High and Low Moving Average Indicator

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High Low Moving Average

Tutorial About using High-Low Moving averages in technical analysis and how to generate trading signals based on this indicator. You will find more than 150 unique studies on our index and stock charts. Third part of these indicators is unique and could not be found anywhere else with exception of our web site. Subscribe to our stock charts (no downloadable software is needed) and you will have constant access to the stock market info and technical analysis under your fingertips. Read below About using High-Low Moving Averages in technical analysis and how to generate trading signals based on this indicator.

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Technical Analysis, Studies, Indicators:

High-Low Moving Average (H-L MA)

Description

High-Low Moving Average (also known as High-Low channel) is a simple indicator where moving average applied to a bar’s high and low prices instead of a bar’s close price. Respectfully, instead of one MA you will have two MAs on a chart where one represents High’s MA and second is MA applied to a bar’s low price.

Technical Analysis, Signals and Trading Systems

In similar to other moving averages way, technical analysis uses High-Low MAs to generate trading signals and to define a rend. At the same time H-L MA caries the characteristics of a channel which allows in some cases to reduce periods of choppy trading during a side-way trend.

Traditionally, technical analysis recommends using the same bar period for both High and Low moving averages. The simplest trading system based on the High-Low MA would suggest buying when close price moves above High MA and it recommends selling when close price drops below Low MA. On the QQQ stock chart below you may see an example of such trading system.

Chart 1: QQQ stock chart with signals based on H-L MA

One of the other ways of using High-Low Moving Average is to apply MACD principles by applying smaller bar period to High MA (using it as fast MA in MACD) and by selecting bigger bar period for Low MA (using it as slow MA). In this case, a simple trading system would recommend selling when High Moving Average drops below Low Moving Average and it would suggest buying when High MA raises above Low MA. On the QQQ stock chart below you may see the illustration of such simple trading system and buy/sell signals.

Chart 2: QQQ stock chart with signals based on High and Low MAs crossovers

High-Low MA’s Formula and Calculations

High-Low Moving Average is calculated in the same way as other moving averages are. The only difference is that two MAs are displayed on a chart as a channel.

HMA = MA applied to Highs

LMA = MA applied to Lows

On our index and stock charts you may select Simple, Weighted and Exponential MAs for High-Low Moving Average.

By V. K. for MarketVolume.com

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High and Low Moving Average Indicator

A common tool that Future traders use is the high/low moving indicator. The tools incorporates two moving averages that is based on a period’s highs and lows in order to make a price channel moving average envelope. Nonetheless, is this indicator useful for traders of binary options?

KNOWING MORE ABOUT THE HIGH/LOW MOVING AVERAGE INDICATOR

This tool is commonly used by futures traders. It is just like price channels and moving average indicators but are quite simpler. It makes use of two moving averages. One moving average is based on higher prices and the other is based on lower prices. This is quite unique from the usually moving average which is solely based in typical or closing prices. The average makes price channels that you can use in different ways for signal generation and trend confirmation as well as resistance and support.

USING THE HIGH/LOW MOVING AVERAGE INDICATOR

The first thing you need to do is to calculate moving averages. This is based on easy moving averages and two varied time periods. You will know if it’s a high moving average when there is a simple ten bar moving average. Low moving average only comes with 8 bars. You can download the high/low MA indicator tool if your chart package does not have it.

The tool is not used as a tool for crossover but you can also use it this way. What can be measured as a great signal that follows trend is a hard break below or above the upper moving average. You can use this strategy together with a trend or trends so that you can get rid of fake signals.

There will be a contrarian signal if there is a break just outside of the envelope which is counter to the existing trend. An example would be prices being sold in a robust downward trend, you can go for support and then bounce higher. You can enter Put if prices can break high moving average contrarian.

Moreover, you can use this tool when you want to find and confirm support. There is also a similar behavior of the moving average to prices. This may break or bounce through areas with support and resistance. When prices test and break through temporarily through an area with support and resistance while the high and low envelope verifies that either resistance or support, it is signifying an additional contrarian entry signal. This strategy is also a great trend following indicatory. It confirms trends in a similar way as resistance and support confirmation. Once the indicator moves, bounces and trends from trend line then it signals trend following entry.

As a plus, you can also use this indicator for volatility measurement. Once the envelope becomes wider, there is increase in volatility and the moment it narrows it shows that there is a decline in volatility. Binary traders may not find this very useful but it can be used together with other tools in order to get prospective entry points. Another way to trend on such signal is to enter positions that follow trend when there is a very narrow envelope and when the envelope is wide then there is a contrarian position.

WHY IS THIS INDICATOR GOOD?

For starters, this strategy is great. One reason why it does not suck is that it mixes many kinds of analysis to a single indicator. This is really beneficial for binary traders because you can actually add this and get rid of two other indicators. Channels and moving averages are very well recognized and trustworthy indicators for trading, giving numerous signals. The indicator mixes those features thus allowing to offer at least five varied kinds of signals. Another thing why it is good is that newbies can find it quite appealing and easy to use.

WHY IS THIS INDICATOR BAD?

This indicator is not so good because it is just a single indicator. If you are a fan of using more than one indicator and time frames for getting great signals, then you might not enjoy this. On its own, this may offer a lot of false signals and whipsaws for it to be really efficient for binary signals. Nonetheless, mix it with other tools such as Fibonacci, trend lines, and other tools then you can surely appreciate its true beauty.

High Low Moving Average Indicator – Something to Build On

Full Review of the High/Low Moving Average Indicator for Binary Options

The high/low moving average indicator is a tool commonly used by futures traders. This tool combines two moving averages based on the high and lows of the period to create a price channel moving average envelope. Find out if this indicator is useful for binary options traders.

What Is The High Low Moving Average Indicator

The High/Low Moving Average indicator is a tool used by futures traders. This tool similar to moving average envelops and price channels but uniquely simple. This tool utilizes two moving averages, one based on high prices and one based on low prices. This is different from the typical moving average which is based solely on closing or typical prices. The average creates a price channel that can be used in a number of ways to generate signals and to confirm trends, support and resistance. Is this tool one that can be used by binary traders? I think so but like most indicators it does come with some caveats.

How Do You Use The Hi/Low MA Indicator

First you have to calculate you moving averages. This tool is based on simple moving averages and uses two different time periods. The high moving average is a ten bar simple moving average, the low moving average is only 8 bars. If your chart package does not include a high/low ma indicator you will have to download the tool or program your charts accordingly. You can not just use an 8 and 10 day moving average.

This tool is not considered to be a crossover tool but it can be used in that way. A solid break above or below the upper moving average can be considered a strong trend following signal. This strategy is best used along with the trend in order to weed out false signals.

A break outside the envelope that is counter to the underlying trend can be considered a contrarian signal. For example, prices are in a solid down trend, hit support and bounce higher. When prices break the high moving average contrarian put plays can be entered.

This tool is also good for finding and confirming support. The moving average envelop will behave similarly to prices and may bounce or break through support and resistance areas. If prices test and temporarily break through a support or resistance area while the Hi/Low envelope confirms that support or resistance it is indicating another contrarian entry signal.

The high/low moving average indicator is also a good trend following indicator. It can confirm trends in much the same way as it confirms support and resistance. When the indicator moves, tests and bounces from a trend line it is signaling a trend following entry.

As an added bonus this indicator can also be used to measure volatility. When the envelope widens it signals that volatility is up and when it narrows it signals that volatility is declining. This is not super useful for binary traders but can be combined with other analysis to find prospective entry points. One possible way to trade on this signal is to enter trend following positions when the envelope is extremely narrow and contrarian positions when it is extremely wide.

Why The High/Low Moving Average Indicator Does Not Suck

This indicator definitely does not suck. For one it combines several different types of analysis into one indicator. This makes it especially useful and helpful for binary traders because you can theoretically add this indicator and remove two others. Moving averages and channels are both well recognized and reliable trading indicators, providing a number of signals. This indicator combines those features enabling it to provide at least 5 different signal types. The indicator is also easy to read and easy for new comers to pick up.

Why This Indicator Might Suck

This indicator might suck because it is only one indicator. I am a big fan of using multiple indicators and multiple time frames in order to get the best signals. By itself this indicator may provide too many whipsaws and false signals to be truly effective for binary options. However, combine it with trend lines, Fibonacci or other tool and discover its true value.

My Last Words On The High/Low Moving Average Indicator

I like this tool. It is simple, easy to read and provides a wide variety of useful signals. It combines multiple types of indicator and theory into one tool and it is useful in multiple time frames. This tool is one of my new top favorites and one that I can endorse for newbies. For best results I highly recommend using it with other analysis and in more than one time frame. As an added bonus, because the tool combines so much it is possible for it to confirm itself. For example, a contrarian signal that is then followed up by a new trend confirming signal or envelop break out is stronger than the contrarian or break out signal alone. Expiration times for these signals will vary but it looks like 4-5 bars is enough, so if you are trading off the daily charts use a 4-5 expiry or if using the hourly charts 4-5 hours.

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