The Perfect Moving Averages for Day Trading
5-, 8- and 13-bar straightforward moving averages offer best inputs for day investors looking for quick earnings on the long as well as short sides.
Choosing the right moving averages adds reliability to all technically based day trading strategies, while poor or misaligned settings undermine otherwise profitable approaches. In most cases, identical settings will work in all short-term time frames, allowing the trader to make needed adjustments through the chart's length alone.
Given this uniformity, an identical set of moving averages will work for scalping techniques as well as for buying in the morning and selling in the afternoon. The trader reacts to different holding periods using the charting length alone, with scalpers focusing on 1-minute charts, while traditional day traders examine 5-minute and 15-minute charts. This process even extends into overnight holds, allowing swing traders to use those averages on a 60-minute chart.
5-8-13 Moving Averages
The combination of 5-, 8- and 13-bar simple moving averages (SMAs) offers a perfect fit for day trading strategies. These are Fibonacci-tuned settings that stand the test of time, but interpretive skills are required to use the settings appropriately. It's a visual process, examining relative relationships between moving averages and price, as well as MA slopes that reflect subtle shifts in short-term momentum.
Increases in observed momentum offer buying opportunities for day traders, while decreases signal timely exits. Decreases that trigger bearish moving average rollovers in multiple time frames offer short sale opportunities, with profitable sales covered when moving averages start to turn higher. The process also identifies sideways markets, telling the day trader to stand aside when intraday trending is weak and opportunities are limited.
Two Trading Examples
Using 5-8-13 in a Long Trade