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Now we will combine these insights to maximize the efficiency of trading. So let’s go over the basics.

When the 9 period moving average crosses the 18 period moving average this is the set up. That is why technical analysis is not an exact science.

If new information was introduced it would change the price of the stock but it would still be reflected in the price. The market discounts everything.

Consider the following. Three Different Trading Methods In this section of the course I want to introduce you to three simple trading tactics.

If not stopped out by a stop loss, or a trailing stop, exit day positions before the market closes. As the price continues to rise your stop 'trails' higher in tandem.

These include smoothed, weighted and exponential moving averages. Regardless of how he approached it, the price of a stock was just as likely to go up or down on any given day despite what happened on the previous day.

There are four commonly used moving averages: simple, smoothed, weighted and exponential. For markets that have volume I would expect to see a sudden increase in volume to help confirm the breakout.

An appropriate choice relevant to one's trading style is the most obvious. It represents the consensus of their expectations.

Consider the following. The tendency of statistical data.

You may use "programmed" stops if your broker offers them. The bid is the price other traders or institutions are prepared to buy a security at and the offer is the price other traders and institutions are prepared to sell a security at.

Which Moving average to use Any time span can be considered from minutes to years. You can see that the market progressed to R1 and then retraced to S1, this is the setup.

The market finally topped at R5 and headed South to S5. I won't go into their complex mathematical derivations of these.

Should back up here slightly and mention that in 1884 Dow published his first stock market average of 11 stocks. Success depends on recognizing and trading the appropriate trend.

These include smoothed, weighted and exponential moving averages. Set the rules and ALWAYS follow them.

Once you have entered a trade immediately place a stop. This second correction often takes more time than the first to complete the corrective process.

Market price that has declined too steeply or too fast. It’s important to insure that your stop is canceled if you close your position.

If new information was introduced it would change the price of the stock but it would still be reflected in the price. The longer the time span used to calculate the moving averages the greater the significance of its violation by price.

Channels are a good visual representation of the struggle between buyers and sellers. A downtrend is present when prices make a series of lower highs and lower lows.

We also can observe that prices once finding support or resistance will move ahead and away from the trend line then return to the trend line. The primary trend is the main force behind the trend and is like a river flowing in a particular direction.

Moving averages are generally calculated using the closing price. This means that the results will be totally random.

Some types of charting software are capable of displaying the offer price but most commonly the price you see is the bid price. Should back up here slightly and mention that in 1884 Dow published his first stock market average of 11 stocks.

This is what kills the trader. You may use "programmed" stops if your broker offers them.

This is what kills the trader. The actual theory is fairly straightforward to explain and sensible if you take the time to think about it.

You may use "programmed" stops if your broker offers them. The actual theory is fairly straightforward to explain and sensible if you take the time to think about it.

That is the price at which traders are prepared to buy from you. Once you are in a profitable trade, the next challenge becomes when to take profit.

Sometimes the term refers to the price at which an order is executed. I have put a 20 period moving average of the closes just as a visual guide and reference point.

Intermediate term trend by a 40 day moving average. It is very important to understand the concept of support and resistance.

This to and fro, buying and selling in the direction of the trend plots out a recognizable channel of dynamic flux of the trend. A moving average (MA) is a way to try and eliminate or minimize the fluctuations of the numerical value of price fluctuations we are observing.

The normal bull/bear market cycle, usually 4 years in duration, would be entirely missed by choosing a four year moving average, a two year average would be frustratingly slow and you would be in and out of the market too late to make much, if any, profit. When finally prices violate the third fan line it invariably means the trend so monitored has finished and a reversal of the trend is underway.

Simple moving averages give equal weighting to each time period’s price. The price at which a trade takes place is the price at which a bull and bear agree to do business.

Simple Moving Average This is the most widely used and is simply calculated by adding up a set of values and dividing the total by the number in the set. If new information was introduced it would change the price of the stock but it would still be reflected in the price.

We will get more specific about things later. The last major part of the theory is the trend should be assumed to still be in force until there is a definite indication that the direction has in fact changed.

If each day in the market were in fact an independent event then it would be impossible for you to make money from it consistently. Some brokers do not offer this.

This means that the results will be totally random. Self-fulfilling prophecy (investors buy as they see prices rise).

Now this is important because later on as we discuss this it will play a major roll in our analysis. It is very important to understand the concept of support and resistance.

The rest of the time prices will trade more or less in a side ways range. The secondary trend can take anywhere from a few weeks to a few months in duration and the minor trend may be in the opposite direction of the primary trend.

The last major part of the theory is the trend should be assumed to still be in force until there is a definite indication that the direction has in fact changed. So let’s go over the basics.