Friday, September 23, 2011

Trading 101: Moving Averages and Patintero




Trading or Investing in stocks is like playing Patintero. 
It's all about the lines.


Taken from en.wikipilipinas.org


When I started trading stocks, i didn't know anything about candlesticks or patterns. And though I did my best to learn them, as a newbie without a mentor, I got frustrated halfway. I tried listening to the words of the 'enlightened ones' or gurus - sometimes it helped, sometimes it didn't. 

Starting out, my only trading system was "Buy and Pray."
It's funny when I think about it now.

But hey. Later I found out a better way of trading - Following "The Lines."
And these lines became my trusted friends in trading. The Moving Averages.

These are my linemen. You can customize your linemen the way you want.

Red Line = 30 MA
Pink Line = 60 MA
Blue Line = 90 MA


In Simple words:
When your "linemen" are above the candles, the trend is down.
When your "linemen" are below the candles, the trend is up.


In Patintero, once a lineman catches you, you're out! Period.
In stocks, I can choose which lineman tells me when I'm out.


Example:






Because No matter how fundamentally solid or trashy the stock, 
it is emotions that drive the price.




Additional Notes:

+ Moving Averages works well with Blue Chips, some 2nd Liners,
 but rarely on 3rd Liners (should be jockeyed).

+ When you use MAs, you need to have patience. 

+ My current linemen are 20/50/100 MAs.

"The trend is your friend."

+ Always consider how many of your linemen are on your side. 
Ask these questions:
x - How many are below/above the candles?
x - Which MA is bullish/bearish?



70 comments:

  1. Di pa din ako marunong ng technical analysis. Hope one day matutunan ko din. Thank you at di ninyo pinagdadamot ang dunong ninyo. God bless

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    1. This comment has been removed by the author.

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    2. I'm new to investing too! I've tried learning from blogs but what really helped me understand it is the learn feature in investagrams. Sign up lang kayo, it's free and legit. Madaming article na pwede basahin. For basic technical analysis eto po ang nagpaintindi sa akin. I hope this helps you too!

      https://www.investagrams.com/daily/2017/10/the-complete-beginners-guide-to-technical-analysis/

      Delete
  2. Hello Sir Z! Si tatandarin ito ng FM. I'm just wondering, paano yung set up ng MA, bakit 30/50/100 yung iyo? yung akin kasi default 20/50/100.

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  3. Tatandarin: I've already changed mine to 20/50/100 - Nasa Additional Notes Below this Post. :)
    But sometimes I use 30/60/90 For Blue Chips.

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  4. why do you change the set up of MA? what's the difference between 20/50/100 and 30/50/100 or in my case the default of COL which is 32/65/130?

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  5. ^ With 20/50/100 MAs, I can position and exit earlier than traders using 32/65/130.

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  6. bat di ko mamapalitan ung SMA lagi bumabalik sa 32 65 130

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  7. Change the number then press Enter. Do this for the 3 MAs. Then save your settings.

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  8. same here, as soon as i move the mouse, nagrereset sya sa default na 32, 65 and 130 :(

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  9. sir why do you want your sma3 at 100days, isnt it this is yourlast warning to exit? why not on 90 or lower?thanks.

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  10. For blue chips i use 90MA.. But usually, i'm already out once 50MA snaps.

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  11. Hi sir! 2GO already broke above the linemen (i used 20/50/100) but the 20 and 50 MAs are still below the 100 MA. Must these two crossover above 100 first before it can be considered a buy? Thanks!

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  12. 2GO is an illiquid 3rd liner. MAs might not be a suitable guide for it.

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  13. sir pano ba malalaman pag blue chips, 2nd liner at 3rd liner?

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  14. Hmmmmm.. Good Question.

    Index stocks = Blue Chips
    2nd Liners = Good fundamentals But Lacks Liquidity
    3rd Liners = Good/Bad Fundamentals. Very Low Liquidity

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    Replies
    1. Hi Sir Zee,
      This is an old post but I hope someone can answer my question.
      May number of volume ba or category bago natin masabing 2nd Liners siya or 3rd Liners?

      Thank you very much

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    2. tignan mo sa pse edge ang market cap nya. 10billion below consider na 3rd liner

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    3. im not sir ZF but what i usually do since ang means lang naman to be called 2nd liner is to be liquid, na hinde part ng index.

      so i screen stocks which are above their average volumes for the past 10/15/20 days.

      kasi nalala ko ang simpleng definition ni sir ZF sa liquidity is you can buy and sell shares easily, meaning hinde mo need magintay ng ilang minuto or oras para magmatch yung buy or sell mo.

      so far ok naman, I manage to filter alin yung me galawan (VUL, PXP, MRC, LR, etc)

      Delete
  15. thanks Sir Zee, this is very informative. although I have a little knowledge about it already, this still confirms everything and the settings is a first to me. great read :)

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  16. Thank you, Sir Zee Freaks very helpful, just started to study technical analysis.

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  17. thanks sir Zee I wish to join ine of your seminar

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  18. Zee, I would like to ask if it is better use DAILY or WEEKLY movements?

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  19. Hi Sir Z,

    This is extremely helpful information and clears the murky waters on my noggin' regarding MAs.

    BTW, how would distinguish the liquidity? is it the public float percentage? the lower the more illiquid?

    TIA!!

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  20. You can gauge if it is liquid enough by the monthly-weekly value turnover. If you want full liquidity just check out top active stocks. Most of those are blue chips.

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  21. Hi ZF,

    What indicators do you use? I'm still a newbie and I use MACD, RSI, RVI, STS and Volume. Anything to add or remove? TIA

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  22. might not be COL charts, and yet and still banging my head on the wall trying to search if this can be done in COL lol.
    Need to observe this MAs

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    Replies
    1. derp, textbox pla yun. nebersminds

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    2. Hi ZF, thank you for sharing your great knowledge. I would just like to check what it means if the price went down again to the 100MA level after having a ZS yesterday. I entered X yestereday when I saw a ZS, but, as of this writing, its price went down back to the 100MA level. TIA

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    3. Not all ZS are sustainable. AOTS is much stable. Check link below.

      http://zeefreaks.blogspot.com/2013/03/zeus-strike-and-alignment-of-stars.html

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  23. Sir zee newbie lng po. ano po ung gamit nyong chart? dindownload b cya o yan ung sa col? thank you

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  25. Hello sir Z, do you use EMA for 20MA or 32MA? If yes which strings is technically OK with them?

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  26. Such a great example sir Zee.. it made it easier to understand for me. Thanks!

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  27. Zee Ive learned a lot from this post.thanks!!more power

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  28. I've started backreading your blog Zee! Thank you so much for the lesson!

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  29. Sir Zee Freaks, Thank you for your insights. It is very helpful. God bless po...

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  30. Senpai read test apply repeat..2nd ulit hahaha

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  31. Salamat at may nagshare ng blog na to sa Investagram, been learning a lot. Masarap basahin dahil may mga pictures, inspiring ang mga figures at higit sa lahat malalaman mo na hindi pansariling kapakanan ang motive ng nagsulat. Maraming salamat sa pagse-share ng biyaya.

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  32. Sir zee, been backreading your blog the second time. Just have one question in categorizing the stocks. You mentioned that to gauge the liquidity of a stock, we need to check the monthly turnover. May I know po what are the ranges of value turnover to be considered as illiquid?
    Kasi napansin ko po usually tsaka lang lumalaki ang value turnover kapag matured na ang trend ng isang stock especially sa basuras. Or may na miss po ba ako and not getting the bigger picture?
    Tsaka once nacategorize na ang isang stock, do you change it from time to time?

    Thanks.

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    Replies
    1. To simplify things, liquidity will now depend on your portfolio. If you can easily buy and sell the same stock within a day without causing wild swings above 3% then that is liquid.

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  33. Very informative! Thanks for sharing your wisdom to us. God bless.

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  34. Hi sir, ano pong gmit nyong linemen sa 3rd liners. Thanks in advance

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  35. Hello po, SMA = MA? Thanks.

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    Replies
    1. I think pareha lang yan.

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    2. ang SMA and MA ay magka pareho lang sila..Both are moving averages.

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  36. Hi sir, how do you choose your 2nd and 3rd liners?

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  37. learned something just by reading the comments! Thanks!

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  38. Hi Zee,

    x - How many are below/above the candles?
    > HOW MANY DAYS/CANDLES DO YOU CONSIDER BULLISH BEFORE ENTERING/EXITING?
    x - Which MA is bullish/bearish?
    > HOW SHOULD WE INTERPRET A BULLISH/BEARISH LINEMAN? SAY, MA100 IS BELOW(I believe that's ZS in one of your system)... WHAT IF IT'S 20 OR 50?

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  39. Sir ZF ano ang gamit nio ngaun na MA's?

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  40. Salamat sa Patintero. Laro ko to nong bata pa ako. LOL

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  41. Hi Sir Z,
    I'm just starting out with charting MA's in COL. Just want to ask what field setting do you use? Open, close, high or low price?

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  42. Hi Sir Z,
    I'm just starting out with charting SMA's in COL. Just want to ask what field setting do you use? Open, close, high or low price?

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    Replies
    1. Just use the default value which is "close"

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  43. ano gamit nyo na chart sir wla kasi ako makit na MA sa COL chart po.

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  44. Ngayon ko lng nabasa to and nde ako gumagamit ng MA. Salamat ir for putting it into simpler terms. Mabuhay ka Boss Zee!

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  45. Thank you Sir ZFT, sa mga araw na nagsimula ako ng Trading. Buy and Pray, naka relate Hahaha Thank you Sir ZFT, more power... God bless

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  46. thank you for your teachings sir zee

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  47. First time here sa blog nyo Sir Zee and I'm really thankful na nakita ko to! Still a newbie and been trading for 2 months pero mostly failed pa so I wanted to learn more. Sana maging profitable din akong tulad nyo one day! Thanks for selflessly sharing your knowledge!

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  48. Hello SIr Z,

    nagsisimula pa lang po ako mag aral ng TA. Very Thankful po sa blogs nyo. Sir, I have a questions lang po, How can you identify of which MA is bullish or bearish po? Naguguluhan po kasi ako sir. Thank you po.

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  49. Hello sir Z,

    I know this is an old post but I'm still hoping na masagot mo tanong ko. How about EMA? Why you are not using EMA? Salamat po.

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  50. Starting out, my only trading system was "Buy and Pray."
    It's funny when I think about it now. - Parang ako din Boss :)

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