X-Ref “03 – Technical Analysis – Video 3 – Moving Averages Explained”
Use the MA as a form of Support and Resistance.
MA acts as a form of support. When the MA5 is broken, a downward movement can often occur (and vice-versa) . [Cross and Break Out]
When the MA5 is broken and the price reaches the MA20, the MA20 will often act as a line of support and resistance. [Compare this to the horizontal lines of support and resistance.]
There are 2 types of Moving Average:
- Simple
- Exponential
An exponential MA has more weight added to the front end making the exponential MA more responsive. Exponential are better used only on the lower range of moving averages.
Use these:
- 5/8/10 (exponential)
- 20/21 (exponential)
- 50 (simple)
- 100 (simple – optional)
- 200 (simple – optional)
All set to closing price.
Same on each time frame.
The first two are set to exponential because they are more responsive.
