One of the most basic, yet proven, techniques for using moving averages as a trading tool is the single moving average method. This trading method involves nothing more than a single, simple moving average of any given length (but preferably suited to the contract and time frame being traded) and its relation to the underlying contract’s price. Entry and exit signals for trading are provided by how the priceline trades in relation to the moving average — whether above it or below it. Notice should also be given as to whether or not the moving average is rising or falling relative to the priceline.
One little known and widely overlooked aspect of moving averages is that they work best when used in conjunction with cycle analysis. The trader must have at least a basic understanding of market cycles in order to consistently use moving average analysis to his or her advantage. So crucial is cycle theory to the profitable employment of moving averages to any form of trading, that we felt compelled to include two chapters in this book dedicated to cycle analysis when used in conjunction with moving averages. Chapter 6, alone, should be worth the price of this book for the serious trader.
You will find throughout this work a number of “real-market” charts, supplied by BigCharts.com, which will greatly add to your understanding and comprehension of the principles this book aims to teach. Nothing but experience can ultimately assure consistent success in the markets, but the studies and examples included in this book will further your understanding of how moving averages, once properly implemented, will greatly enhance your trading success.
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