No, the signal lags behind price by many days. Its not even worth marking on charts or using as a selection filter for potential markets to trade.
However, the “condition” of the market can be gauged from MAs - I am interested in (for longs) -
This reflects my opinion too regarding MA crossovers - or any other “lines” or indicators fot that matter. The lines themselves mean nothing unless they are related to the characteristics of the current price movement itself. We ultimately trade the price.
The only purpose from [I]any [/I]kind of line, indicator, or anything else we place on our charts is to try to identify something significant that is (or is not) emerging or taking place within the otherwise often haphazard and erratic fluctuations in the price. This applies whether one uses indicators or so-called Price Action in one’s technical analysis.
Tommor lists some good examples of how current price activity can be viewed relative to previous levels using EMA’s. Of course, the same process is taking place when one compares current price with a support/resistance line or trendline, etc.
It should also be worth keeping in mind that use of TA should be considered with respect to the timeframe being used. For example, I do not use any MA’s under 50 periods on any particular TF as they are too slow for the TF concerned (for my purposes) - but a 50 period EMA on a 4H chart is approximate to a 200 period MA on a 1H chart. This leads to the concept of multiple TFs where one can draw rules such as “cross though the xxEMA on 1H in the same direction as the xxEMA on the 4H higher TF.”
hi manxx, i am new here, do your images show the ribbon method that you use and describe in another thread?
Hello,
The crossover in moving averages or in EMAs work only in a market with clear trend. In a consolidation period, the signals that the averages give are most of the times false. Note that, the moving averages and EMAs are calculating the previous period price action and are moving slower from the price.
Yes and no!
The approach is the same, but not, in this case, the SMA’s used in the ribbon method. Applying displacement to various MA’s is purely a technique, not a method as such. It just helps to give a faster warning of a reversal. It is very useful, for example, in exit planning rather than waiting for a normal type of crossover such as this thread is discussing. But when used on its own, can lead to false signals like any other crossover approach, especially on short TFs like 15m or 5m.
For example, I like it as part of 3H charts and higher, and I am aware of some traders who regularly apply it on daily charts with significant results - but it is just a tool like any other.
I dont use EMA to enter trades but i use them as confluence (with price action).
I honestly don’t think so. Just ask this question from yourself, if there is a certain signal as death crosses and golden crosses exists, why many people can’t make it through the market? Crosses dont work at ranging markets and at trading markets, not all crosses are that useful. They usually tend to signal sooner or with certain delay so you can’t trust them as they appear. My experience is cross overs signal are as it’s best after a certain amount of consolidation or low volume ranging markets.
They work in long-term trading but they are very inefficient, demanding lengthy periods of massive drawdown.
MA’s are useful in confirming a trend has already become established, but a trend is a process, not an event. It is impossible to identify the start of a trend in real time, because only the passage of time and the continuation of the price movement in the same direction can make a trend. MA crossovers do not confirm a trend exists.
Also would suggest some back testing would help you to see this for yourself which I think is an important part of the process. This style of trading might work for you if you don’t have a lot of time to be on the charts and you can swallow large drawdown as tommor suggests.
I don’t use EMA’s, but they work well for some traders. If you have a large enough account, you can trade with 50 and 200 EMA on the daily chart to get a buy or sell signal when they cross.
MA crossovers work badly for almost all traders who try to use them. They sometimes think that reducing the MA durations will work better. Or shortening the chart time-frame. These responses are also wrong.
Perhaps you would say more about the methods you do use rather than the methods you don’t?