This is an idea that I am working on and trying to refine. After watching a video on Moving Averages I realized that if somebody were to buy or sell short when a 10 day ema crossed with the price, they would post gains. Possible big gains. It is a strong indicator that the price will continue in that direction. This works best in a up or down trend. In sideways trends it is imperative that the unit is bought and sold at the ema line or money will be lost. So the problem is that on some days the price could fluctuate so many times on the line and so fast that placing orders everytime would be futile. The key is to buy when the price and ema lines decisively cross. I searched for more info on this strategy and found that the 10 day EMA can be enhanced by other indicators to avoid the sideways trends. For instance, using a 10 day SMA along with a 20, and 30 day EMA, can provide a start position indication when the 10 day crosses the 20 and 30. Closing a position could possibly be accomplished by a trailing stop, or when the price crosses back across the 10 day MA. One other small problem with this strategy is the commision costs of buying and selling. This would lose relevance with an increasing trade size. I am also wondering about using some kind of volaility indicator to determine the perfect moving average time increment, and avoid temporary bumps. It seems like this could be a strategy that, with some fine tuning, could beat the crap out of average market gains (DOW SP500). Does anyone have any good experience trading with this type of plan? How about some advice on how to make it work efficiently?
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