Trends & The Simple Moving Average

In this video, Stuart McPhee talks about trends and the simple moving average. As you move in time the application of volume just loses its relevance and importance. One of the things that Stuart does is to buy things that are going up, things that are moving higher. He prefers to buy after a three months period of increase. He does not look to buy after two or three weeks after the stock goes higher. He is perfectly happy to wait until the period of three months knowing that it has a period of consolidation. This period of moving higher demonstrates the ability and the capacity to develop a good steady medium term up trend.

This is a conservative approach. He takes a first period of three months, and the moving higher three months period, and compares the volumes of each period. He expects that the second volume will be much larger. And that is all. This is the concept, a very simple concept. He cannot guess the higher price where the stock will get. He does not set targets, all he knows is that this is an established medium term up trend. He is happy to buy at the higher price because that stock is already demonstrating the ability of moving up and it will get higher and higher. And if it does not happening, he will just get out.

Also, Stuart McPhee does not thinks that what happens in the first three months does not affect the moving up period of another three months, because it may be a larger period back in time that affects this period. It is just a typical pattern. For Stuart, this is just a very conservative, patient approach and that is why patience is very important.

Submitted by YouTube Trader on Fri, 04/09/2010 - 21:41

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