Post by Admin on Aug 4, 2013 11:20:49 GMT 8
What is an average as aply to trading?
In skool you alredy learn about average. if you forget, here is simper refresher.
You go wif your buddies (Tom,Dick,Harry) to eat. You all including you is 4 pax, decide to order ala carte. So you all happily eat and den end of meal when bill comes you all shocked, cost $1000. So you all decide to split, and take the average. So den each one will pay $1000/4 = $250. That is call simple average. In trading, we use moving average (MA). So for xxamper if you set MA=3
Day 1 = $1
Day 2 = $2
Day 3 = $3
MA = 1+2+3 / 3 = $2.
Day 4 = $4
MA = ( Day2 + Day3 + Day4 ) / 3 = (2+3+4)/3 = $3
Day 5 = $3
MA = (Day 3 + Day 4 + Day 5 ) /3 = (3+4+3)/3 = $3.30
Dis is simple moving average (SMA).
The MA alredy program in your software so it will cow cu late the above for you and then plot on the chart by joining these numbers up. that's how you get your MA line.
Then you ofetn see MA called Exponential MA (EMA), or Weighted MA (WMA). They are just oso statistic cowculation excpt they put more weight on recent data. In the xxamper of the buddy eating, you may decide that, since Tom eat more chicken wings, he will pay more den take average. And since Harry eat more beef, he will oso pay more den take average. So you gib these 2 more weight. Dis is close enuf xxamper for the lay man on EMA or WMA. I dontch want to go into the detail as it can blur you like sotong if you poor in maths. So, for us small fry retailers, we just learn how to use can leow.
So averagte is just a simple tool for you to use in trading. All is maths oni. In real life, we oso use average to help us decide some thigns.
If you are coach in basketball tim and and want to choose player. You oso can choose player whose height is over the avrage player height for basketball and throw away those below average. If you gotch one guy 4m tall (move away from average till beri far away), you wud oso reject him becorse basketball gotch height limit (i tink so, just xxamper laaa)
Guys oso rate chio bus also using average hehhh. Ugly, more ugly, average, pretty, more pretty, excelent. Girls oso the same.
So when we relate the trading, take for xxamper the 10v20 strategy. You are just making decisoni oso based on a statistic of 10days ago and 20 days ago. that is using the 10 and 20 EMA, if you see price is above both, you can decide that its bullish, so you will go on the long side. when price below both, then you can decide to short and etc.
10v20 and 100/200 is just one out of so manee statist tools/indicators out there. I use them becorse its simper for me. You may find others more guud later on. No mater what you use, use them properlee will do.
In skool you alredy learn about average. if you forget, here is simper refresher.
You go wif your buddies (Tom,Dick,Harry) to eat. You all including you is 4 pax, decide to order ala carte. So you all happily eat and den end of meal when bill comes you all shocked, cost $1000. So you all decide to split, and take the average. So den each one will pay $1000/4 = $250. That is call simple average. In trading, we use moving average (MA). So for xxamper if you set MA=3
Day 1 = $1
Day 2 = $2
Day 3 = $3
MA = 1+2+3 / 3 = $2.
Day 4 = $4
MA = ( Day2 + Day3 + Day4 ) / 3 = (2+3+4)/3 = $3
Day 5 = $3
MA = (Day 3 + Day 4 + Day 5 ) /3 = (3+4+3)/3 = $3.30
Dis is simple moving average (SMA).
The MA alredy program in your software so it will cow cu late the above for you and then plot on the chart by joining these numbers up. that's how you get your MA line.
Then you ofetn see MA called Exponential MA (EMA), or Weighted MA (WMA). They are just oso statistic cowculation excpt they put more weight on recent data. In the xxamper of the buddy eating, you may decide that, since Tom eat more chicken wings, he will pay more den take average. And since Harry eat more beef, he will oso pay more den take average. So you gib these 2 more weight. Dis is close enuf xxamper for the lay man on EMA or WMA. I dontch want to go into the detail as it can blur you like sotong if you poor in maths. So, for us small fry retailers, we just learn how to use can leow.
So averagte is just a simple tool for you to use in trading. All is maths oni. In real life, we oso use average to help us decide some thigns.
If you are coach in basketball tim and and want to choose player. You oso can choose player whose height is over the avrage player height for basketball and throw away those below average. If you gotch one guy 4m tall (move away from average till beri far away), you wud oso reject him becorse basketball gotch height limit (i tink so, just xxamper laaa)
Guys oso rate chio bus also using average hehhh. Ugly, more ugly, average, pretty, more pretty, excelent. Girls oso the same.
So when we relate the trading, take for xxamper the 10v20 strategy. You are just making decisoni oso based on a statistic of 10days ago and 20 days ago. that is using the 10 and 20 EMA, if you see price is above both, you can decide that its bullish, so you will go on the long side. when price below both, then you can decide to short and etc.
10v20 and 100/200 is just one out of so manee statist tools/indicators out there. I use them becorse its simper for me. You may find others more guud later on. No mater what you use, use them properlee will do.