{"id":2918,"date":"2013-07-31T10:02:44","date_gmt":"2013-07-31T14:02:44","guid":{"rendered":"http:\/\/www.morpheustrading.com\/blog\/?p=2918"},"modified":"2023-01-24T11:24:29","modified_gmt":"2023-01-24T16:24:29","slug":"10-day-moving-average-support","status":"publish","type":"post","link":"https:\/\/morpheustrading.com\/blog\/10-day-moving-average-support\/","title":{"rendered":"How To Use The 10-Day Moving Average To Maximize Your Trading Profits"},"content":{"rendered":"

Swing traders rely on a diverse arsenal of technical indicators when analyzing stocks, and there are literally hundreds of indicators to choose from. But how is a new trader supposed to know which indicators are most reliable? Deciding which technical indicators to use can frankly be a bit overwhelming, but it doesn’t have to be (nor should it be).<\/p>\n

While learning to master our winning system for swing trading<\/a> stocks and ETFs in the early years, we tested a plethora of technical indicators. Our conclusion was that most of the technical indicators served their intended purpose of increasing the odds of a profitable stock trade. However, we quickly discovered that using too many indicators only led to analysis paralysis<\/a>. As such, we now avoid this problem by simply focusing on the tried and true basics of technical trading: price, volume, and support\/resistance levels.<\/em><\/p>\n

One of the easiest and most effective ways to find support and resistance levels is through the use of moving averages<\/em><\/a>. <\/strong>Moving averages play a very big role in our daily stock analysis, and we rely heavily on certain moving averages to locate low-risk entry and exit points for the stocks and ETFs we swing trade.<\/p>\n

For gauging price momentum in the very short-term (a period of several days), we have found the 5 and 10-day moving averages work very well. If, for example, a stock or ETF is trading above its 5-day MA, there is usually no good reason to sell. One possible exception is if the stock or ETF has made a 25-30% price advance within just a few days.<\/p>\n

The 10-day MA is a great moving average for helping us ride the trend<\/strong> with a bit more “wiggle room” than provided by the ultra short-term 5-day MA.<\/p>\n

For trend traders, no stocks or ETFs should be sold while they are still trading above their 10-day moving averages following a strong breakout. To understand why, compare the following daily charts of U.S. Oil Fund ($USO) and First Trust DJ Internet Index Fund ($FDN). First is $FDN:<\/p>\n

\"$IHI<\/p>\n

With the exception of a brief “shakeout” of just two days (a common and acceptable occurrence), notice that $FDN has been holding above its rising 10-day MA ever since breaking out in early July. This is a clear sign that the momentum from the breakout is still strong.<\/p>\n\n\n