Thursday, April 10, 2008

Moving Average Custom Indicators

Creating your own combination of indicators does not meant do as you like. Usually traders will do this after studying the behavior of the chart for sometimes to determine the general patterns of movement. For example they study the time frame and the movement patterns using moving averages.

The most common of customs made indicators will consist of moving average lines. The moving averages are actually the foundations of most indicators such as MACD, B. Band, etc which take the average of the market volume. So the idea of using moving averages is by taking the best of all averages to predict the overall market movements. This is what we are going to do.

We will use 2 simple moving average lines. The first moving average line setting is 120 (Red) and another 50 (Blue) to create a combination of lines that is similar to MACD or Slow Stochastic on the chart. It is going to look like this.

The above signal bullish and below signal bearish

Based on the person who created it this signal is good to use in 15 minutes time frame. The application goes like this when the blue line moving above the red line this is bullish signals or the opposite when the blue line moving below the red line this is bearish signal as shown on the chart.

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