Do Moving Averages Still Work?
You’ve heard the stories about the commodity traders who (think it was back in the 70s) used a combination of three moving averages and made a killing. Since then, there has been a fascination with moving averages. All kinds of tweaks have been made to them, to “make them more acurate.” So, do they still work? Can you still trade a simple cross of two moving averages profitably? No. So in that sense of the word, no, moving averages don’t work anymore. (Some have then thought of trading the opposite of the cross, e.g. going long when fast moving average goes under the slow one. That doesn’t work either.) But there is more to it than that. You can use moving averages for other things. But first there is a caveat emptor. Moving averages lag (as do all indicators). Realize that. Accept it. There is no mathematical tweak to make them “know” the future. Offsetting them on the charts won’t help either. As long as you accept the facts, you can use moving averages to their full advantage. They
