![]() FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. And although stop losses can be considered a risk management (loss management) strategy, their function can never be completely guaranteed.ĭisclaimer Regarding Hypothetical Performance Results: HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. In cases where the market is illiquid–either no buyers or no sellers–or in cases of electronic disruptions, stop losses can fail. Past performance is not necessarily indicative of future results.īe advised that there are instances in which stop losses may not trigger. There is a substantial risk of loss in trading futures, options and forex. Please be aware that the content of this blog is based upon the opinions and research of GFF Brokers and its staff and should not be treated as trade recommendations. But it doesn’t always work, so be prepared for either outcome. The 50 EMA can make a good “technical” buy point for an asset whose price is falling. So, once again, set your stop loss in case it does. Set your stop loss accordingly, and don’t seem shocked if the market disagrees with you.Īnd even if price does bounce back, it doesn’t mean that the upward momentum will continue. So, be careful and don’t expect a bounce back each time. The caveat is that an asset can sink well below it, especially if the fundamental picture looks bearish. So the 50 EMA is one potential price level at which to buy a dip. ![]() There isn’t a solid and proven reason for this, and perhaps it’s a self-fulfilling prophecy, but it tends to happen. And if the price of an asset is above the 50 which is also above the 200 EMA, then the uptrend is healthy and strong.įor some reason, lots of investors think that the 50 EMA acts as “support.” This means they expect the price to bounce back once it reaches the 50 EMA. So, if the 50 EMA is above the 200 EMA, the trend is…(you got it) healthy. The basic idea is that if a moving average is moving upwards, the trend is healthy. ![]() ![]() But just know that a lot of traders use it because they think it’s more responsive to near-term price movements.ĮMAs Can Help Measure The Strength Of A Trend The “exponential” part is simply a calculation that gives more weight to near-term prices. The average price over the last three days is $0.93, or ninety three cents. And three days ago, it was discounted to $0.70. Imagine a candy bar whose price changes everyday. Forget the “exponential” part and just focus on the “moving average” part.Ī moving average is an “average” of prices across a number of days anything greater than 2 days (it can be 5 days, 10, days, 100 days, etc.). This means that the longer-term uptrend is strong.īut here’s the thing: Unless you know what they’re talking about, it all sounds like a bunch of gibberish. You might also hear that the 50 EMA is above the 200 EMA. This means that an asset’s price is still on the up and up. When you tune into financial media, you’ll often hear some chartist say that price is above the 50 Exponential Moving Average (or EMA). ![]()
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