Sunday, February 1, 2009

Sunday Reflection: Shorter Windows in Technical Trading

An interesting point to note is that because of the huge drop in the stock market in Sept, moving averages using periods that extend beyond that time frame are skewed. However, even many short term technical indicators still point to "Sell" (although not as dramatically). Therefore, it is important to understand the behaviour of trading in the market. It's clear that there are very few buy signals and those that exist must be fairly carefully scrutinized.

In technical trading, your trading spread will get smaller for shorter time windows accounting for smaller movements in the momentum of the stock price. Otherwise you'll have to use more leverage by putting more money into play / at risk.

Interesting moving average time frames are 3 month, 1 month and even weekly or intra-day.

Technical trading is a great way of filtering out noise by watching the movement of capital and after reviewing the patterns of last weeks stocks, it looks like stocks are still dropping across the board, but a few good picks can still be found for the discerning investor.

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