200 Period Moving Average - What's the Deal?

[Clint]

I’ve read in more than one place that the 200 period moving average is “da bomb!”

If it’s a tool I could use to my advantage, I’d like to know how and when.

I agree Norm., I think the importance of the 200MA is overstated for short-term traders. I do look at it but only as one chart factor out of a dozen or so to help me gauge the strength and consistency of a trend. But really it is perhaps much more applicable to long-term buy-and-hold for shareholders, not the sort of approach that’s translatable to forex.

Here’s one fairly tried-and-true application of the 200-period moving average to forex trading:

The 4hr200SMA is at the heart of Dennis’ very successful trend-following methodology. Essentially, Dennis guages a currency’s strength or weakness by the degree (expressed as a percentage of price) to which it deviates from its own 4hr200SMA.*

Many newcomers to his thread have asked, “Why the 4-hour chart, instead of the daily, or some other time frame?”, and “Why the 200SMA, instead of the 50, or the 100, or some other?”

Dennis has basically said that trial-and-error optimizing has proven to him that the 4hr200SMA works better than anything else.

And that, I guess, is the key point regarding this moving average, or any other tool:
If it works for you, use it. And if it ain’t broke, don’t fix it.

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*Scroll to post #1181 in Dennis’ thread for a short video describing the calculations he makes using the 4hr200SMA in order to determine his Strong/Weak Ratings and Rankings.

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Norm, it’s good to see you back here in the forum. While the Kilauea volcano was making the news on a daily basis, I was wondering whether you or your community were affected by it.
I hope that all is well with you, your family, and your neighbors.