Dear David,

Please see attached.

How come the candle was going up for 40 mintues ( 10:20am to 11:00am) but the Parabolic SAR still shown the down trend? Sometimes I just dont trust these technical indicators. Thanks

WC

Attached Files

Parabolic SAR.pdf (35.0 KB, 50 views)

Hi wilson10307,

Glad to hear from you and welcome to the community.

Thanks for showing me the chart that makes it a lot easier for me to help out where I can. I think most traders would agree that the Parabolic SAR is good for trending markets but tends to whipsaw you in ranging markets as you are seeing here.

While the market was going up during the time period you point to in my opinion that doesn't really constitute a trend even on the hourly chart. What I would think of as a trend, and therefore an appropriate time to look for the Parabolic SAR to be on the side of the market you would expect it to be is from just before 12:00 until 1:00 on your chart there.

So in short the Parabolic SAR is designed to work in trending markets, so it does not work so well in ranging markets. It is because of this that its developer recommending establishing the trend first with trend lines or another indicator such as the ADX, and then once you feel the market is trending then use the Parabolic SAR.

Hope that helps.

Best Regards,
Dave

Hi David,

I see most of the people are using the 20,50 & 200 DMA on the chart. When those lines crossover, does it mean anything special ?

Hi Wilson10307,

Glad to hear from you again hope things are going well.

Yes the 20, 50, and 200 period moving averages are probably the most popular moving averages for traders on daily charts who are seeking to trade trends or bounces off significant support/resistance.

The reason for this is that traders tend to watch the 20 period moving average as an indication of the shorter term trend in the market, the 50 as the intermediate term trend, and the 200 as the long term trend in the market.

In addition to getting a feel for the overall trend in the market traders will also use crossovers of the averages like you have asked about to try and identify turning points in the market. So for example if the 20 crosses above the 50 then this may be an indication that the trend is starting to change.

Another example of this is when the moving averages are in order with the 20 above the 50 and then both the 20 and the 50 above the 200 this is an indication of a strongly trending market.

As moving averages are not only a very popular indicator as stand alone tools but also used as components of many other indicators, there are literally hundreds of different ways that traders use them. I have two videos which cover the basics of moving averages and the main ways that traders use them which you can find at the links below:

Learn to Trade using Moving Averages Part 1

Learn to Trade using Moving Averages Part 2

Hope that helps. Feel free to post if there are any other questions or comments on this one.

Best Regards,
Dave

Thanks David.

I do day trade most of the time. Should I use the 13 MA with a 20 MA for the shorter terms? I certainly use other indicators as a conjunction as well. DMI and slow Stochastic are my favorite with a 3 min. chart.

WC

i agree with what david is saying. moving averages are probably my favorite indicators. for me, they are simple and they work. can't ask for more than that!

in my experience, i am not a big fan of using the 200 moving average -- it's too long term for me. i like to use the 5, 10, 20, 50, and 100. i also use the 4 and the 7 to identify exit points. i also like EMA -- exponential moving averages -- as they favor the more recent data more, which i find to be useful in analyzing trends.

My Pleasure.

I think the answer to your question lies in the answer to the question of do you feel that using the 13 MA in conjunction with the 20 MA gives you some information about the market that can be used to make profitable trades?

If so then my next question would be how did you come to that conclusion?

If you don't mind coming back to me with the answers to those questions then I will be glad to give my opinion on whether or not I think they will be useful.

Best Regards,
Dave

Thanks Dave and Simon. I do use the 4, 5 or 10 days to identify the trends for shorter terms but I found the 50 and 200 MA both are too long term and too far away from the numbers. I like using the EMA as well.

My pleasure Wilson10307 thanks for your participation.

Best Regards,
Dave

For intraday I use 10,20 ema's with some indicators like williams indicator(%R), DMI, RSI.
These are my favourite indicators.