Trading Psychology

Moving Average Definition

A Simple Moving Average (SMA) is the average price of a security over a given number of days. Simple Moving Average is a momentum indicator used to monitor whether a security’s momentum is rising, falling or bound to reverse.

The important timeframes to monitor the simple moving average are: 20 days (1 month time frame), 60 days (3 months time frame), 120 days (6 month time frame) and 250 days. (1 year time frame) Simple moving averages are used to calculate the MacroVar Market trends indicator which ranges between -100 and +100.

Trading time frames

During normal market conditions occurring 80% of the time historically, the typical trading time frame used is ranging between weeks to months. Hence, traders should use daily and weekly charts to find trading ideas during normal conditions.

During high volatile market conditions which occur approximately 20% of the time, time frame is reduced from 1 day to 1 week. Technical analysis tools use 60 minutes and 240 minutes charts to time the extremely volatile conditions right.

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