All right everybody. So today we're going to talk about day trading terminology and the term of the day is moving averages. And we're actually going to be talking about simple moving averages and exponential moving averages. So plural moving averages and the two different types all right.

Now this is actually one of my favorite technical indicators. It's very simple and for me, I'm all about keeping my charts simple I don't want to overcomplicate it I don't want tons of indicators. You guys have probably seen people on, you know, social media and stuff posting charts, pictures of charts that are really complicated I just don't find it necessary. and I've got a couple charts on here that I can load that are a little busier.

this one's I mean this isn't even that busy really when we think about it, but you know you can get a little bit more complicated on some of these. But for me, I've always done well keeping it simple and I'm a trader who in the last six months is up over two hundred thousand dollars. So this goes to show that you don't need tons of technical indicators in order to be profitable. If you keep it simple, you can do really well.

So one of the moving averages that I use almost every single day is the nine moving average. and I show this to you guys pretty much on every chart. It's this gray line right here. I Use the nine, the twenty, and then the 200.

These are all exponential moving averages. Alright, so let's talk about what these are and how they work. Alright, so the term of the day moving averages sometimes called MAS or EMA s Now, a simple moving average is is very simply the average price over a set period of time. So if you're looking at a nine period moving average, you're looking at the average price over the last nine periods.

Now, if you're looking at a one minute chart, the average price of the last nine one-minute candles is going to be different than the average price of the last nine daily candles, for instance. So, your moving average prices will change depending on which time frame you're looking at, and that's why I always have the moving averages on all three time frames that I use the one minute, the five minute, and the daily or some traders use the 15 minute, the 60 minute, or whatever and they would have the moving averages on those timeframes as well. Now, in contrast to a simple moving average, we have the exponential moving average. Like a simple moving average, it's based on a set period of time, the nine period, the 20 period, 25, whatever it might be, and it's giving you the average price over that period of time.

The only difference, and this is an important difference, is that exponential moving averages weight current price action heavier than older price action. So what does that mean? That means that current price action is going to cause the moving average to move quickly. So the moving average moves faster in response to current changes in price. And you can see this example right here where I have my exponential gray moving average moving up and you can see the the yellow is the simple.

The simple was a little slower to start moving up, and then it was a little slower to start slowing down right to start coming back down once the price dipped. So that's what I really like here about this exponential moving average is that when the price pulled back quickly, this moving average had a quick curve to it, quickly pulled back down, whereas the simple is much more gradual. Much more, you know, just like a smooth ribbon. And the exponential as a day trader moves faster.

That's the 9 and these are both 9 . this is the 20 period exponential in blue green. Here you can see it's a little quicker to respond to the price, but being that it's a longer period, it's always going to be a little bit slower than the 9. Shorter periods move faster than longer periods.

But in any case, you can see here that the 20 is curling up and then it starts to come back down. Where's the simple moving average here? The thinner line in orange is a little slower to start going up and then a little slower to start pulling back down. So as a day trader, I find the exponential. Moving averages work really well and I Find that they're really well respected on the intraday charts, especially the 5 minute chart.

The 1 minute timeframe is good as well I use these moving averages on that time frame, but the five minute is really where I find the strongest setups and this is of course a five minute time frame right here. Now if we back up out of this and we can zoom into one of these charts here and just sort of look at the look at the differences between these moving averages. Now for me, I'm using them not just on the intraday charts, but of course also on the daily charts and it really is incredible to see how well respected these moving averages can be when we see price come up and just tap the moving average almost to the penny it. It really is a reminder that thousands of traders are watching these same exact price points.

So let's look at a couple. LP TN Okay, I've already got this up, so let's back up on this one. Actually, what I'm going to do is I'm going to show you a slide that I have here. All right.

So this is LP TM This is a what a ways back and look at on this day how the price came up right here. It came up to the 200 moving average, it tapped that level and then it pulled back off that level. It's not a coincidence when I'm trading and I see the stock coming up to this moving average. I see this as resistance.

So this to me is a point of resistance. So the price coming up here and running into it and not being able to break over that level. That's predictable. you can see here.

on the other hand, the 20 of the 200 moving average the Purple Line is forming support. The price first breaks up above it and then often we come down and we retest support. So we test that level right and we bounce off it and then we're off to the races. Well, we end up coming down a few weeks later.

Maybe a month or two later we come down, we bounce off it again, then we move up. We come down. We bounce off it again. So this is becoming a very well-defined level of support.

Traders are really respecting it. In fact, they're respecting it quite a bit more. Really, it seems than like the 50 moving average, this red line, or the 20 or the nine. So sometimes we'll notice that for whatever reason one moving average is being respected more than the others and that may be for any number of reasons.

It could be that there are some large institutional traders who are trying to buy around the 200 moving average because they see that as sort of a safe entry point. They're putting in their buy orders and they're creating support if you have a couple of those guys using exponential moving averages, well, then that's the one that's going to get respected on another stock. Maybe it will be the simple moving average that gets respected it. It sort of depends, but generally you will see that you know moving averages are respected.

It just can vary stock to stock, which one is kind of in the most control. Now, an example of a stock with Saud just yesterday was Ellie I And we look at the daily chart on this one and in this case it happens to be the 50 moving average that's being really well respected. see how the price came up and tapped it and then pulled back, tapped it, and then pulled back. We tapped it and then pulled back.

So this has happened once, twice, three times, almost a fourth times. Just yesterday. as soon as I saw it popping up yesterday I was like no, I'm not going to buy this because it's going to run into resistance right here. At 160, it's too close.

it's too nearby. now. if we can break over 160, then we have room from 160 up to the 200 moving average. So that's the next one.

and again, there will be some traders using 100 moving averages and traders using 120 and 200 at 250. It's true that you know if you looked at a different moving average, you would see different areas of resistance. I Focus on using the ones that are the most common among traders. The big difference, of course is that some traders like simple and some like exponential.

So if we change this to, let's see, just for instance, if we change this to an exponential moving or a simple moving average, you know it does change it a little bit. It kind of. It clearly looks different than when it's exponential. To me, the exponential is the one that's kind of getting respected more in this case.

But again, you know this is what I use as a trader and for the sake of consistency I Just keep it. You know, keep it easy and use just the exponential moving average. Now as far as intraday charts go, I'm primarily using the 9 and the 20 I don't use the 50 I don't feel that it helps me or that it's really necessary I just again, keep it I'd say keep it simple but I keep it exponential and just use this. that's 9 and the 20 I don't want to overdo it and have things too complicated all right.

So in this case, you can see the way the price pulled back here to the 9 EMA that for me was a buying opportunity I Love that I love seeing that type of pullback and that for me is really, it's almost the perfect bull flag when we have that consolidation over. And at the moving average, it really is just exactly what I look for in the strongest bull flags. I'm going to show you a couple of examples here of bull flags that I've traded, this is one here and and you can see how clean this is. the move up the pullback to the moving average right here.

First, camel make a new high as your entry stops at the low. This is based on the moving average pullback. Now in this next example I wouldn't buy up here because of how extended we are off support moving averages are levels of support and resistance. So I like to bind your support and sell as we squeeze away from it.

Alright, that makes sense or short as we're far away and cover as we come back down. If you're a short seller or you like reversals or bottom bounces as well, So here you get the spike up first, pullback entry, squeeze here. And although this is a bull flag pattern which is a specific you know type of strategy, and this stock has to be the right type of stock to trade. meaning it's got low float.

It's got a catalyst. You know we're talking in this terminology session specifically about moving averages. But one of the things you'll realize is that all of these lessons do sort of. You know, compound onto the next one.

So this is part of building your foundation. One thing affects another, which affects another. So building your knowledge as a trader requires you to understand how all these different things in act. and you know you need to understand moving averages.

You need to understand candlestick patterns, the bull flags, the flattop breakouts. You need to understand the right type of stocks to trade. Those are going to be ones that have the potential to move 20 or 30 percent intraday. There's only certain type of stock that has that potential.

You need to learn how to find it. That means you need to know how to use stock scanners I need to be able to find those stocks that have big potential, jump into them as early as possible, understand risk management, etc. etc. But when it comes to the moving averages for me, I use them just simply as this level of support.

So the pullback to the moving average entry here sell through the high Pullback entry here, sell through the high. This is another one. Squeezing up the pullback entry, stop at the low selling through the squeeze and these are stocks that I would find right off my high a day scanners. This is another nice pullback squeeze up pullback entry right here.

So this really is important for me to understand whether the stock is to extend it or not. If I didn't have the moving average there, I wouldn't really be able to understand the context. so that's what it helps me understand. It helps me see context.

It helps me see kind of the big picture. Is this stock too extended? or is this a safe place to get in? So you know in this case here we are a little bit extended. We ended up getting a little bit of a false break. Alright, so we'll back out of that here and switch over to Fred We'll look at this one today or yesterday actually.

So one of the things that I do I have when I trade reversals. There's two different ways that that you can trade reversals. One way is to short as close to high a day as possible. like way up here in the top of this type of candle and cover on the move back to the moving average.

All right. So this to me is that rubber band snap back setup where the rubber band is super stretched out and you want to snap back. So my target is the moving average. It's the 9 moving average on the 5-minute and the 20 moving average on the one-minute chart.

So in this case, here, you're watching this short I think it was, you know, right around here, something like that. So this ends up dropping down, popping back up, dropping down. So if you took the one-minute set up with a stop at high of day, you know 2035. This ended up moving down to 1876, So a pretty decent pullback when you think about it.

Some traders are going to use this one-minute set up They're going to short off the high and cover on the move down to the 20 moving average. Knowing that most stocks will bounce off this blue line, this one ended up not really bouncing off that line. It broke below, it popped back up above it. But then you can see right in this area.

We were kind of forming some resistance. right? That blue line was resistance and that's important when you see a stock break below this line. Now you set your stop on the other side of the line. So if the stock now breaks up above the price breaks the move the moving average, then you're going to stop out.

So some traders instead of trading the short from the extension down to the moving average, they wait for the moving average to break and then they take a short position like right in this area. Here they get short right in here. maybe not on this first drop, but after we pop back up and then confirm and make a new low and then they hold until the stock breaks back over the moving average in the other direction. So in this case you know they'd be back.

They'd be covering their position right here. But of course in other cases when you have a longer-term pullback, those can be a bit stronger. This one, you know, didn't really give us the the cleanest pullback on that day. It just sort of dropped down and then ended up meandering higher and overall being a fairly fairly strong strong setup.

This here is another example of a pullback, and this stock just was pretty much staying right below that 20 moving average. So anytime we popped up to the moving average, this was also an opportunity to take a short and then stop on the other side of it. Very similar to the way I would buy a long position on the pullback to the moving average right. You can short on a mount up to the moving average and then just ride this momentum down.

This down here is a bottom bounce opportunity. The first target is a move up to the moving average. That's A that's going to be a quick trade, a little bit of scalp off the low and other traders would instead wait for the first time. This actually breaks over this moving average and holds, because when that happens, you can see it's going to be significant.

It hasn't broken and held over that level all day long, so by the time it does it, that's going to signify a real shift in trend. So that's sort of the thing with reversals and how moving averages come into play. You can either take the rubber band snap or you can take more of a trend reversal where you're really looking at a shift in momentum, the tide shifting and you don't get in, you know, right off the bottom for a scalp. You wait for the shift over the moving average and then ride the moving averages.

It comes back up with a stop just below it. This one. Here's another example where we had a stock. That was, it was pretty weak.

Now on the 5-minute chart. we had this long period of selling, but there wasn't To me the clearest entry for a reversal because of the way you know. I Like when I do a 5-minute bottom bounce to have at least five to seven consecutive red candles. But we had that down here.

But then we kind of went sideways and then washed out again with peaking volume at the low so you can see on the one-minute Yes, you ended up getting a pretty big bounce right here. but who's to say it was going to happen there and not. you know here here and here. So when you're sort of watching these selling off when it's not consistent, you don't I Usually don't trust trading on the one-minute chart.

So I say okay. Well, I'm not going to take that one-minute bounce because we don't have enough consecutive red candles. Now if we had, you know when we have a setup where we've got ten consecutive one-minute candles, then I'll jump in on the 1-minute chart. That's fine, but this is one of those cases where we didn't have that.

So just to give you a sense of what it looks like when we have all those consecutive candles, this right here happens to be the five-minute but let's just say this was the one-minute This is the time where I would go ahead and short I was short on the one-minute because it's so obvious the first candle make a new low is going to be. you know, a significant point a spot worth. You know, taking a trade on this is another one here that you can see. This one on the side happens to be a one-minute where we have this long sell off first one minute candle to make a new high stop on the low.

It's a two-point bounce, so that's a time I would take the one-minute chart, but in this case it's just a kind of grinding lower. I Wouldn't feel safe taking the one-minute It bounces right up to the 20. However, I would be interested in the trend shift where I get in for the break of the 20 moving average. So here we break above it and now this is kind of the point.

are we going to hold above it? So I would consider right here an entry now that we're kind of consolidating right at that level in entry over 22 72 with a stop at the low, that's about a 30 cent stop. Looking for the break over the moving average and now you can see here the trend is starting to shift Now we've broken for the first time in quite a while we've broken over this moving average so this is significant now that we've broken over it. I would move my stop up here to just below the moving average. So when my entry is 72 I've now got like a 20, maybe 15 cent stop and now you can see this is kind of riding and now it's holding this moving average and riding up so we can keep adjusting our stop.

Now we've got a profit stop. you know, moving it up just under the whole dollar and it continues along. So now this level that was resistance has become support. Again though, it's important to understand that you can't use the moving averages on every single chart.

This is a stock that had really high relative volume so it comes back to you have to trade the right stocks if you try to trade you know moving averages with you know the SP Y or something like that. you're going to see a lot more of this type of stuff where it's just breaking them up and down. This is not really respecting the moving average that much right? I Mean maybe at times, but for the most part it's in between all over the place. This is a stock that does not have high relative high relative volume.

Right today the volume was lower than average coming into the holidays. That makes sense. But the important thing to take away is that the only stocks worth day trading our stocks that have high relative volume. And why is that? It's because stocks with high relative volume have thousands and thousands, tens of thousands, maybe even hundreds of thousands of traders watching that stock.

That means the brakes of moving averages are going to come with more volume. They're going to be. The logical levels of support and resistance are going to be well respected because you have traders there who respect it. On a stock that doesn't have high relative volume, some of this might be end up becoming algorithmic trading high-frequency trading and the drops and pops are not even related to an actual trade or watching you know any particular stock.

It's just kind of the you know the ups and downs of the overall market. So that's why I Really encourage traders. You know to make sure they're using scanners like these where you can go in and you can just immediately filter out everything that doesn't have high volume. and that way you know you're focusing on setups that other people are watching.

If you're thinking about taking a bottom bounce, you know why does the bottom bounce work like back on? CC It works because thousands of traders are buying at that same spot, right? That's why it works because thousands of traders recognize. Okay, the trend is shifting. It's it's going to bounce all of this volume. Here is what we look for.

the peaking volume on the downside, and the volume coming back up and it's no different. On you know this on the smaller cap stocks, the low price stocks. these are the same way. And I can scroll back this on this one a couple days and you can see that we had a really nice breakout and during that break out, the nine moving average was very well respected.

So safe entries on this ad: Support Here's a support level right here. So I look for the consolidation at Support and I Buy here. This is an entry at ten dollars whereas my stop, it's right down here. It's a 20 cent stop, 25 cents selling through the high, selling on the extension away from the moving average up to a high of 12 and then pull back to the moving average.

Alright so now the low is 12 11 25 entry at the first Campbell to make a new high which is this green candle as it breaks over this candle. So your entries 1165 stop is 11:25 $0.40 stop and now selling through the push. Now we're through high up. Day of 12 we go up to a high of 13.

So 1165 to 13 you know that's a dollar dollar 35. That's a really nice move versus the 40 cent stop. and you can just do that all day long. And it's by using the moving average.

You don't need anything else on your chart you don't need MACD you don't need RSI You don't need to do a Stix You don't need that stuff. If you have your moving averages right, moving averages, and a candlestick patterns, that's really all you need. But of course you know you also need to be able to find these setups in real time. Understanding You know the criteria of stocks that have homerun potential and you know that does take practice.

so I wouldn't discredit the value there, but you know, just to say you can keep your charts very simple, you don't need to overcomplicate it. The only other indicator that I use from time to time are Bollinger Bands and I Use those for one specific purpose I use those because I know that when the price is trading outside the Bollinger Bands the stock is experiencing extremes. Alright, when we put these Bollinger Bands on, you're going to see that almost all of the price action is inside the Bollinger Bands. So if you have a candle that's way up here outside the Bollinger Bands that's an extreme right.

and that's a good place to take a reversal trade to take a short with a stop just above the high because there's a really, really good chance that that stock is going to come back down and is going to come inside the Bollinger Bands right? It can only trade outside those Bollinger Bands for so long you know, before it's finally just it's to extend it. So as an example of that, let's see: I think I've got a good one here. Yeah, here's a good one. So this is a stock squeezing way up outside the Bollinger Bands that candle outside the Bollinger Bands Really uncommon to see that and so when I see it I take a short covering on the move back down to the moving average.

And then of course, once we get to the moving average, some traders may take that momentum shift trade for the break of the moving average, but by that point I would already be up a lot from the short when it was so extended. and I always find these to be easier to identify. It's easier to find stocks that are really extended because I can use my scanners, right? these reversal scanners to find a stock that is consolidating you know, at the 20 moving average and maybe getting ready to break over that level that's not as easy to do. You'd really have to be watching that stock all day long.

The good news is that if you focus on a strategy of trading you know the top 4 highest volume stocks each day highest relative volume, then you can watch those four stocks all day. And when you get these types of shifts in momentum, there's a good chance that you'll you'll catch it. And because it's a stock that's in play, thousands of other traders will be watching as well. Alright, so I hope this has been a helpful, helpful terminology session.

If you guys do have any questions, you can always email me or put comments down below. All right, Thanks guys! Let's be honest, if you made it this far, you must have really enjoyed that video. So what's stopping You subscribe right here and get email alerts anytime! I upload new content. Until then.

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