Are you trading/taking Buy or Sell decisions based on 20 day EMA. The below picture will tell you how 20 EMA is inefficient in picking up the trends.
The above Nifty chart plots the 20 day EMA line along with Buy and Sell Signals.
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A Buy Signal(Green Arrow) is produced if the candle closes above 20 Day EMA
A Sell Signal(Red Arrow)is produced if the candle closes below 20 Day EMA
When there are too much of crowded mixed signals it is difficult to take the correct signal obviously we will fail to capture the correct trend. More over a sideways trend results in too much distortion in the signal.
If you are a believer of considering 20 day EMA as supports/Resistance for your trades then you need to rethink about modifying your strategy
Now visualize yourself Crossover of the Candle with 20 day EMA cant be the right strategy to trade/invest
But this can happen with any average, why only 20 ema?
If 20 ema is “inefficient” then which one is efficient?
Besides, nobody is so naive to use only one average to generate buy sell signals.
@Epsilon Eridani… Just check out any financial forums/blogs that talk about stock markets. Many are using it in their trades to take decisions
Just check out 90 days SMA. It’s one of the good point to enter / exit. Sometimes, it coincides with Ichimoku cloud.
Gopal
Nice Article Bro…
Hi, Rajendran how are u. Madras eye illness has gone? HOPE you will be ok now. I am expecting your correction on Deravas Box AFL. my mail id is [email protected]. Thanking
Ananthakrishnan
SIR ,
mail it to me also @ [email protected] . tx
But you’ve not answered my question and instead you want me to take a look at all the idiotic blogs around!
To repeat : why 20 ema is inefficient according to you? Why not 19 ema or 17 ema or 1900 ema?
If you can’t answer then say that you don’t know and stop blogging and save your time as well as mine.
@Epsilon Eridani
luk brother these kind of manners are not expected here
—“If you can’t answer then say that you don’t know and stop blogging and save your time as well as mine.- Epsilon Eridani”
atleast Rajandran R jee is taking great efforts to answer to queries and share his knowledge in posts in his free times
its very easy to point out others mistake or make bulley rather than develop something urs and contribute it
so if u really have guts than try to make and maintain ur own blog and contribute what u know
@Epsilon Eridani
20 day EMA is just a very basic indicator. More over the middle line of the bollinger band is nothing but the 20 day EMA. Many of the traders are religiously following bollinger bands for their investments and even for intraday trades. Thats why i opted to visualize 20 day EMA.
Here the motive is whether to trade on 20 day EMA alone or not and to visualize it on the screen which may not suit for those advance traders who are using sophisticated trading system/softwares. It is for those who are still struggling with the basics.
Hi RR,
Another wonderful study, thanks.
Its nice to look into the intricacies, especially when 20ema is a very commonly followed one. It makes a good example for this analysis, like may be a 5 or 50ema, most adopted.
I appreciate your presentation which are always unique in content, simplicity, approach and presentation.
You have made so much contribution to the blogger and general community.
Have a nice day!
Best regards
moh
In bull market, enter with buy signal and exit with sell signal as per 20 EMA. Don’t go for short. Certainly you got handsome returns.
regards
s.ramkumar
HI Rajandran,
All indicators lag but degree of lag varies. Also no one method will always work everytime, when we follow a particular set up we choose one which we will be consistent with and which will will give us the best result. This system will also FAIL WHEN the market behaves differently.
One another question IF everyone sells when RSI>80 and buys when it is <20 then we should all be getting the same results, at least for those who are using the RSI indicator, so is it like that?
Hope to have a healthy discussion and thanks Rajandran for highlighting the above.
significant moov happen sometimes at least for intraday any scrip cross 200 dma on eitherside. but how to scan scrips which is just near 200 dma
Dear Rajandran
Can you please teach me how to get that paintbar in a chart in amibroker like the one you have in your chart?
as said in topic itself moving avgs are generally rigid since they are based on permanent numbers as in india mainly 21 38 51 100 and 200 are used and in japan people prefer 42, 89 ,135 like in different avgs like
sma,ema,tema,dema,tma,lsma,wma,wildersMA,ama,dama,camrilla avgs or fibo avgs etc
but the whole concept is that in all over world different ratios or sequences are being followed as per different indexs and metal exchanges
so points to remember while finding a good moving avg is
1 the momentum of prices must be calculated in it
2 some weightage must be given to volume in sync with prices
3 most imp – the market works on cycle span in bulls vs bears like for 3 years ,5 years and 8 years in which trends, moves and market dynamics change froquently so the moving avg must incorporate it all automatically instead of how much days need to get selected
which many analyist achieved it by building moving avgs
based on cos sin and tan function, via integrating rsi adx in judging moving avg directions or via intergrating optmizing and walk forward testing continous function by putting some dll functions in amibroker
personnely i find adaptive moving avg good for me
@Aman : I think you are asking about that Amibroker Ribbons. I have those in my schedule to write it in this weekend.
Hi Dear Rajendra ji.
Can you pl. send me the afl of the above strategy ( 20 EMA ). My mail id ia [email protected].
Thanks & regards.