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2 Hour Moving Average
Feb 13, 2008 - Simple yet effective trading tool
Two Hour Simple Moving Average - Simple is correct. There is nothing magical about this concept. The U.S. stock market is basically 6 ½ hours. We don't trade options during the first 30-minutes because there is simply too much manipulation taking place. So, that leaves a 6 hour trading day. Break the day into Morning, Lunch, and Afternoon. That's three periods of the day, each 2 hours in length. Therefore, we plot a 2-hour moving average. As simple as this concept is, it has an uncanny ability of showing you exact turning points and gives us high probability answers to questions such as "Is this the low or high price of the day?". I suggest you consider adding the 2-hour moving average to your list of tools. If it didn't work I wouldn't use it.
Notice once the OEX index broke above the 2-hour moving average (resistance) that it remained above for over 2 hours. There were two tests of the 2-hour moving average (now support) and each successfully supported the market which saw additional market strength develop. Late in the day we saw the OEX fall below the 2-hour moving average (support). We can now conclude that the majority of the day's buying interest is behind us and each bounce is price is likely to be met with selling. One of my favorite entry techniques is to buy call options on pullback tests of the 2-hour moving average. Typically you will see the OEX pullback and test its average at least once before prices climb. For protection, I place a stop on the close of a 10-minute bar below the 2-hour moving average. If you apply this simple tool to your day trading charts you will be amazed how accurate it is. Experiment with different ideas until you find something you're comfortable with and become a specialist of that concept. ...thanks
for the trust you've shown in MrSwing. p.s. Membership to oexstreet.com now includes auto trading access to our russell eMini system, NUTUS ER....
Disclaimer:Please note that charts and commentary provided by the moderator are for educational purposes only. Any trades placed upon reliance on the moderator’s charts or information is taken at your own risk for your own account. Past performance is no guarantee of future results. While there is great potential for reward trading stocks, futures and options, there is also substantial risk of loss and you must decide your own suitability to trade. Future trading results can never be guaranteed. This is not an offer to buy or sell stock, futures, options or commodity interests. Most trading systems are based on historical formulas which have worked in the past. However, what has happened before may or may not happen again. You can lose all your money trading stocks, futures, and options and you must decide your own suitability as to whether or not to trade. Only trade with true risk capital you can afford to lose. Only trade markets you can properly afford to trade. Properly funded trading accounts typically perform better than those that are not. Never risk more than 2-3% of your account on any one trade. Always define your risk before entering a trade and place a stop to limit your risk. There are no guarantees or certainties in trading. Trading involves hard work, risk, discipline and the ability to follow rules and trade through any tough periods during a system’s draw downs. If you are looking for a guarantee, trading is probably not for you. Most people lose money trading. One of the reasons is that they lack discipline and are unable to be consistent. A system can help you become consistent. Ironically, worrying about the monetary aspect of trading can contribute to and cause a trader to make trading errors. Therefore, it is important to only trade with true risk capital.
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