Leading Stock Indices Indicators
Moving Average Leading Indices Indicators
A trader can choose a moving average based on the stock indices chart time frame that he is trading: the trader might choose to use this Moving Average indicator on the minute stock indices charts, hourly stock indices charts, day indices charts or even weekly stock indices charts.
The indices trader can also choose to average the closing indices price, opening stock indices price or median indices price.
Moving average indices indicator is a oftenly used indicator to measure strength of indices trends. The data is precise & its output as a moving line can be customized to a indices trader's preferences.
Using the indices trading moving average is one of the basic ways to generate indices buy and sell trading signals which are used to trade in direction of the trend, since the Moving Average indicator is a lagging indicator & a indices trend following indicator - this means that it will tend to give late indices entry signals as opposed to leading stock indices indicators. However, as a lagging stock indices indicator it gives more accurate stock indices signals and is less prone to whipsaws compared to leading stock indices indicators.
Indices Traders select the moving average period to use depending on the type of indices trading they do: short-term indices trading, medium-term stock indices trading and long-term stock indices trading.
- Short-term indices trading: 10 - 50 Moving Average Period
- Medium-term indices trading: 50 - 100 Moving Average Period
- Long-term indices trading: 100 - 200 Moving Average Period
The stock indices price period in this case can be measured in minute stock indices charts, hourly stock indices charts, day indices charts or even weekly stock indices charts. For our example we will use 1 hour indices chart timeframe period.
Short term indices trading moving averages are sensitive to stock indices price action and can spot indices trends signals faster than the long term moving averages. Shorter term indices trading moving averages are also more prone to whipsaws compared to long term moving averages and a trader should choose a indices price period that will generate a stock indices signal early but not give too many indices trading whipsaws.
Long term indices trading moving averages help avoid indices trading whipsaws, but are slower in spotting new indices trends and trend reversals.
Because long term moving averages calculate the average using more stock indices price data, it does not reverse as fast as a short term indices trading moving average and it is slow to catch the changes in the indices trend. However, the longer term indices trading moving average is better when the indices trend stays in force for a longer time but may also give late stock indices signals.
The work of a trader is to find a moving average period which will spot indices trends as early as possible while at the same time avoiding fake-out signals (indices trading whipsaws).
