One the important aspects of my trading plan is moving averages. I am most concerned with where is price in relation to the moving averages. If price is above the 5 ma and the 20 ma and I am long I am making money. Simple right…? Next are the moving averages properly aligned? 5, 20, then 50….proper alignment you are making money. Third and not least the slope of the moving average. Is it sloping up or down? If I am long it needs to be sloping up…if short it needs to be sloping down.
- Price in relation to the moving averages
- The proper alignment of moving averages
- The slope of the moving average
See the blue lines below for example of slope. Notice the 2nd blue arrow? The moving averages are flat….no slope…notice what happens. The trade goes against me.
Notice the slope moving averages of the current “buy” signal. Both the 5 ma and the 20 ma are sloping at a nice up angle and price is printing above the 5 ma. I am making money on this trade. I went long 2000 shares Nov 22nd with avg price of $16.00. I am up $680 on the 2nd set of 1000 shares and locked in a coupon payment of $485. So far that is $1,060 of easy money.