There are dozens and dozens of trading indicators to chose from when using a technical trading system however in my experience few rival the significance of a 200 Day Moving Average on a daily and 4 hour Chart. It’s generally considered the barometer for whether or not you should be looking to buy or sell a market. My favourite is the 200 Day Exponential Moving Average which I consistently use on a Daily chart for my trade direction and 4 hour chart for warning signs of major support or resistance.
Simply put if the price on the daily chart is below the 200 Day EMA I will only look to short a market and if above long a market. It’s my firm view that all traders would increase their chance of making money if they traded with this approach and it would also eliminate many trades that keep your trading account ticking over for the broker and doesn’t make a meaningful impact on your account. Remember what I said yesterday, it’s about the quality of your trades not the frequency.
To test my theory pull up a daily or 4 hour chart and put a 200 Day Exponential Moving Average onto the chart. Scroll back a year if on a 4-hour chart and scroll back 3 years if on the daily chart. Now scroll forwards and see how the 200 EMA acts as a significant area of support and resistance and how the trend is maintained when above or below on the Daily chart.
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About the Author: Andrew Barnett
Andrew is a professional trader and successful investor who has a strong focus on education. He is a regular Sky News Money Channel Guest and one of Australia’s most awarded and respected financial experts, and is regularly contacted by the Australian Media for the latest on what is happening with the Australian Dollar. Director at LTG GoldRock, Andrew Barnett, guides thousands of traders around the world in the live market on a daily basis, advising them on buy and sell directions, as well as trading his own personal account. Andrew, a regular key-note speaker at trading and wealth-creation events throughout the Asia Pacific region, is an authorized representative registered with the Australian Securities and Investment Commission (ASIC).
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