Moving Average 2 Lines (2 MA)

Description:

Any secondary system that analyzes a shorter time period then the primary system can be considered as a timing device. Typically, a 3-day moving average could act as a timing technique for a 10-day average; however, the delays of 1,2,3, or more days, are also for timing. A 5-day delay would not be sensible choice to be used with a 3-day moving average, because, the two periods would be incompatible. Plotting a lag and a lead moving everage values is another possible timing method.

In using two averages, the slower one, requiring a longer calculation period, will determine the long-term trend. The faster average will be used for timing. The long-term trend generates the signal compatible with the long-term trend, regardless of recent patterns. A trader would be more comfortable knowing that there is a recent short-term surge of prices in the direction of the new position at the moment of entry. To implement this idea, select two moving averages, one noticeably faster then other, and apply either of the two following rules:

1.BUY when the faster moving average crosses the slower moving average going up. SELL when the faster moving average crosses the slower moving average going down.

2.BUY when the current price crosses above both moving averages, and close out long positions when prices cross below either moving average. SELL when the current price crosses below both moving averages, and close out short positions when prices cross above either moving average.