So what are moving averages and how do you use them to better your training in
this video I'm going to show you how to setup and use moving averages to
increase your profitability hey how's it going on this channel you will learn the
steps I took to go from trading with a full-time job you're trading as a
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the video make sure to check out the notes and links in the description below
I'll list out any valuable resources down there now today we are talking
about moving averages so even though we are going over these moving averages in
thinkorswim whatever charting platform you are using all these concepts will
still remain the same now there are two different types of moving averages you
have simple and exponential and the only difference between the two is that a
simple equally weights all the days that you put into the moving average and an
exponential puts more weight on the more recent days it doesn't really matter
which one you use but you want to really stick to using an exponential or a
simple moving average most of the time because when in trading in the market
consistency is the key to profitability and you don't want to be switching back
and forth because that will change up your trading style a lot more than you
really think now because I use exponential all the time we're gonna be
looking at exponential moving averages here but again there's not much
difference between the two other than what is gonna work best for you and what
you feel comfortable with using the periods that I use for moving averages
are actually the Fibonacci sequence numbers because I trade using Fibonacci
retracements quite often I actually have my moving averages using these same
numbers from Fibonacci so for moving averages I will quite often use the 8
the 21 and the 34 and those are numbers from the Fibonacci sequence so to add a
moving average in thinkorswim we're just gonna go up here to studies and then
edit studies and just type in the search box exponential and that'll bring up
moving averages and then just double click on that and I'll bring it over
to add it to the chart and then I'm gonna edit properties and change this to
an 8 day moving average the length is gonna be 8 and that would just be how
many candlesticks it takes and because I'm on a daily chart
it'll be an 8 day moving average with moving averages you can change on what
price they're calculating off and if I select this you can see that there's a
lot of different ways you calculate a moving average off of and so you can
either do the closed or the open or a lot of different variations but you want
to stay consistent in which one you pick most averages are based off of the close
and so that's what I use now there aren't really any other crazy settings
that you can change the general default settings are really what you want to go
with so we're just gonna click OK and then add this to the chart and we can
see the moving average on the chart now an 8 day moving average is a pretty
quick moving average so how I like to use that is using it for when the market
is moving at a quick pace as well because an 8 day moving average is gonna
stick to price action pretty quickly because it only has 8 days in the moving
average and it's exponential you want to really use it when the market is moving
as the market maybe takes off you want to be using the moving average as
potential support in a strong up move once it breaks that you're gonna want to
look to a longer moving average so for me I would be then looking at the 21
moving average so if I go up here again and add another exponential moving
average and create that as a 21 day moving average and you're gonna want to
come down here and change the color because it's gonna default to the same
color and it's gonna be really confusing if all your moving averages are the same
color so we're just gonna add that to the chart and using these moving
averages they really allow you to kind of see the trend in the chart with a 21
moving average being a stronger support level and then once the stock or market
continues to break out the 8 is a more momentum based support and how you can
see that is if we look at this stock in this area as
the market trailed off and took off up here it came back and got pretty close
to the 8 EMA multiple times and this is kind of showing that it holds that zone
as a support there not really a pinpoint hold exactly kind of thing it's more of
it's holding this area of the ATM a and over here where it broke through that 8
day moving average it kind of breaks that support and so when it breaks the 8
day moving average it's gonna want to go to the next moving average and for me
that's the 21 so you can see that this stock came back down to the 21 moving
average and held it as support a few times and then once it took off and then
began to help the eight EMA as the support level you can see that it
repeated this cycle quite a few times once it broke through this eight it came
down to the 21 and then once it regained its strength it started to hold the 8
day moving average as the support before it eventually became to over spot and
then had to come all the way back down to the 21 but then again the 21 is a
stronger support level and it held the 21 before it began to make all-time
highs again now as you can see that on this next pullback right here that we're
having right now the market is pulling back further than 21 and so that would
be looking to the next exponential moving average for that support zone you
can always increase the length of the moving average if the stock is going to
have a larger pullback then maybe these shorter 21 or 8 the length moving
averages so to do that we're just going to come up to studies again and add in
another exponential moving average and the next one in the fibonacci sequence
is going to be the 34
so that is gonna hopefully hold support for us and if it doesn't we're gonna
have to look at the next one which would be the 55 now it looks like the stock is
right now potentially going to hold it but maybe it won't so the next one we
would want to add is the 55 and I would guess that that would be somewhere down
here and so the stock might have bounced off of that today now I don't actually
use moving averages to trade alone quite often and a really good way to use
moving averages is to just identify a trend or a shift in trend and one way to
do that is using moving averages to identify a really strong trend and
you're really strong trend is when the moving averages are stacked and what I
mean by that is the shortest moving averages are on the top and that longer
ones are on the bottom so right here we have stacked moving our just that 8 is
above the 21 and it's above the 34 and that gives you a really strong trend and
it tells you that the market is really strong right now so if you're gonna look
to buy one of these pull backs these pull backs are really easy buys because
you know that well the trend is really strong right now and these might just be
kind of faked just profit-taking pull backs instead of a major sell-off and
this allows you to be able to trade with the trend and keep buying and making
money as the stock market goes up hey thanks for watching this video if you
want to learn more about the thicker swim platform or trading in general make
sure to subscribe to the channel and if you had any comments or questions make
sure to ask them in the comment section below and I will make sure to get back
to that