I have been asked about the moving averages I use and what is the best way to understand then.
There are two ways in which these work.
One is the big push away from the closely grouped averages.
Two is the retracement after the push.
Take a look at the two attached images of Crude Oil.
In the first we see the 5m 20 sat on the 5m 50, the 15m 20 on top of the 15m 50 the 60m 20 is also there and these averages are supporting price nicely.
I always like to see the 20 on the 50 for longs and 20 under 50 for shorts.
This gives me a double protection.
In this case we have a lot of protection on the downside and a lot of fresh air to fill on the upside. This particular move went 400 pips without slowing down in under an hour.
The second picture is slightly more complex.
The first thing I want to see is my 5m 20 crossing my 5m 50 before I would contemplate a reversal play. This is demonstrated in the first highlighted area.
In this instance and every instance after getting that confirmation the target area is where?.........the next m.a, being the 15m 20.
This is the most dangerous of all reversal plays as we don't even have the support of the 15m 20ema yet.
Mt personal preference, for safety's sake is the cross of the 5m 20 over the 15m 20 or better still the 15m 20 over the 15m 50 as we can see in the second highlighted area.
We now have our 1m 20 (green 4ema running through candle) sat on the 5m 20 which is sat on our 5m 50 This is sat on our 15m 20 which is sat on the 15m 50 offerring a 5 layered protection of support
Where is our target here?.............yep, you got it, our next 20ema, being the 60m 20. Only 150 pips in this one but not bad for a couple of hours work !!
You will need to study this in some depth if you are a newcomer but I can assure you it will be worth it.
I'll be back later for some more farmyard frolics. Please feel free to ask questions and vote for the thread at the top of the page.