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Attention cman: What Breaking The 50-Day Average Really Means
Wonderful. "Arbitrariness" explained in many, many words.
There is more money to be made selling subscriptions talking about the 50 day moving averages than trading them.
But there is an aspect of self-fulfilling prophecy to technicals. They seem to work when enough people believe they work and act on it. This is what props up Bollinger bands and head and shoulder patterns and Fibonacci sequences.... Understanding that helps in creating effective stop limits for trading volatile instruments not meant for buy and hold or trading trend/momentum based strategies. As long as someone doesn't confuse it with science or natural laws.
Comments
There is more money to be made selling subscriptions talking about the 50 day moving averages than trading them.
But there is an aspect of self-fulfilling prophecy to technicals. They seem to work when enough people believe they work and act on it. This is what props up Bollinger bands and head and shoulder patterns and Fibonacci sequences.... Understanding that helps in creating effective stop limits for trading volatile instruments not meant for buy and hold or trading trend/momentum based strategies. As long as someone doesn't confuse it with science or natural laws.