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Readers reviews of Moving Averages Simplified

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Moving averages 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.

 

For traders 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 resistance levels.

 

For experienced 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.

 

These turning 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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