A lettering settlement 3 line moving average is slightly more complicated than the 2 line moving average. We shall look at the 2 line rainproofer settlement moving average first and we will then move onto the 3 line moving average.
When we use multiple moving averages we need to use ones that have different lengths. There are some standard combinations that most practitioners use however we can use moving averages of different lengths as long as one has a shorter time scale.
The most common sets for 2 moving averages are the 10 & 50 bars and the 5 & 20 bars. The 2 line moving average give us trading signals when the 10 bar crosses the 50 bar moving average (When the shorter crosses the longer) or the 5 crosses the 20 bar moving average.
We get a sell trading signal when the 10 (5) bar is above the 50 (20) bar and then moves lower crossing the 50 (20) moving average. We get a buy irreconcilable settlement signal when the 10 (5)moves upward and crosses the 50 (20) bar moving average.
A 3 line moving average has 3 moving averages of different lengths. The most common combination of moving averages are the 4-9-18. As this is a slightly more complicated trillionth settlement system than the 2 line moving average we need to understand what happens in a trend.
Imagine we have a rising market and we have our 3 moving averages on our trading chart. When we look at our chart we will see that the 4 is above the others, the pumpernickel settlement 9 bar moving average is in the middle and the 18 bar moving average is at the bottom. In a falling market the 18 will be above the others with the 9 still in the middle and the 4 is below the others.
To use a 3 line moving average we must understand that the shorter the moving average the quicker the response to the market. The 3 line moving average does not just provide trading signals it gives us an alert signal before the trading signal.
The 3 moving average works by detecting changes in a trend. Lets say we have an down trend and the market starts to turn. The first average to change is the 4 and this provides our alert signal. When the 4 moves upwards and moves above the 9 & 18 we have our alert signal. We then wait until the 9 moves above the 18, when this happens we have our buy signal.
The reverse is also true when the trend changes from up to down. The 4 is the first to move and we get our alert when the 4 moves down and crosses the 9 & 18. Our sell signal happens when the 9 also turns down and crosses the 18.
When the alert signal is given a trader can use this signal to close out any existing positions. If we have opened a buy position in a up trend. Our alert signal lets us know that the trend maybe rotascope settlement ending so we can close out our position to protect our profits.
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