Can somebody explain to me about Moving Averages in Different time frames/intervals?

[Mbrown10012]

I'll use GS for example with a 200MA. The current closing price is 112.95. If you look at the daily chart, you will see that 200ma is at 117.53. However if you use the 30 minute interval, the 200ma is at 94.72. If you look even further and use 1 minute interval, the 200ma is at 108.39.

Am I missing something here. I thought the 200 MA is a set number of the last 200 days. How come the MA change by such a large margin If I'm looking at a today's charge whether its daily/30 min/1 min?

Lets say I use a strategy with just the MA. I would short the market until it can break the 200ma on the daily chart. So I would short at current price and place my stop loss somewhere above the 117.53 area. However if I use the 30 minute or 1 minute time frame, I'm already over the 200ma.

How comes the Ma work with different timeframes. The MA is telling me a different story just based on different time frames?

[Mbrown10012]

I guess what I'm trying to say is, the signal can be long or short just based on the different time frames using indicators. If i use a daily chart, the signal is short. If I use a 30 minute chart, the signal is long.

[Bolimomo]

.....
Am I missing something here. I thought the 200 MA is a set number of the last 200 days. How come the MA change by such a large margin If I'm looking at a today's charge whether its daily/30 min/1 min?
.....

I think you have them totally mixed up.

A Moving Average is a Moving Average. It is calculated based on the last X number of "bars". Be these bars be daily, 30 min, 1 min or 100 tick.

Of course the 200MA of a daily chart is different from the 200MA of a 30-minute chart and it is different from the 200MA of a 1-minute chart.

How you use the information is up to you.


RE: The MA is telling me a different story just based on different time frames?

Of course! The price chart of daily is tell you a different story than the price chart of 1-minute. The 1-minute price chart maybe bullish today (actually today was indecisive)... the daily price chart is still very bearish.

In general, the inertia of price moves in longer time-frames win over the price moves in shorter time-frames. Thus traders short bear market rallies and buy bull market dips.

[Mbrown10012]

So I can use the longer time frame to confirm the trend, then use the shorter time frame to make a precise enter/exit points.

But if I was going to trade on the daily chart for swing trades, the 1 minute chart would do me no good because it will whipsaw too much.

[Bolimomo]

So I can use the longer time frame to confirm the trend, then use the shorter time frame to make a precise enter/exit points.

Yes. I believe that is the right thing to do.

I always advice using 3 time-frames:

1) Your "base" time-frame. If you are a long-term investor, your base time-frame is probably the daily chart. If you are a swing trader (holding 3 to 10 days), your base is probably 30-minute. If you are a day trader, your base is probably 1-minute or 5-minute.

2) You use a lower time-frame chart to more precisely control your entries/exits. E.g. if you swing-trade, you use 30-min as your base to trade, but look at 5-min for best places to enter. I use 1-min as my base (I am a day trader), and a 42-tick to help me enter/exit trades.

3) You use a higher time-frame as a reference to help you decide which side to be on and how to trade.

Note that these different time-frames should be different by at least 1 order of magnitude. The difference is something like 5 times to 10 times. For example, the 1-min and 3-min pair is not good because they are too close. A 1-min and 10-min pair is good because they are 10-times apart.

[Mbrown10012]

This logic should apply to all the indicators/oscillator as well. Very informative and thank you. Overbought in the 3 minute chart does not necessarily mean overbought in the 30 minute chart. Shorter term charts will show minor resistances/support level while the daily might show the stronger support/resistance.

Time frames can be subjective but it all depends on how you want to set up your trades. It should be safer if you enter/exit using the same time frames while using other time frames as outside advice.

[Gordo]

Good thread.:top:

[timmhaan]

you can put a 5 day moving average on an intra day chart - you just have to do the math.

for example, if you're looking at a 30 minute chart and there are 6.5 hours in a trading day:

6.5 hour x 2 = 13 periods per day.
13 periods x 5 days = 65

the 65 period moving average is equalivant to the 5 day moving average on a 30 minute chart. i kinda like to keep a 5 day moving average on the same chart, if possible, so i can see in detail how the prices act around that level.

[Bolimomo]

you can put a 5 day moving average on an intra day chart - you just have to do the math.

for example, if you're looking at a 30 minute chart and there are 6.5 hours in a trading day:

6.5 hour x 2 = 13 periods per day.
13 periods x 5 days = 65

the 65 period moving average is equalivant to the 5 day moving average on a 30 minute chart. i kinda like to keep a 5 day moving average on the same chart, if possible, so i can see in detail how the prices act around that level.

I don't think this is correct at all.

By definition: a daily chart only tracks the day's OHLC. Before today's close, you don't have any data for today. A 5-day moving average on the daily chart uses the OHLC price (whichever you choose) for the past 5 days to calculate its value. The 5-day MA value based on a daily chart does not change intraday.

On your intraday 30-min chart: your moving average is changing ("moving"). It is based on the last 65 bars of the intraday values of the 30-minute bars. This MA value changes 13 times through out your trading session, up and down.

If you want to visualize your 5-day moving average on your intraday chart, just get its value and draw that as a horizontal line for your reference.

[Bolimomo]

If you want to overlay a 5-bar moving average of a 30-min bar chart in a 1-minute chart... that can be done. A bit tricky. And you need the charting software that allows you to customize your indicators. You can do your own aggregation of the 30 bars on a 1-minute chart, then obtain your OHLC values for each 30-minute bar, and then do your calculations for the 5-bar moving average, and plot it.

[timmhaan]

I don't think this is correct at all.

By definition: a daily chart only tracks the day's OHLC. Before today's close, you don't have any data for today. A 5-day moving average on the daily chart uses the OHLC price (whichever you choose) for the past 5 days to calculate its value. The 5-day MA value based on a daily chart does not change intraday.

On your intraday 30-min chart: your moving average is changing ("moving"). It is based on the last 65 bars of the intraday values of the 30-minute bars. This MA value changes 13 times through out your trading session, up and down.

If you want to visualize your 5-day moving average on your intraday chart, just get its value and draw that as a horizontal line for your reference.

you're absolutely right! i guess this is a good example of peer review in action. good catch, i need to update my charts.

[Florida]

you're absolutely right! i guess this is a good example of peer review in action. good catch, i need to update my charts.

You are giving in too easily timmhaan, you are correct that using calculations similar to your example, you can have an "indication" of where another time periods moving averages would be on any given chart. It may not be exact, but close enough for analysis purposes, should that be important to you.

[timmhaan]

You are giving in too easily timmhaan, you are correct that using calculations similar to your example, you can have an "indication" of where another time periods moving averages would be on any given chart. It may not be exact, but close enough for analysis purposes, should that be important to you.

just checked the 65 period moving average against the 5 day moving average. it is close, which is why i probably missed it before, but not trivial either:

using up-to-date SPY data:
65 period moving average on a 30 minute chart: 80.82
5 day moving average on a daily chart: 80.60

[Horace Kent]

I don't think this is correct at all.

By definition: a daily chart only tracks the day's OHLC. Before today's close, you don't have any data for today. A 5-day moving average on the daily chart uses the OHLC price (whichever you choose) for the past 5 days to calculate its value. The 5-day MA value based on a daily chart does not change intraday.

On your intraday 30-min chart: your moving average is changing ("moving"). It is based on the last 65 bars of the intraday values of the 30-minute bars. This MA value changes 13 times through out your trading session, up and down.

If you want to visualize your 5-day moving average on your intraday chart, just get its value and draw that as a horizontal line for your reference.


dude, you're totally right. I agree wholeheartedly.

However, when using a MA for that short of time on a daily chart isn't worth the trouble, i believe that using the 65 MA (for the case of 30 min bars) would actually be more accurate, because it includes all the periods within that time frame - not just the close.

again - your description is accurate, i just prefer to use the "5DMA" only on intraday charts - so, I apply that to what ever intra-day time frame I use, be 15 min or 5 min.

it gets even nuttier with futures or fx.

but, again - i think this depends on your preference and what works for you.