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Frank, can you explain why you chose the 40 sma? I've reread post 19 and I think you use it to approximate vwap but I just want to make sure. Thanks for the great thread. |
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there is no magic with the 40 sma. I am using it only to 'represent' where current price has moved 'from' in order to gauge 'value migration.' It is being used as a 'reference point' to help guide me. As price and the moving average converge, you might say the current auction is 'aging' -- but not necessarily over. Remember, it's not over until you get a sign of 'excess.' I do not want to be looking for reversals ALL the time or else I would miss out on lots of good trades. The market will often auction one direction and then chop around while the moving average 'catches up' to current price. As this happens, you get closer to auction reversal and should be on the lookout for 'excess' -- as reviewed above. (also, note that occassionally -- the 'excess' signal is kind of grew -- using a moving average will act as a bit of a safety-net in case I missed the signal).
btw, 'vwap' measures todays average price. I never look at
vwap for a period longer than current day. there might be use in such but I have not discovered such.
hope that helps a little bit,
frank