1.) I want to know that trading on moving average crossovers refer to Simple Moving Average(SMA) or Exponential Moving Average(EMA). Which averages crossover do most traders use?
2.) Also what should be the ideal time period used in RSI, MACD, SMA and EMA, for e.g. in RSI we are given 14 period by default. Is it okay or we should use a higher period?
Moving averages smooth the price data to form a trend following indicator. They do not predict price direction, but rather define the current direction with a lag. Moving averages lag because they are based on past prices. Despite this lag, moving averages help smooth price action and filter out the noise. based on the requirement we choose moving average of simple or exponential.
A simple moving average is formed by computing the average price of a security over a specific number of periods. Most moving averages are based on closing prices.
Exponential moving averages reduce the lag by applying more weight to recent prices. The weighting applied to the most recent price depends on the number of periods in the moving average.
For RSI recommended periods are 14
you can change or use periods of EMA / SMA based on your requirement
Hello Trader,
Could you please let us know your trading style: daytrader, swingtrader, investor ?
I am a day trader and occasionally do trades for 2-3 days.