Technical Analysis
What is a Moving Average?
Investing Using Moving Averages
When investing in financial markets, there are many different indicators and systems that you can use to determine when to enter into a position, and just as importantly, when to exit a position. One of the most popular indicators that investors employ to help make intelligent decisions are moving averages. What exactly is a moving average and how can you use it to invest in the financial markets?
What is a Moving Average?
Simply stated, a moving average is the average price of a stock over time.
To be a little more technical, a moving average is a statistical measurement (the mean) of a dynamic set of data (aka “rolling”) that helps to identify trends in the underlying instruments. A 13-week moving average provides the average price of the financial instrument using the stock prices for the preceding 13 weeks. A 50-week moving average uses data from the preceding 50 weeks, etc. Each new day, the oldest day’s data is removed from the population and the current day’s data is added; in this way the population is always equal to 13 weeks’ worth of data, measured from that day back.
The moving average is a linear measurement of the average price of a stock over the period in question. The line communicates the historic trend of a stock’s price. Most consumer trading platforms offer moving average indicator tools for use in technical analysis.
There are two different types of moving averages Read the rest of this entry »
Stock Market Fluctuations
The Manic-Depressive Stock Market: What to Make of It
The psychology of the market may be teetering on the edge
The stock market: one week it acts like Dr. Jekyll, the next week it’s Mr. Hyde.
That shift can even occur in the course of a single session.
These dramatic fluctuations appear to be impulsive; and we know that impulse does not flow from cold reason. Even so, the Efficient Market Hypothesis would have us believe that investors are constantly applying reason and logic to reach some objective market pricing, via the latest news or measure of stock market valuation.
The February 2010 Elliott Wave Theorist provides insight: Read the rest of this entry »
Has Wall Street Ever Warned You in Time?
Stock Market Turning Points: Has Wall Street Ever Warned You in Time?
Divorce yourself from the crowd. Independence is good.
In the play “The Secret to Freedom,” Pulitzer prize writer Archibald MacLeish had a character say this:
The only thing about a man that is a man is his mind. Everything else you can find in a pig or a horse.
MacLeish knew how to state the truth plainly.
And the truth is, you can use your mind in any way you wish.
When it comes to financial markets, most allow others to do their thinking for them. You’ve heard the phrase “the blind following the blind.” Yes, they both fall into the ditch. Read the rest of this entry »
Diagonal: Straight Shot to a Trading Opportunity
Today we sit down with Elliott Wave International’s Futures Junctures Editor and Senior Tutorial Instructor Jeffrey Kennedy to discuss his favorite wave pattern of all: the diagonal.
EWI: You say if you had to pick just ONE of all 13 known Elliott wave structures to spend the rest of your technical trading life with, it would be the diagonal. First, tell us what the diagonal is.
Jeffrey Kennedy: The diagonal is a five-wave pattern labeled 1 through 5, in which each leg subdivides into three smaller waves: 3-3-3-3-3. Unlike impulse waves, however, diagonals are the only five-wave structures in the direction of the main trend in which wave 4 almost always moves into the price territory of wave 1. (See illustrations below.) Read the rest of this entry »
Which Method Can Traders Use to Confirm an Elliott Wave Count?
Jeffrey Kennedy has developed a theory that guides his analysis
When you are watching a pattern develop on a chart, how can you be sure that your wave count is correct? The Elliott Wave Principle offers rules and guidelines that you can use to add confidence to your wave count.
Elliott Wave International’s Senior Analyst Jeffrey Kennedy spent years designing his own technique to improve his accuracy. He came up with the Jeffrey Kennedy Channeling Technique, which he uses to confirm his wave counts. The following excerpt from Jeffrey’s Trader’s Classroom lessons, a regular feature of his Futures Junctures Service, offers an overview of his method. Read the rest of this entry »
Learn How to Apply Fibonacci Retracements to Your Trading
EWI’s new eBook helps you identify trading opportunities
Elliott waves often correct in terms of Fibonacci ratios. The following article, adapted from the eBook How You Can Use Fibonacci to Improve Your Trading, explains what you can expect when a market begins a corrective phase. Learn how you can read the entire 14-page eBook below. Read the rest of this entry »
Applying Fibonacci to Stock Market Patterns: It’s easier than you might think!
Patterns are everywhere. We see them in the ebb and flow of the tide, the petals of a flower, or the shape of a seashell. If we look closely, we can see patterns in almost everything around us. The price movements of financial markets are also patterned, and Elliott wave analysis gives you the tools to interpret those patterns.
The Fibonacci sequence is vital to Elliott wave analysis — as a matter of fact, R.N. Elliott wrote that the Fibonacci sequence provides the mathematical basis of the Wave Principle. Once you understand the Fibonacci sequence, it’s easy to apply it to the markets you trade.
The following excerpt is from a new eBook from Elliott Wave International Senior Tutorial Instructor Wayne Gorman: How You Can Use Fibonacci to Improve Your Trading. Wayne explains how the Fibonacci sequence is derived and how it can be used to understand market behavior. Read the rest of this entry »
Technical Indicators: A Love-Hate Relationship
Part I: How One Technical Indicator Can Identify Three Trade Setup
Trading using technical indicators — such as the MACD, for example — can do one of two things: help you or hurt you.
Elliott Wave International’s Jeffrey Kennedy explains what he loves and hates about technical indicators and shows you how he uses them to his advantage in this excerpt from his FREE eBook, The Commodity Trader’s Classroom.
I love a good love-hate relationship, and that’s what I’ve got with technical indicators. Technical indicators are those fancy computerized studies that you frequently see at the bottom of price charts that are supposed to tell you what the market is going to do next (as if they really could). The most common studies include MACD, Stochastics, RSI, and ADX, just to name a few.
The No. 1 (and Only) Reason to Hate Technical Indicators Read the rest of this entry »
How to Identify and Use Support and Resistance Levels
Since 1999, Elliott Wave International senior analyst and trading instructor Jeffrey Kennedy has produced dozens of Trader’s Classroom lessons exclusively for his subscribers. While commodity markets are known as some of the toughest trading environments around, these actionable lessons from a skilled veteran can help you trade commodities, or any market for that matter, with more confidence.
Enjoy this excerpt from Elliott Wave International’s free Club EWI resource, the 32-page Commodity Trader’s Classroom. Read the rest of this entry »