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are fundamental to many technical analysis approaches. A single moving average provides a
time tested and successful method of trading market activity. It has been overtaken by
combined moving averages. Droke argues in this book that many traders apply moving average
incorrectly. He suggests that a better
understanding of these important indicators will improve trading results by making for
better entry and exit conditions.
struggling with moving average trading techniques this is where the strength of the book
is found. For more experienced traders the book delivers additional useful information to
fine tune turning points and identify support and resistance levels. He also suggests ways that averages can be used to
identify the underlying 3 and 4 period cycles in the market. These are not the ways that
moving averages are normally applied.
The key issue
for Droke is the way the dips and bumps in the moving average are related to three
features. These are the concepts of cyclic turning points, the idea of parabolic relationships and the development of support and
traders this is the most interesting section of the book because it brings together three
ideas which are normally considered separately. He uses the turning point of the moving
average to help identify cyclic turning points. Most traders look for price evidence of
this, but Droke explains how the moving average behavior is a more significant and
reliable guide to the identification of
cyclic turning points. He illustrates this concept using stock, futures and index markets.
points are characteristic of parabolic behavior. He provides a tantalizing introduction to
his wider concepts of parabolic behavior. Additionally he shows how these features can be
used to establish support and resistance levels. This is a step away from the standard
approach that uses horizontal lines to plot these
levels. Experienced traders will take these
concepts and apply them to stocks they know. This method is particularly useful for
protecting profits by providing early exit signals.
This is a
useful introduction to moving averages for the new trader. It also provides some
interesting food for thought for more experienced traders.
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