Thread by @SJosephBurns

Ten key lessons from my book:

Moving Averages 101: Second Edition: Incredible Signals That Will Make You Money

A thread 🧵

“The 10-day EMA is a good moving average to keep a trader on the right side of a major market trend, and this was a favorite strategy of legendary day trader, Marty Schwartz. It’s typically the first line to be lost before a trend reverses in the opposite direction.”

“I use the 10-day EMA is conjunction with the 50-day EMA as a crossover trend signal. This helps me get into trends and smooths out much of the volatility of the 10-day or 50-day as standalone signals.”

Leading growth stocks typically pullback to the 50-day EMA during bull markets. This is a common vertical price support level for strong uptrends. It’s normal for markets in an uptrend to pullback to this line and find buyers who want a stock they missed on the last run up.

“Moving averages work best in low volatility markets. The more volatile the market is, the more market participants will let emotions cloud their judgement and the less useful moving averages will be.”

70 RSI means overbought & a 30 RSI reading means oversold. The risk/reward ratio typically starts to diminish for long positions near the 70 RSI & short positions near the 30 RSI. This is true for stock indexes and big cap stocks. A 70 RSI is a good profit target for long trades

“Most good trends start with some type of momentum, either a gap in prices, a break over a longer-term moving average or a large candlestick at the beginning of a trend.”

“While trading with the 20-day EMA filter during strong trends, it’s important to use an exit strategy that maximizes profits instead of waiting for a return to the 20-day EMA. The RSI is a tool I use for exiting trades in stock indexes and big cap growth stocks.”

“The most common moving averages I use on daily charts are the 5-day EMA, 10-day EMA, 20-day EMA, 50-day EMA, 100-day SMA, 200-day SMA, and the 250-day SMA.”

Moving averages are powerful tools for quantifying the direction of price action, backtesting, technical analysis, following trends & creating large wins or small losses. Use moving averages to create a trading system that fits your own time frame, risk tolerance & return goals.

Book link: amzn.to/3hXxw8n