EMA and conflicting information
Posted: Sun Sep 10, 2023 11:14 am
My understanding of the role of the EMA from the lectures is essentially a quick visual representation of the average price and a quick visual representation of an overbought/oversold market. Its an indicator, not market structure. A visual aid. Im speaking broadly and generally, just the gist. This is my understanding and it is very much in line with what Im seeing. The market is moving all the time through support and resistance and changing from one to the other, basically re-testing itself everywhere it goes on its way to its destination. This is the "tell" of what exactly the market is doing.
What I dont understand though, is the when someone says "I didnt like it because it finished below the EMA (long), yet the market is testing precisely the last breakout area. Or they will say "I want to see it come up and test the EMA" (long) but there is no market structure to "test" in that exact area at that moment, so of course its not going to look like its testing the EMA because theres nothing there to "test" because the EMA is an "indicator" not a physical thing that every trader on earth is looking at. Its just a little line on "our" screen.
Someone on macks forum swears that he will not take a long unless it finishes above the EMA or a short below, basically trading the EMA like its market structure. I dont see how on earth that would ever work because the EMA isnt a real thing, just an indicator, not structure.
When I watch Macks trades, he sort of talks like this but its situational. When I look beyond his words, hes trading mostly the underlying structure but he does on occasion pass on a trade that "finished below the EMA" even though the underlying structure is perfect. When this happens it throws me off and I cant really understand it, although its rare when he does this. The next day he will take a long 3 points under the EMA, a clear trade testing an important area on the chart, seemingly contradicting himself, although no doubt its me who is missing some aspect, or possibly they are just anomalies as nobody is perfect and/or its simply an expert eye trading from experience and it cant be taught.
I guess the point of this thread is to ask what is what and who is right and who is making stuff up arbitrarily, and if I understand the EMA's role in all this. I understand mean reversion trades and I understand not buying when really overbought (unless runaway trend), but why do some people trade the EMA (or VWAP or SMA or whatever for that matter) like its a rigid thing to be traded. Honestly it seems to me after looking at this for so long now that you could trade a pure naked chart without any indicators or moving averages at all just fine.
I dont seem to be actually looking at the EMA much anymore other than to check how "far away" it is, and im not sure if thats "right" or "wrong"? Im not ignoring it, but its not a rigid thing I consider anymore like it was when I started this journey.
Any feedback and/or insight would be appreciated.
What I dont understand though, is the when someone says "I didnt like it because it finished below the EMA (long), yet the market is testing precisely the last breakout area. Or they will say "I want to see it come up and test the EMA" (long) but there is no market structure to "test" in that exact area at that moment, so of course its not going to look like its testing the EMA because theres nothing there to "test" because the EMA is an "indicator" not a physical thing that every trader on earth is looking at. Its just a little line on "our" screen.
Someone on macks forum swears that he will not take a long unless it finishes above the EMA or a short below, basically trading the EMA like its market structure. I dont see how on earth that would ever work because the EMA isnt a real thing, just an indicator, not structure.
When I watch Macks trades, he sort of talks like this but its situational. When I look beyond his words, hes trading mostly the underlying structure but he does on occasion pass on a trade that "finished below the EMA" even though the underlying structure is perfect. When this happens it throws me off and I cant really understand it, although its rare when he does this. The next day he will take a long 3 points under the EMA, a clear trade testing an important area on the chart, seemingly contradicting himself, although no doubt its me who is missing some aspect, or possibly they are just anomalies as nobody is perfect and/or its simply an expert eye trading from experience and it cant be taught.
I guess the point of this thread is to ask what is what and who is right and who is making stuff up arbitrarily, and if I understand the EMA's role in all this. I understand mean reversion trades and I understand not buying when really overbought (unless runaway trend), but why do some people trade the EMA (or VWAP or SMA or whatever for that matter) like its a rigid thing to be traded. Honestly it seems to me after looking at this for so long now that you could trade a pure naked chart without any indicators or moving averages at all just fine.
I dont seem to be actually looking at the EMA much anymore other than to check how "far away" it is, and im not sure if thats "right" or "wrong"? Im not ignoring it, but its not a rigid thing I consider anymore like it was when I started this journey.
Any feedback and/or insight would be appreciated.