Per Investopedia, the moving average (MA) is a simple technical analysis tool that smooths out price data by creating a constantly updated average price. The average is taken over a specific period of time, like 10 days, 20 minutes, 30 weeks or any time period the trader chooses.
The 20-Day Simple Moving Average is the average price of the past 20 days. In this swing trading strategy, we consider price to be bullish when it is above the 20-Day SMA bearish when it is below the 20-Day SMA.
Per Investopedia, The relative strength index (RSI) is a momentum indicator used in technical analysis that measures the magnitude of recent price changes to evaluate overbought or oversold conditions in the price of a stock or other asset.
RSI > 70 signals an overbought condition, and RSI <30 signals an underbought condition.
Per Investopedia, Moving Average Convergence Divergence (MACD) is a trend-following momentum indicator that shows the relationship between two moving averages of a security’s price. The MACD is calculated by subtracting the 26-period Exponential Moving Average (EMA) from the 12-period EMA.
Looking at the MACD on the chart, crossovers occur when momentum has changed from bearish to bullish or vice-versa.
None of these 3 indicators are full-proof. Used by themselves, many would even consider them useless. However when used in conjunction they can be extremely helpful in predicting future price movement.
Therefore, in order to enter a trade we are looking for:
Before taking a trade, you should map it out. Where you will take profits and where you will take a loss if the trade moves south.
Price Targets: Price Targets are set at previous highs or previous resistance, as well as 70 RSI. Decide how much you will sell at each sell target. I typically opt for 1/5. You could also choose 1/3 or 1/4.
Stop Losses: Stop Losses are placed at support levels. If price drops below these levels you take a loss. You can sell your full position, 1/2, or any other amount. Others choose not to sell any and will wait for price to move sideways again and average down.
See how I prepared for a $GRPN Swing Trade in the image below.
Remember, price has memory…
Technical Analysis: Human Psychology
Managing Your Trades Intraday
Determining Your Bias
Bonus: Options Trading 101
Bonus: Beginner to Expert 0-100 Trading Flow Map
Bonus: Portfolio Management, The Secret to Long-Term Greatness
Trades by Ticker
Gap & Go
Gap & Fill
Head and Shoulders
Inverse Head and Shoulders
NFLX – 2021
Sign Up With a Broker and Deposit Money
Understanding Price Action
Reading and Annotating Charts
Core Watch List
Buy the Dip
Support & Resistance
Candlesticks, OHLC Bars
Analyze Core Tickers
Analyze Daily Focus List
Using Price Alerts
Develop a Trading Plan
New Highs vs New Lows
Stocks Above 200-Day SMA
Linear vs Logarithmic Charts
Fibonacci Retracements & Extensions
Market Research & Resources
CTM Custom Indicators
Early Entries & Key Pivots
65-Min & 195-Min Charts
Earnings Do’s & Don’t’s
Unfiltered Notes From Live Trading
Candles & OHLC Bars
Trading Patterns for Dummies
Relative Strength Index (RSI)
CTM Chart Setup
Abundance Mentality – Always another plays
High Growth for High Returns
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