Leading Stock Indices Indicators

MA Leading Indices Indicators

A trader can choose a moving average based on the chart time frame that he is trading: the trader might choose to use this Moving Average indicator on the minute charts, hourly charts, day charts or even weekly charts.

The trader can also choose to average the closing price, opening price or median price.

Moving average indicator is a oftenly used indicator to measure strength of trends. The data is precise & its output as a moving line can be customized to a 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 trend following indicator - this means that it will tend to give late indices entry signals as opposed to leading indicators. However, as a lagging indicator it gives more accurate signals and is less prone to whipsaws compared to leading indicators.

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 price period in this case can be measured in minute charts, hourly charts, day charts or even weekly charts. For our example we will use 1 hour chart timeframe period.

Short term indices trading moving averages are sensitive to price action and can spot 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 price period that will generate a 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 trends and trend reversals.

Because long term moving averages calculate the average using more 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 trend. However, the longer term indices trading moving average is better when the trend stays in force for a longer time but may also give late signals.

The work of a trader is to find a moving average period which will spot trends as early as possible while at the same time avoiding fake-out signals (indices trading whipsaws).