I know the number of indicators can be overwhelming at times and not terribly useful when too many are used at once for entry.
I am currently working on a shorter term system (holding a few days to a few weeks) and noticed something interesting in my testing. Applying the 200 day MA to my chart (which I will look to use for my longer term strategy) I noticed that quite frequently the 200 day MA represented turning points or price consolidated around this point. It appeared to be a point of support or resistance quite freuqently.
So my question is: Do people find medium/long term indicators useful for short term trading? and how religiously do they stick to this?
I found for myself that taking into consideration the 200 day MA can:
- make me more aware of exactly where the trade is in the longer term trend
- be used to determine the profit potential (e.g. if the MA is just ahead/below it may be wise to wait and see if it crosses)
- be used in conjunction with my short term MA (but I won't have any hard and fast rule that I can only buy when entry for my shorter term trade is above the 200 day MA, but rather it must be above my short term MA).
No doubt this will be the case with other indicators and maybe this is just common sense, but for a beginner like me this opened my eyes for the need to be aware of exactly where the trade is in its long term cycle.