Skipping Lessons and Moving Averages

 

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I am self-studying a system to succeed at stock trading. I have zero knowledge in finance, banking or business. But I have seen a lot of people in various walks of life doing well at stock market so I decided to try it for myself. As I was reading to through the blog posts, some concepts are still hard to grasps for me. At first, I thought I would tackle them head on like MACD but it just made me more confused and I can't seem to move forward. This takes me back to the post of Yggdrasil where he quickly transitioned to a master chartist in a week. It begins with a gratitude to a mentor with a portfolio screenshot  of gains. Then 7 days later, he presented a complex stock chart analysis. I want to learn and be like him, but getting it all in in 7 days, I am not sure. So for now, let's start with moving averages. Lifted from Investopedia

simple technical analysis tool that smooths out price data by creating a constantly updated average price. The average is taken over a specific period of time, like 10 days, 20 minutes, 30 weeks or any time period the trader chooses. Moving average crossovers are a popular strategy for both entries and exits. Common moving average lengths are 10, 20, 50, 100 and 200. When the shorter-term MA crosses above the longer-term MA, it's a buy signal, as it indicates that the trend is shifting up. This is known as a "golden cross." when the shorter-term MA crosses below the longer-term MA, it's a sell signal, as it indicates that the trend is shifting down. This is known as a "dead/death cross."

ZeeFreaks (ZF) would describe moving averages as linemen. He has other terms for the golden cross and dead cross. And I quote ZF

When your "linemen" are above the candles, the trend is down.

When your "linemen" are below the candles, the trend is up.

In Patintero, once a lineman catches you, you're out! Period.

In stocks, I can choose which lineman tells me when I'm out.

Here is a video from Trading 212 to illustrate about moving averages

And here is part two of moving averages which illustrates that when a shorter-term MA crosses above the longer-term MA, it's a buy signal and when the shorter-term MA crosses below the longer-term MA, it's a sell signal

Questions and Answers from ZF

•  When can you use moving averages in stock trading?
  • Moving averages can be used with Blue Chips, some 2nd Liners, but rarely on 3rd Liners [more about blue chips, 2nd liners and 3rd liner below]
• What SMA numbers do you use?
  • The simple moving averages I use  20/50/100 MAs; But sometimes I use 30/60/90 For Blue Chips.
• Which linemen or SMA tells you sell/quit that stock?
  • For blue chips, I use 90MA. But usually, I'm already out once 50 MA snaps
• What are Blue chips, 2nd liners etc?
  • Index stocks = Blue Chips 2nd Liners = Good fundamentals But Lacks Liquidity 3rd Liners = Good/Bad Fundamentals. Very Low Liquidity
  • Yue Kai commented to checl PSE EDGE, if the market capital is below 10 billion and below consider that company as 3rd liner
  • Liquidity means you can buy and sell shares easily, no need to wait for a long time for your buy or sell to match
• Is it better use DAILY or WEEKLY movements?
  • Daily is better

Original post: Moving Averages and Patintero