MULTIPLE MOVING AVERAGES FOR SWING TRADER

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. As a swing trader you must be very clear to identify which trend is your friend.

Swing traders must be attuned to the minor trend as they look to capitalize on short-term moves that may last from a few days to at most a few weeks. However, if your exclusive focus is just on the near-term picture, then you will often get hit with nasty surprises.

for the following days: 4, 9, 20, 30, 50, 150 and 200. They are simple (not exponential) moving averages.

Different technicians will swear by the 40-day moving average or will extol the virtues of combining the eight-day moving average with the 32-day or the power of the 65-day moving average. However, I don't think any single moving average is "the right one." Once you have found a combination that works for you, then stick by it so you get a feel for the signals that those particular averages generate. There is no one moving average or combination with a special power; the key point is to represent the moving averages in various, multiple time frames. Here's why I have decided to focus on each of these particular time periods:

The four- and nine-day moving averages represent the very short-term (or minor) trend.

The 20-, 30- and 50-day moving averages for me represent different "slices" of the intermediate-term trend.

The 150- and 200-day moving averages are definers of the long-term market trend.

In any good charting package, you should be able to place all of these moving averages on the same chart. While at first this practice may seem like information overload, you will quickly adjust to these types of charts (and your persistence will be rewarded with more accurate trading signals).

Combining moving averages from multiple time frames allows you to determine when the trends from all three periods are in your favor.

. Moving averages define the trend and provide support and resistance. By placing and examining multiple moving averages on the same chart, we increase the probability of trading in harmony with all three trends: primary (or long term), intermediate and short term.

As long as price remains above the key moving averages and the moving averages are trading above one another in what I've labeled "bullish alignment," traders should hold their long positions. If price is below the key moving average and the averages are in "bearish alignment," then that particular stock should be held short.

swing traders can use as few as two moving averages or as many as three or more. These moving averages should be combined with other technical analysis tools such as candlesticks and indicators such as MACD

A moving average crossover system of great importance to swing traders was made popular by R.C. Allen. This system involves the 4, 9, and 18-day moving averages. Allen created his system well before Bollinger bands were created, and I have modified his concept slightly by

A moving average crossover system of great importance to swing traders was made popular by R.C. Allen. This system involves the 4, 9, and 18-day moving averages. Allen created his system well before Bollinger bands were created, and I have modified his concept slightly by substituting a 20-day moving average for the 18-day. This change gives me the advantage of adding a Bollinger band to the chart without creating visual clutter.

According to Allen's system, a cross of the 4-day above the 18-day is an early signal that the trend has changed to bullish. When the 9-day crosses above the 18-day, this change in trend is confirmed and a buy signal is created. It's worth noting that at that time, of course, all three moving averages will be in "bullish alignment" with each other and all three will also likely be sloping upward.

When the uptrend is in the process of reversing, an early indication of trend change will take place when the 4-day moving average crosses down through the 9-day. A swing trader might want to nail down profits at this time even though a confirmed signal has not yet been gi

A swing trader might want to nail down profits at this time even though a confirmed signal has not yet been given.

When the uptrend is in the process of reversing, an early indication of trend change will take place when the 4-day moving average crosses down through the 9-day. A swing trader might want to nail down profits at this time even though a confirmed signal has not yet been given. The confirmation does come when both moving averages cross below the 18-day and all three averages are in "bearish alignment."

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