Understanding the 8 Vs. 20 Period SMA 60 Minute Filter

The "8 Vs. 20 Period SMA (60m)" filter in stock trading compares two different Simple Moving Averages (SMA) calculated on a 60-minute chart. SMAs are commonly used technical indicators that help traders analyze the direction and strength of a trend in a stock's price.

Here's how the filter works:

Simple Moving Average (SMA): The SMA is calculated by averaging the closing prices of a stock over a specified period. In this filter, two SMAs are utilized: an 8-period SMA and a 20-period SMA.

Comparison: The 8-period SMA represents the short-term trend, considering a shorter time frame of price data, while the 20-period SMA represents the longer-term trend, considering a longer time frame of price data. By comparing these two SMAs, traders can gain insights into the relationship between short-term and long-term trends in the stock's price movement. The number is always expressed as a percentage.

Signal Generation: When the 8-period SMA crosses above the 20-period SMA, it may indicate a bullish signal, suggesting that short-term momentum is increasing relative to long-term momentum. This is commonly referred to as a "golden cross" and is considered a bullish indicator. Conversely, when the 8-period SMA crosses below the 20-period SMA, it may indicate a bearish signal, suggesting that short-term momentum is decreasing relative to long-term momentum. This is known as a "death cross" and is considered a bearish indicator.

Interpretation: Traders may use these crossover signals to make trading decisions. For example, a bullish crossover may signal a potential entry point for long positions, while a bearish crossover may signal a potential entry point for short positions. Additionally, the relative positioning of the two SMAs can provide insights into the strength and duration of the prevailing trend. If the short-term SMA consistently remains above the long-term SMA, it indicates a strong bullish trend, and vice versa for a bearish trend.

Chart Representation: On a 60-minute chart, each candlestick represents price action that occurred over a 60-minute period. The SMAs are plotted on the chart, allowing traders to visually identify crossovers and trend dynamics.

8 Vs. 20 Period SMA 60 Minute Filter Settings

Configuring the "8 Vs. 20 Period SMA 60 Minute Filter" is simple and can be done within the Window Specific Filters Tab of the Configuration Window in your Alert/Top List Window.

Here's how to set up the filter in your configuration window:

• Adjust the minimum value to 1 to see only stocks in which the 8-period SMA is above the 20 Period SMA on a 60 minute chart.

• Set the maximum value to -1 to focus only on stocks in which the 8-period SMA is below the the 20 Period SMA on a 60 minute chart.

Using the 8 Vs. 20 Period SMA 60 Minute Filter

The "8 Vs. 20 Period SMA 60 Minute" filter can be used in various trading strategies, including:

Crossover Strategy:

Bullish Signal (Golden Cross): When the 8-period SMA crosses above the 20-period SMA, it generates a bullish signal. Traders may consider entering long positions or buying the stock, anticipating further price appreciation.

Bearish Signal (Death Cross): Conversely, when the 8-period SMA crosses below the 20-period SMA, it generates a bearish signal. Traders may consider entering short positions or selling the stock, expecting further price decline.

Crossover Strategy: Look for crossover signals between the 8-period SMA and the 20-period SMA on a 60-minute chart. A bullish crossover occurs when the 8-period SMA crosses above the 20-period SMA, signaling potential upward momentum and a possible entry point for long positions. Conversely, a bearish crossover occurs when the 8-period SMA crosses below the 20-period SMA, signaling potential downward momentum and a possible entry point for short positions.

Pullback Strategy: After a crossover signal occurs, wait for a pullback in the price to retest the crossover point on the 60-minute chart. If the price holds above the crossover point during the pullback in a bullish scenario or below the crossover point in a bearish scenario, consider it a potential entry point in the direction of the crossover signal.

Confirmation Strategy: Use the relative positioning of the 8-period SMA and the 20-period SMA on a 60-minute chart to confirm the prevailing trend. If the 8-period SMA consistently remains above the 20-period SMA, it confirms a bullish trend, and vice versa for a bearish trend. Enter positions in alignment with the confirmed trend direction.

FAQs

What do the numbers "8" and "20" represent in the filter name?

• The numbers "8" and "20" denote the periods used for calculating the Simple Moving Averages (SMAs). The "8" represents the short-term SMA, calculated over an 8-period time frame, while the "20" represents the long-term SMA, calculated over a 20-period time frame.

How do I interpret a crossover between the 8-period SMA and the 20-period SMA?

• A crossover occurs when the 8-period SMA crosses above or below the 20-period SMA on a 60-minute chart. A bullish crossover, known as a "golden cross," happens when the 8-period SMA crosses above the 20-period SMA, indicating potential bullish momentum. Conversely, a bearish crossover, known as a "death cross," occurs when the 8-period SMA crosses below the 20-period SMA, signaling potential bearish momentum.

What time frame does the 60-minute chart represent?

• The 60-minute chart displays price data for each interval or candlestick representing a 60-minute time frame. This means that each candlestick on the chart represents the price action that occurred during a 60-minute period.

Should I use additional indicators alongside the 8 Vs. 20 Period SMA filter?

• While the 8 Vs. 20 Period SMA filter can provide valuable insights into trend direction and momentum, it's often used in conjunction with other technical indicators to confirm signals and enhance trading decisions. Consider using complementary indicators such as volume analysis, oscillators, or trend-following tools to validate signals and improve overall trading accuracy.