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Chapter 10. How I use “TMVTT”

Chapter 10. How I use “TMVTT”

My preferred approach to analyzing the markets is technical. In the long run, fundamentals do determine price; however, as Lord Keynes once said, “In the long run, we're all dead.” As any journalist can tell you, it's easy to report the fundamentals after the fact, but you and I are not privy to inside information. Furthermore, as Richard Dennis once noted, “A known fundamental is a useless fundamental.”

My primary goal is to determine the trends of the markets I trade. I believe if you are able to determine accurately the trend of any market, then you will, over time, make money. Just as it's easier paddling downstream than up and it takes less effort walking with the wind than into it, it's generally more profitable trading with the trend than against it. The best tool I've found for determining the trend with a fair degree of accuracy is the moving average. Since my previous books were released, I haven't lost any enthusiasm for moving averages—they remain the most valuable technical tool (TMVTT). However, I have modified and hopefully improved my methodology and will present the improvements in this chapter. In years past, I utilized shorter-term weighted averages. More recently, I've found (at least for me) that longer-term exponentials (in combination with shorter terms under certain scenarios) work best. What works best for you in your own trading is contingent on the time frame you're most comfortable with. I am going to share my approach, and I recommend that if you find this discussion useful, you should consider modifying it to fit your own trading based on your personal preference for risk tolerance.


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