This Tool Is a Technical Trader's "Bread and Butter"

You are receiving this email because you signed up to receive True Market Insider. Unsubscribe Keep the emails you value from falling into your spam folder. Whitelist True Market Insider. Forgot your login information? Click here. This Tool Is a Technical Trader's "Bread and Butter" Today, let's talk about every technical trader's "bread and butter." I'm talking about Moving Averages (MAs). Moving averages are lines plotted on a chart that smooth out data and make it easy to spot trends. Smoothing the data is helpful because it reduces the noise created by daily market volatility. Identifying trends is at the heart of technical analysis and is the basis for practically all trading decisions. Most professional traders watch moving averages to identify support levels during bull markets and resistance levels during bear markets. There are a number of different moving averages out there. But two of the most popular types are the Simple Moving Average (SMA) and the Exponential Moving Average (EMA). The Simple Moving Average is the average price of a security over a number of time periods (days, weeks, months, etc.). A 50-day moving average would take the sum of the last 50 days' worth of closing prices and divide that number by 50. The Exponential Moving Average reduces the lag in simple moving averages by applying more weight to the more recent price data. Therefore, it reacts more quickly to the recent price changes. Notice below, in this old chart of Medarex (MEDX), the difference between the 50-day EMA and the 50-day SMA. ========Recommended Link======== UNLOCK MASSIVE PROFIT POTENTIAL 25-year sector trading veteran reveals the simple 3-step process that maximizes your profit potential. [WATCH NOW] It's a matter of personal preference, but I choose to use the Exponential Moving Average because I find that it makes a much more effective indicator, and I can spot trend changes more quickly. Use Moving Averages to Track Trends and Momentum Why use anything other than trend lines to spot trends? Support and resistance levels are useful technical tools, but they shouldn't be used as stand-alone indicators because sometimes they give false signals. Stocks have the capability of overshooting trend lines. In some cases, we even give trend lines (especially long-term trend lines) leeway using price filters or time filters to avoid "whipsaws." Sometimes, using moving averages makes more sense than using trend lines, as moving averages aren't straight lines and adjust to the recent volatility of a security or index. Like trend lines, moving averages also act as support and resistance because of the self-fulfilling prophecy caused by all other traders who view them the same way. In fact, you can make the case that moving averages actually cause prices to move more than trend lines do. I say this because trend line analysis can be somewhat subjective, as people can interpret trends differently. Moving averages cannot be disputed. They're simply a mathematical equation. Therefore, it is possible to enter signals, based on moving averages, into computer programs that automatically trade stocks. Therefore, when stocks violate, or bounce off of popular moving averages, there are often a heck of a lot of computers out there automatically buying or selling that stock. The moving averages that you choose to use to guide you in and out of positions depend on your personal trading style and preferred time frame. But don't forget that you should always identify, and trade, in the direction of the next larger trend, and that you should identify the next smaller trend to help with more precise timing of your trades. We'll have more to say about moving averages in future columns. In the meantime, if you're looking for another way to boost your gains, make sure you check out this replay of the live event I hosted on Tuesday. During this event, I showed traders how to quickly and easily select the best stocks from a list of thousands. The replay won't be available for much longer, so make sure you click here to watch it before it's gone forever.   Trade safely! Chris Rowe True Market Insiders HOW TO PICK THE PERFECT TRADE Instantly boost your trading capabilities and unlock massive profit potential for every trade! WATCH NOW RECENT STORIES Want to Make Consistent Money in the Market? The Most Accurate Indicator You've Never Heard Of The Best Traders All Have This "Superpower" Before You "Double Down" on a Losing Stock, Do This Instead… Copyright  ©   2020  True Market Insiders, All rights reserved. Our mailing address is: 33 SE 8th St, Boca Raton, FL 33432 Want to change how you receive these emails? You can  update your preferences   or   unsubscribe from this list DISCLAIMER The information contained herein has been prepared without regard to any particular investor's investment objectives, financial situation, and needs.  Accordingly, investors should not act on any recommendation (express or implied) or information in this material without obtaining specific advice from their financial advisors and should not rely on information herein as the primary basis for their investment decisions. True Market Insiders LLC is not an investment advisor and is not licensed to give specific financial advice.   The chairman of True Market Insiders, Chris Rowe, is also the CEO, CIO and owner of Rowe Wealth Management LLC, which is not owned by and is not the owner of True Market Insiders. Information contained herein is based on data obtained from recognized statistical services, issuer reports or communications, or other sources believed to be reliable ("information providers").  However, such information has not been verified by True Market Insiders or the information provider and TMM and the information providers make no representations or warranties or take any responsibility as to the accuracy or completeness of any recommendation or information contained herein.  TMM and the information provider accept no liability to the recipient whatsoever whether in contract, in tort, for negligence, or otherwise for any direct, indirect, consequential, or special loss of any kind arising out of the use of this document or its contents or of the recipient relying on any such recommendation or information (except insofar as any statutory liability cannot be excluded).  Any statements nonfactual in nature constitute only current opinions, which are subject to change without notice.  Neither the information nor any opinion expressed shall constitute an offer to sell or a solicitation or an offer to buy any securities, commodities or exchange traded products.  This document does not purport to be complete description of the securities or commodities, markets or developments to which reference is made.   Unless otherwise stated, performance numbers are based on pure price returns, not inclusive of dividends, fees, or other expenses.  Past performance is not indicative of future results.  Potential for profits is accompanied by possibility of loss.    You should consider this strategy's investment objectives, risks, charges and expenses before investing.  The examples and information presented do not take into consideration commissions, tax implications, or other transaction costs.   The material has been prepared or is distributed solely for information purposes and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. Some performance information presented is the result of back-tested performance.  Back-tested performance is hypothetical (it does not reflect trading in actual accounts) and is provided for informational purposes to illustrate the effects of the True Market Insiders LLC strategy during a specific period.  The relative strength strategy is NOT a guarantee.  There may be times where all investments and strategies are unfavorable and depreciate in value.  Relative Strength is a measure of price momentum based on historical price activity.  Relative Strength is not predictive and there is no assurance that forecasts based on relative strength can be relied upon.   Back-tested performance results have certain limitations.  Such results do not represent the impact of material economic and market factors might have on an investor's decision making process if the investors were actually managing money.  Back-testing performance also differs from actual performance because it is achieved through retroactive application of a model investment methodology designed with the benefit of hindsight.  True Market Insiders believes the data used in the testing to be from credible, reliable sources, however; True Market Insiders makes no representation or warranties of any kind as to the accuracy of such data.  All available data representing the full platform of investment options is used for testing purposes.