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. Our ETF Moving Average Signal Generator The purpose of this signal generator, is to alert an investor when a new trend occurs. Moving average crossover systems are popular signal generators among both traders and investors because they can be used to get in at the beginning of the trend, be positioned to profit from most of the rise, and to get out early when the trend turns negative. Moving average systems will not get you in at the bottom or out at the top. However, they can help reduce risk and at the same time enable a person to lock in a significant portion of the gain when an ETF is in a rising trend. Some like to buy when a stock crosses from below to above its 30-day moving average, and sell when it crosses from above to below its 30-day moving average. These systems are particularly popular with those who invest in Exchange Traded Funds (ETFs) because ETFs are considered by most people to be a little less volatile than other stocks. The thinking is that lower volatility would make them a little less prone to whipsaws. The 30-day moving average is favored by many because it is sensitive enough to respond fairly quickly to a new trend. Some investors prefer to use the 50-day moving average as a signal generator. It catches intermediate-term trends well, and institutional investors tend to be buyers when a stock rises above its 50-day moving average. Having institutional investors on your side is considered a real advantage because the large amounts of money they invest helps increase the stock's momentum in the direction indicated by the signal. Some technicians have written books that urge the use of the 150-day or 30-week moving average. For example, Stan Weinstein highly recommends a 150-day moving average system in his book, Secrets for Profiting in Bull and Bear Markets. He writes, "Over the years, I've found that a 30-week moving average (MA) is the best one for long-term investors, while the 10-week MA is best for traders to use." These are the 150-day and 50-day moving averages respectively. Our own tests verify the usefulness of these moving averages. Joseph Granville favors the 200-day moving average in his book, A Strategy of Daily Stock Market Timing for Maximum Profit. He wrote that "The 200-day chart, having a slower moving average line, is considered to be more reliable than a 10-day, 50-day, 80-day, or 100-day moving average price chart. The penetrations of that average line by the actual price of the stock are considered to be more meaningful." Others counter that the 200-day moving average is too slow in responding to new trends, and that even though the slower moving average is a more reliable indicator of long-term trend direction, they can make more money by using a more sensitive (shorter) moving average. However, the crossover of any moving average by the closing price is notoriously subject to whipsaws (signals that are reversed the following day or soon after). Many traders therefore require that the crossover be sustained for several days. Alternatively, they might use a very short moving average versus the longer moving average. In our algorithm, in order to cut down on whipsaws the formulas use a 3-day moving average cross of the longer moving average rather than a cross by the closing price of the longer moving average. The algorithm is designed with the purpose of giving more trustworthy signals than the simple cross of the closing price versus the longer moving average. Our algorithms generate alerts for five moving averages (30-day, 50-day, 100-day, 150-day, 200-day). For example, a cross of the 3-day moving average of the closing price from below to above the 30-day moving average generates a "30-Up" alert. A cross of the 3-day moving average of the closing price from above to below the 30-day moving average generates a "30-Dn" alert. The alerts are intended to draw attention to the fact that the crossover condition has been met. It will up to you to determine whether or not you will buy or sell. The following is an example of how the lists are configured. This is NOT a current list. Subscribers access the current list by clicking on the "Subscribers" tab on the left side of the screen, then by selecting "ETF Alerts."
The moving averages used are always simple moving averages. Our tests show that they are, on average, at least as profitable as weighted or exponential moving averages. Although weighted and exponential averages tended to be faster, their average returns were less in our tests. We also include the 14-day Relative Strength Index (RSI) for those who would like to incorporate a short-term strength measurement in their system. For example, a crossover with a surge in price would register a higher RSI than a crossover without a surge in price. We generate a fresh list daily.
Links To Other Places On This Web Site Stop Losses Stops Products The Valuator StockAlerts Trading Tools About Us Contact Us Fees & Refunds Links Index . All pages on this Web site are protected by copyright Copyright 2010 by Stock Disciplines, LLC No part of this publication may be reproduced or distributed in any form by any means. .
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"But thou shalt remember the Lord thy God: for it is he that giveth thee power to get wealth." Deut. 8:18
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