far as you can call it, into a trend faster than with a crossed over.

Moving averages always are a lagging indicator, but you're able to kind of see where that change is

occurring on the line as opposed to waiting for crossovers and prices is what you're looking to do and

still suffers from lag.

It still suffers from whipsaws, but it is all true.

And you can use some of these filters we talked about as well to establish filters or rules around that

as far as using this without the crossover of the price, but looking at when the basically when the

moving average itself starts making some changes and we look to this graphically, you can see here

you can see how it's kind of in this this curve right at this particular moving average, they can look

different this.

But as you look along the curved line, you can see as it starts to flatten out over time, you can

see that's when the moving averages starting to change.

And you can see up in the upper left there what's a 50 day moving average?

And, you know, the moving averages at one hundred thirty eight dollars and ninety five cents in this

example.

So when you start seeing, you know, things are coming up less than that, then that might signal a

change in that upward trend that we're generally seeing with this thing.

If we start seeing that number going going down, that might show a downtrend there.

And as you can see it, depending on the length of time here in this graphic that you choose, you have

a 50 day moving average and a 200 day moving average.

And of course, the longer the time period, the prices will differ, too.

But if you look at the curves, you can see where the top line at the far right, you might see it more

of a downward trend on the far right of the blue where the right is actually starting to trend upward.

A little bit of an upward trend as they start to move towards each other.

And so that's kind of giving you a kind of conflicting, conflicting messages.

Right.

And that can happen.

So, you know, that time frame length can really impact that.

The more time you have, the more the decision will be delayed as far as making a change and you want

to take that in consideration.

And again, you can use this with other filters.

You can use this with other indicators to decide what you want to do.

I personally, I like the crossover rule.

It's much more stylish.

It also seems to be easier to comprehend and easier to see to than.

But if you want to look at something, where might you indicate the trend is changing?

Sooner you can use this moving average and just look at the moving average itself and not really looking

at the prices.