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Bottom line

Moving averages are not the Holy Grail and are not all created equal. However, when used systematically and consistently, they will keep a trader on the right side of the big moves. Moving averages are a totally technical approach (rely on price only), and it doesn't matter what market you use them on. They work well in bull and bear markets and in the stock and commodity markets; however, they whipsaw the trader in a sideways or trend-less market. Still, this isn't as big a disadvantage as it might appear on the surface. My experience has shown that markets spend more time in trending modes than in trend-less modes. However, sometimes I've been involved in choppy, whipsaw-type markets that have lasted for many weeks. At times, a seasoned trader can sense a market is trend-less (the time to step to the sidelines), but if not properly capitalized or disciplined, a trader can be wiped out, or at the very least become demoralized and abandon the program. Usually he quits just before the big move starts. Remember, you need to catch the big moves when using a moving average system, or you won't win.

The next chapter goes into greater detail of how to use TMVTT; I will present a methodology I've found useful in my own trading for utilizing moving averages of varying lengths.


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