Today quick simple question I'd love to bring up (yet, a fairly complex one to answer) : today, there's been a bunch of moving averages created.EMA, ALMA, SMA, WMA, HMU and the list goes on.
It can be difficult to discern which ones are junk, and which are good.
I guess the most important thing in their use is what are they best for ? Do you want a trend filter ? Then lag is maybe best and avoids noise. Do you want an entry signal ? Then lag is bad but noise is a problem.
So I'd love to know what you guys are using for developing strategies in terms of moving averages types and range of periods, and when to use which depending on your goals ?
Since I don't like stealing people's brain without giving back, here's my (modest) 2 cents :
SMA,EMA have predictive power especially on "classic" length (200,20,50ect..) as a lot of people use them.
SMA has lag which is useful in avoiding noise as the weight of the calculation is equally distributed for each candle of the period, but it's a double sided knife : it won't react quickly to quick change of behavior in the markets.
SMA for Bollinger bands is the default and to my experience it's best as it strikes the balance needed for breakouts (on periods like 50 or 100) as you need the lag.
Periods combinaison for MA cross : long periods with very short periods crosses seem to provide interesting results (ie : 5 and 100) as it provides a sign that price can hold above/bellow the longer MA and allow the trader to jump in early. In my opinion it's a better way to use the price cross above x periods moving average as it eliminates a lot of false signals.
Feel free to share your 2 cents I'm sure it could be a great thread !