All language subtitles for 9. Multiple Moving Averages As A Indicator

Another effective strategy is not to really look at the prices really at all, you're looking at the

moving averages and how having more than one moving average and how it interacts with each other, looking

for Price Crossover's, you're actually looking at moving average crossover.

So how that kind of works is you have one chart, you know, you have your chart of your candlesticks,

your prices, whatever is going on there, and you're using a moving average with different timelines.

You can even have different types.

Or they could be the same type of.

They definitely have two different timelines as far as, you know, days, minutes, hours, whatever

your timeframe is.

And what you're looking for is not that the price is going to cross that moving average, but that a

shorter timeline moving average is going to cross a longer time line, moving average.

And we'll have some graphics here.

They'll show that in action and what to really look for.

But I think conceptually, like not about price to moving average lines and then they're crossing over

themselves is the idea.

And then what do you do?

Do you buy or sell based on that crossover's idea?

And we're going to talk about that.

So, for example, a real common way to do it or combination is have a five day moving average on a

20 day moving average is a common combination.

You can see the shorter time frames and in effect, you're comparing one week of prices, five trading

days and one month of trading.

You know, trading prices are, you know, four weeks times.

Five is 20 days as far first being open, markets being open, closed two days a week, open five days

a week.

So that's a common way.

We're looking at a week versus a month.

And are they crossing over?

How are you can choose and experiment with your own timelines.

And that's perfectly OK.

A lot of people use 50 day versus 200 day moving average versus lots of different ways you can do it.

But a common one to get started is like a five day and twenty day moving averages.

So what you do is when you buy, when the shorter time frame moving average line crosses, the longer

moving average line on the upside.

So you've got this longer moving and growing and the shorter one is crossed above that line so that

the same token you sell on the shorter moving average line cross this, the longer moving average on

the downside.

So it's going down below it.

So you've got the shorter one is going to go below the longer one.

And then the buy, of course, from the shorter one is going above the long run.

So let's look at this graphically.

So it makes a little more sense to us here.

So if we look at this chart here, you can see we have a five day moving average in the blue and a 20

day moving average in the we'll call pink here.

And you can see let's go over to the far left.

You can see how the we have a real strong uptrend here in the far left, you can see that five day moving

average prices.

Again, very sensitive because it's not a long time frame.

You know, it's a simple moving average.

It's not a weighted moving average.

We can see how it hugs to the prices versus the twenty day moving average versus the kind of gap between

that blue and the pink line on the far left.

And then you see them start to come together here in the middle where it's almost hard to see.

But you'll see that blue line cross, you know, a little bit or start to cross below that pink line.

You know, those are cell indicators that we might be a little bit of a down trend or an opportunity

to sell that we've topped out.

And we're actually in a more sideways market and it's kind of whipsawing a little bit there.

But that would be our sell signal that the blue line, the shorter time frame is going to cross, you

know, above and go below.

It's going to go below the pink line.

And then as we go a little bit further on, you're going to see a definite uptrend come again where

that blue line five day is going to cross that twenty day.

Definitely cross across that and go above it and then keep going above it.

And that would be a buy side and then so on and so on.

As we go across the chart, you can see the lines crossing each other and each time there's a cross

that means that there is either buying time or buying indicator or a selling indicator as you go through

those.

And I've highly of those here, you can see whether it's a sell, a buy, sell, buy, sell, buy.

You know, as far as looking at those, when they cross over and when they go back up again, again,

if you have longer, let's say instead of a five day, I was using maybe a 40 or 50 day moving average

for the pink line, there might be less times where they might be crossing.

So that's where you can adjust those to see what's comfortable for you.

But this is a classic way to do it is with a five day and a twenty day.

And you're looking for when the lines cross over.

And this has nothing to do with the prices.

You're looking at just the blue line and the pink line.

It should correlate a little bit together as far as with the prices.

But you kind of see you're really looking at the lines more so than prices by looking at moving average

crossover versus price crossing over a moving average line.

In addition, if you see more space or what you call daylight between the two lines, you'd have more

confidence that the signal is correct.

So if we look over in the far left or you can see where the arrows point and the other two areas as

well, there's a lot of daylight, a lot of space in between the blue and the pink line.

So that gives us a.

Is that OK, this is pretty strong, it's going to probably keep going in an uptrend there, for example,

and the far left and so we feel pretty good.

Once there's less daylight, which you can see in the first sell box, it starts to get all kind of

kind of messy.

They're all kind of close together.

Then there's less confidence of that cell signal is correct.

That's not just going to whipsaw and go back to a buy signal.

And then after that second buy signal, we see we see another big gap come up.

And so we have a nice another run up in this particular security where we can have confidence that that's

that signal is correct and so on and so on throughout the rest of the chart.

So when you're looking for things moving average crossover, look for the crossover, but also look

for the how.

Looking back over time, how wide that gap is, how much daylight is there between the two lines to

give you another extra level of confidence that you're making the correct move on that if we were to,

let's say, Layon three moving averages and let's say we want to have this almost a filter, we're like,

yeah, to cross is good, but we want to make sure that all three are crossing to be really extra,

extra, extra.

Sure.

You couldn't do that.

Actually, you could say, OK, I want my shortest time frame.

It'll always be the shortest time frame.

And let's say I've got the blue in five days, the pink and twenty days on this chart.

And then I've added a moving our just simple moving average of sixty days.

Right.

So you can see to the left how there's a lot of daylight between the blue and the pink.

But if you look between the blue and the pink and the green, there's a lot of daylight between them.

And you can see how if we follow that green line going up and we're that blue arrow thing approached

but did not cross, you know, you can see we go all the way across that chart for a long time frame

before we actually cross all three lines, you know, really somewhat significantly where we're crossing

all three lines with the or the blue line is, in effect, crossing the pink line in the green line,

those longer moving averages that are telling us a real cell signal.

So if we did it this way, you can see how it takes up all that whipsawing that occurred earlier than

above and below the line.

You took all that out.

And we have and we've been holding the security all the way until we get to that cell part.

Then we sell from there.

And then as we get to the far right of the chart, we're waiting for by sign where it looks like on

this chart, the blue line, the short time frame is cross the pink already, but we're waiting for

it to cross that green one.

And once it crosses that green one, then we're looking at another buying opportunity.

But right now on this chart, long time we've held this particular security, we've sold it, and then

now we're kind of kind of watching it to see if there's opportunity using two moving averages, crossing

each other for another buy opportunity or if we just stay out of it.

Another thought to is if you're trading platform, A software allows you can you put more than two moving

averages on there or three or four or how many you want, you can go up as high as ten.

Depends on the train platform.

A lot of top out at are at three.

But if you are allowed to put a whole bunch of them on there, then you'll get kind of this colored

line effect.

They'll kind of create like a rainbow.

So you're your shortest time frame is going to kind of move through the rainbow and some people like

that.

But again, if you put a lot of filters, you're going to have less trading opportunity, which might

be good, certainly limiting whipsaws, but you might be giving up an opportunity.

Maybe you should have got out sooner or you might miss a buying opportunity on the on the upside.

So traditionally, it's two moving averages, the shortest one crossing, the longer one, but going

three adds another extra layer of of of filtering basically on that and gives you a little bit more

confidence.

And don't forget that length between the daylight here to give you more confidence to between the lines.