Tuesday, April 19, 2011

Moving Averages

It is 12.22 a.m. at the moment, I had just got home from a shift in the emergency department that started at 4 p.m. I will have to be back at the hospital tomorrow before 10a.m.... yay...... Anyways, on the way back, I found out that it only takes me about 8 minutes to get home from the hospital without traffic. And of course, I fell victim to a McDonald’s ad. When I was at the drive through, I fell prey to a Coke Zero ad. Lol so kudos to good product placement. However, kudos to me for not getting any chips ;)

Unfortunately, Mr Portfolio is still sick. He is still in the ICU and the bleed is not under control yet. One of my friends asked me what my next plan of action was. I think the answer is absolutely nothing. Not because I am lazy and am giving up, but because the charts tell me not to do anything.

I probably have mentioned this before, because this is a game, I’ve decided to take more risk and experiment with a few things. First of all, I didn’t bother with diversification. Most of the companies in the portfolio are either mining or energy and these 2 sectors has been hit pretty hard this past week.

Another thing I had decided is to stick to Darvas Boxes and moving average crossovers, 12 days and 24 days simple moving averages.

Below is a small snip of the chart of one of the companies in my trading places portfolio EWC.

So the idea is to buy when the 12 day moving average crosses the 24 day moving average and sell when the opposite happens. As we can see, they have not crossed yet, so I’ll keep on holding until they cross. This is basically the same story with my other shares. I bought them when the 12 day MA crosses the 24 day MA, they have a few days of gains and are all retreating now.

Below is a small snip of RIO to illustrate what happens sometimes.

If you look at around 15 October 2009, the MA crosses, that is when you buy, Then at around November 16, the lines almost cross but not quite, in that situation you hold on and finally at December 20 then cross and that is when you sell.

Below is an example of how a beautiful MA cross over trade looks like.

Since I’ve decided on what to experiment on, I’ll stick to it and see how it goes. I guess it does not really matter if I do incredibaly bad, it would be a good learning experience. Better lose money in a game than in real live aye.

So what do you think about moving averages? Do you think what I’m doing is wise? Or am I an idiot and should close all my positions now to cut my losses? What would you do?

Thanks for reading! I hope it has been helpful, do leave comments or send me emails if you have any thoughts at all. Do click on the little like button on the right hand side of the screen to like me on facebook or follow me on twitter! Thanks!

Once again the snippets of the charts are taken from bullcharts. www.bullcharts.com.au definitely check them out!

Now time to eat that McChicken and man its past 1 am already, I should sleep soon.

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