BIGTRENDS

BigTrends Coaching

Moving Averages

Course Instructor: Price Headley

BIGTRENDS Page 2

BigTrends Coaching

Access to Big Trends and its coaching services is provided for

educational and informational purposes only. The information presented

here does not constitute a recommendation to buy or sell a particular

investment. You are solely responsible for your investment decisions, and

BigTrends and its staff are not responsible for any trades you choose to

make. Not all Big Trends products or services are appropriate for all

investors. BigTrends does not provide personalized financial, tax or legal

advice. Please consult your tax consultant prior to making any investment

that may impact your tax situation.

BIGTRENDS Page 3

Coaching Schedule

Focused Courses with Defined Goals

Price Action (Technical vs. Fundamental Analysis)

Building Your Trading Plan

Drawing Support & Resistance Lines

Williams Percent R Rules

Moving Averages

1

2

3

4

5

Williams Percent R Scans

Acceleration Bands

Continuous Growth via Trade Journal

6

7

8

9

10

Know Your Options (Intro to Options)

ACE Trading Strategies (Simple Options)

Strategy Session

Trading Plan

Indicator

Indicator

Indicator

Psychology

Options Selection

Strategy Session

Indicator

Indicator

BIGTRENDS

Common Uses for Moving Averages

Page 4

Moving Average Strategies

Trend Identification

When a trend has started

Momentum Indicators

Multiple time period MA’s

Support

When a stock might bottom

Resistance

When a stock might pull back

Exit Points

When the trend has ended

Using MAs in Trading

BIGTRENDS Page 5

What is a Moving Average?

A Moving Average is the mean number of a given data set that changes

over time as new data points are added.

Like many technical indicators, they are a statistical calculation that is

applied to the prices of securities.

Moving Averages remove bar-to-bar volatility. They smooth data and

generalize trends helping traders identify REAL trends.

Multiple Moving Averages with different time frames are often plotted on a

chart in an attempt to determine the current prevailing trend.

Understanding How MAs are Created

BIGTRENDS Page 6

Types of Moving Averages

Most common MA used

Equals the sum of closing

prices in a period divided

by number of prices used

in calculation

Simple MA

Least common used

Created to mitigate equal

weighting issue in SMA

Similarly calculated like

SMA, EXCEPT each data

point is multiplied by

weight correlated to time.

Today’s data is five times

more important than five

days ago…

Weighted MA

Similar to WMA, but more

efficient—weights recent

data more

More responsive than any

other MA

Exponential MA

Understand the Differences

Types vary in calculation, not interpretation—price weight is the difference

BIGTRENDS Page 7

Strengths & Weaknesses

Simple MA

All price data is equal,

regardless of when it

occurred

Recent data is more

important

Weighted MA

Very similar to an

Exponential MA

Not all trading platforms

have this type

Exponential MA

Reduces lag in price by

applying more weight to

recent price action

Can cause more

whipsaws

Compare and Contrast Methods

BIGTRENDS Page 8

Advanced Uses for Moving Averages

Moving Average Strategies

Moving Average Crossovers

One or more short term MA’s

crosses a long term MA.

Using standard deviations around

moving averages

Example… Bollinger Bands or

Acceleration Bands

Applying moving averages to other

indicators or chart data

Example… Volume, DMI, etc.

MAs at work in Indicators

BIGTRENDS Page 9

Price Action

There are 3 Main types of charts in technical analysis.

Line Chart –

Basic chart only showing closing prices.

Doesn’t show broader price action during a given time-frame.

Bar Chart –

Advanced Chart showing Open, High, Low, Close (OHLC) prices.

Price information is displayed by a vertical line with small dashes on both sides.

Candlestick Chart –

Advanced chart showing OHLC information, similar to a bar chart.

Broad price range (High and Low) are displayed on a vertical line.

Narrow price range (Open and Close) are displayed in a box on top of the line.

Candle charts rely heavily on color to distinguish different bars.

Types of Charts

BIGTRENDS Page 10

Bar Chart

There are 4 areas of focus on a bar chart:

Open Price

High Price

Low Price

Closing price

This is an example of a bullish bar.

Bearish bars will have the open price higher than the closing (see red bar in picture).

Bar charts allow you to squeeze more price data onto a single chart.

Key Points

BIGTRENDS Page 11

Candle Chart

There are 5 areas of focus on a candlestick chart:

Open Price

High Price

Low Price

Closing price

Real Body

This is an example of a bullish candle.

Bullish candles have the open price at the bottom of the real body, and the close at the top.

Bearish candles will have the open price at the top of the real body, and the close at the bottom.

Key Points

BIGTRENDS Page 12

Support & Resistance

Technical Analysis is based upon the logic that the price action of a security

(stock) tends to move in similar fashion to past data.

Once a stock has reached a certain price, that level becomes important.

Support Levels are areas where you are likely to see increased buying (potential

bottom).

Resistance Levels are areas where it is likely to see increased selling (potential

top).

Support and Resistance levels don’t always hold, but they are important levels

that merit attention for technical traders.

Key Levels

BIGTRENDS Page 13

Support

Support

A price level where the price tends to find

support (floor) as it goes down.

The price often hesitates at this level

before either bouncing off of the level or

breaking through it.

Once a support level is broken:

The old support level now becomes

resistance.

The price continues to fall until it

reaches the next support level, if there

is one.

Potential Bearish Reversal Point

BIGTRENDS Page 14

Resistance

Resistance

A price level where the price tends to find

resistance (floor) as it goes up.

The price often hesitates at this level

before either bouncing off of the level or

breaking through it.

Once a resistance level is broken:

The old resistance level now becomes

support.

The price continues to rise until it

reaches the next resistance level, if

there is one.

Potential Bullish Reversal Point

BIGTRENDS Page 15

Support & Resistance

Support and resistance lines can be horizontal or diagonal.

These lines are open to interpretation by different traders.

Support & resistance lines are stronger if:

Level has been tested multiple times successfully.

Other technical indicators can prove to be support or resistance, such as:

Moving Averages

Bollinger Bands & Acceleration Bands

50 Level on Percent R

Key Points

BIGTRENDS Page 16

Channels

Channel

Also referred to as a “Price Channel”.

A pair of parallel trend lines that form boundaries

for an existing trend.

Channels can be ascending, descending, or

horizontal.

Upper line of channel acts as resistance, while

lower acts as support.

When a stock breaks through the channel and then

sustains price action outside of the channel, the

trend is violated.

This can be to the upside or the downside.

A Defined Passageway

BIGTRENDS Page 17

Round Numbers

Horizontal support and resistance levels often occurs at round number

price points. Why?

1. Traders are VERY emotional beings, so most major round numbers, such as

DOW 7000 are big emotional hurdles to be crossed.

2. Most option strike prices are in 5 point increments, such as $50, $55 and $60.

Many major stock traders pay attention to the options market, even if they don’t trade

options.

This is because options volume and open interest at the different strike prices can

show a strong interest in a stock reaching a certain level.

Key Levels

BIGTRENDS Page 18

Do You Have

Any Questions?