The moving average technology is most familiar to everyone, but there are very few people who can truly understand and apply the moving average correctly.
Don’t be fooled by the moving average trading techniques that are all over the bookstores. They are just dictionaries that you can learn by just looking at them, but they will fail once you use them.
Why does this happen? Because the people who write books either don't understand moving averages or deliberately don't write the key points. People who really make money continuously will not easily write good things into books for people to read.
The moving average is very important in the following aspects.
1. Moving average convergence: This does not mean that several moving averages are close to each other. It is not like that. The 4, 6, 12-hour moving averages, 5 and 10 lines must be very close and smooth. The directions of the moving averages at multiple levels must be consistent. It is not acceptable for the 5 line to be downward and the 10 line to be upward. The resonance of multiple moving averages is the important feature of moving average convergence.
2. Moving average angle: When the moving averages converge, the angle will become very important. In theory, the larger the angle, the stronger the short-term market trend.
3. Moving average deviation: When the concentration and angle conditions are met, the market is often in an obvious upward or downward trend. Then the problem comes, when the 4- and 6-hour market develops well, if the weekly line deviates too far, it means that the 4- and 6-hour market will not last long.
4. Multi-period resonance: When the above three conditions are met, the market is actually very strong. At this time, a pre-judgment problem will arise, that is, how long can the market last and whether it has come to an end. What is discussed here is the resonance relationship between the large and small weekly levels. When there is a perfect market at the 4- and 6-hour levels, but the weekly moving averages do not have a bullish arrangement, it means that this wave of market is at least not at the weekly level, so it is very likely that the market will end in a few days. If the weekly moving average can also keep up and is also obviously bullish at this time, then this market may be able to run for a few weeks. If even the monthly level is also bullish, then congratulations, it is now a bull market.
There is a crucial point about the effectiveness of moving average: that is the resonance of multiple levels of moving averages, and the upward angle. The greater the level of resonance, the greater the market trend.
The effectiveness of the moving average without the resonance moving average is generally very limited. It is often inaccurate. At this time, you are asking for trouble if you use the moving average as an indicator. In fact, when the moving average is inaccurate, other indicators are basically inaccurate.