Best Moving Average for Intraday Trading

Intraday trading is a very intensive process that demands a high level of alertness and the ability to take lightning fast decisions on the part of the trader. However, to aid his thought process, he makes use of some quantifiable decision support tools that act as a reference point in his overall trading pursuit. Although there are many Technical Analysis tools at the disposal of today’s trader, in this article, we will have a look at the good old moving average and learn how it can be used more effectively for intraday trading.

Although moving average is considered a lagging indicator, a seasoned trader knows how to glean actionable information from this invaluable tool. As it calculates the average price, we get a fair idea or reference point regarding value. In other words, when prices are near the moving average the stock’s price is considered to be fairly valued, while when they are away from the moving average, the stock’s price is considered to be expensive. Hence, it is always better to initiate a buy/short position when prices are near the moving average.

Types of Moving Averages

There are basically four types of moving averages namely simple moving average (SMA), exponential moving average (EMA), smoothed moving average (SSMA) and weighted moving average (WMA). Out of these four types, the SMA is quite lagging in nature as it gives equal weightage to all the data points in its calculation, while the EMA is comparatively faster as it gives more weightage to recent data. On the other hand, although the SSMA cancels out the noise of the SMA, it also shows some lag and is not suited to use in a fast environment like day trading. Last but not the least, the WMA has been designed to be more responsive and hug prices better.

However,we have found that the 20 period exponential moving average (EMA) is the best moving average for intraday trading as it provides a good balance between responsiveness and price tracking. Additionally, we use a 15 min intraday chart for our study.

Buy Setup: When price is above 20 EMA and the average is sloping upwards, it indicates that the stock is in an uptrend. Look for a pullback to the moving average. Buy when the Pullback Bar’s high gets crossed to the upside.

Buy Setup

Short Setup: When price is below 20 EMA and the average is sloping downwards, look for a pullback to the moving average. Short when the Pullback Bar’s low gets crossed to the downside. 

Sell Setup

The main component in this intraday trading strategy is the 20 period EMA slope. When the moving average is sloping upwards, it indicates a strong uptrend and we look for buying opportunities only. Similarly, when the 20 EMA is sloping downwards, it indicates a strong  downtrend and we look for only shorting opportunities. Conversely, when the average is flat, it indicates a non-trending market and hence we stay out of that instrument. best-moving-average-for-intraday-tading_no trade zone

22 thoughts on “Best Moving Average for Intraday Trading”

  1. Hey there, You have done an excellent job. I’ll certainly digg it and personally recommend to my friends.

    I am sure they will be benefited from this website.

  2. Everyone loves what you guys are up too. This type of clever work
    and exposure! Keep up the amazing works guys I’ve included you guys to blogroll.

  3. Good post however , I was wondering if you could write a litte more
    on this topic? I’d be very grateful if you could elaborate a little bit more.

    Many thanks!

  4. Hey there. I found your website by the use of Google even as searching for a similar topic, your website got here up. It seems to be good. I have bookmarked it in my google bookmarks to visit then.

  5. I really like what you guys are usually up too. This sort of clever work and reporting!
    Keep up the very good works guys I’ve added you guys
    to blogroll.

  6. I think this is among the such a lot important info for me.
    And i’m happy studying your article. But wanna observation on some normal issues,
    The web site taste is wonderful, the articles is truly nice : D.
    Just right task, cheers

  7. I just could not depart your website prior to suggesting that I actually loved
    the standard information a person provide on your
    guests? Is going to be back frequently to check out new posts

  8. Good day I am so delighted I found your blog, I really
    found you by accident, while I was browsing on Bing for
    something else, Nonetheless I am here now and would just like to say thanks for a
    fantastic post and a all round entertaining blog (I also love the theme/design), I don’t have time
    to read through it all at the moment but I have saved it and also included
    your RSS feeds, so when I have time I will be back to read a lot more, Please
    do keep up the awesome work.

  9. Needed to send you that little bit of observation to say thank you once again regarding the nice opinions you have featured in this case. It has been really shockingly generous with you to present without restraint what exactly most of us might have sold as an ebook in making some money for themselves, especially considering the fact that you could have done it if you decided. The smart ideas as well acted to be a good way to recognize that most people have a similar passion just as my very own to see more and more in respect of this matter. I know there are lots of more fun times up front for those who discover your blog post.


Leave a Comment