How to Trade the New Single Stock Futures

Three, tend to serve the purpose better. Whereas one moving average will indicate the trend only over a specific length of time, the addition of one or two moving average indicators could significantly improve results by providing several measures of market strength or weakness.

Theoretically, buy signals are generated when two moving average lines cross in the upward direction, and sell signals are generated when two moving averages cross in the downward direction (see Figures 8.19 and 8.20). Finally, a third moving average could be added to further verify timing or to provide more evidence of a change in trend.

The application of various moving averages to determine buy and sell indications has received considerable study over the years. Certain combinations in certain markets are optimal, whereas other combinations appear not to be particularly fruitful. Specifically, the 4-day, 9-day, and 18-day moving averages seem to work best together in the futures markets.

Money managers and speculators frequently use moving average signals, whose popularity derives from their meeting many specific criteria of effective systems. These criteria are the following:

Moving Average Sell Signal

 

Moving Average Buy and Sell Signals

 

Moving Average Buy and Sell Signals

•  Moving average signals are specific and objective.

•  Moving average signals can keep you in the market at all
times—closing out a long, going short, and covering a short
when going long. This is valuable because you will have a po­
sition when major moves begin.

•  Moving averages are trend-following systems. In other words,
when a good trend is set in motion, the likelihood of the mov­
ing average's having a position consistent with the trend is
very high.

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