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Tuesday, December 19, 2006

Tuesday's action

Several people commented on ESCL today. I didn't trade it, but frequent commenter TJ did - here is his analysis:

"I picked it up on the 15-minute chart as it crossed the OR high - on a break of the 12:15 bar.

It set-up again above the Fibonacci extension on a break of the 1:30 bar."

I would add that it had solid support from the 5MA in both cases. Nice trade.

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KayakHandy said...

TJ had a great trade and it was a classic good set up in many regards.

However I want to urge all of you to use the utmost caution when using the 5 MA tool or any MA as a tool and placing more importance on it than what should be.

While this was a great trade TJ's use of the phrase like "the 5 MA provided support scares me.

My caution to you is simply this "Any MA does not provide some kind of magic support and price can be broken above or below an MA at any time...please be carefull and do not learn to rely so heavily on one trading tool.

Trader-X said...

Kayak - those were my words, not TJ's. And, I have been using MA's my whole trading career, and on the blog. We have had numerous discussions about the 5MA over the past few months - it is nothing new.

It is a great tool to determine if price is too extended, and I rely on it heavily to determine whether to take a trade or pass.

Randal said...

I agree that the 5MA is not magic, but Trader-X and my own trading has shown that it does consistently provide good areas of support and resistance, just as the various Fibonacci levels do. I think it is kind of the core of this blog if you look over past charts.

Personally, incorporation of the 5MA has made a huge difference for the better in my trading these past three months. It has made me tighten my focus, take fewer trades, and take better trades.

Barry said...

I agree with Randal. Incorporating and properly using the 5MA has been the single biggest thing that has added to my profitability this year. Thanks X!

KayakHandy said...

Sorry TJ did not mean to put words in your mouth. My mistake on who said what.

I use MA's also but all I am saying is to not get so caught up in them that a person relies on it for 100% truth.

Harold said...

I actually commisioned a portrait of the 5MA...it is hanging above my fireplace.

Trader-X said...

Funny Harold!