Understanding the Change From 20 Period SMA 2 Minute Filter

The "Change From 20 Period SMA 2 Minute Filter" is a valuable tool for traders focusing on short-term intraday trading or scalping strategies. By comparing the current price of a stock to its 20-period Simple Moving Average (SMA) on a 2-minute chart, this filter provides insights into the stock's short-term momentum over the last 40 minutes. It helps traders identify potential entry and exit points based on changes in momentum within a single trading session.

Here’s an in-depth look at how this filter operates:

Simple Moving Average (SMA)

20-Period SMA on a 2-Minute Chart: Calculates the average of the closing prices for the last 20 two-minute periods, smoothing out price data over approximately the last 40 minutes of trading to identify short-term trends.

Calculation: The filter expresses its values in percentage (%), following the formula: Percent Change = ((Last Price - SMA) / SMA) * 100.

A positive result suggests that the stock's current price is above its 20-period SMA, indicating a potential uptrend. Conversely, a negative result indicates that the current price is below the SMA, suggesting a potential downtrend.

Change From 20 Period SMA 2 Minute Filter Settings

Configuring the "Change From 20 Period SMA 2 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 filter for stocks currently positioned above their 20-period SMA on a 2-minute chart.

• Set the maximum value to -1 to focus on stocks currently below their 20-period SMA on a 2-minute chart.

Using the Change From 20 Period SMA 2 Minute Filter

The "Change From 20 Period SMA 2 Minute Filter" can be used in various trading strategies, including:

Trend Following Strategy: Enter trades in the direction of the prevailing trend indicated by the relationship between the current price and the 20-period SMA. Buy when the current price is above the 20-period SMA, indicating an uptrend, and sell when the price is below the SMA, indicating a downtrend.

Pullback Trading Strategy: Look for opportunities to enter trades on pullbacks within the context of the overall trend. Wait for the price to temporarily move below the 20-period SMA during an uptrend or above the SMA during a downtrend before entering a trade, anticipating a continuation of the trend.

Breakout Trading Strategy: Identify potential breakout opportunities when the price breaks decisively above or below the 20-period SMA. Enter trades when the price breaks above the 20-period SMA during an uptrend or below the SMA during a downtrend, anticipating a continuation of the breakout momentum.

Reversal Trading Strategy: Look for potential trend reversals when the price significantly deviates from the 20-period SMA. Enter trades when the price exhibits extreme deviations from the SMA, anticipating a reversal to the mean. For example, buy when the price is significantly below the SMA during an uptrend or sell when the price is significantly above the SMA during a downtrend.

FAQs

How does the "Change From 20 Period SMA (2 min)" filter differ from longer timeframe versions?

• The 2-minute version provides insights into short-term intraday momentum, whereas longer timeframe versions offer perspectives on broader trends over extended periods.

Is the "Change From 20 Period SMA (2 min)" filter suitable for all traders?

• This filter is most suitable for traders focusing on short-term intraday trading or scalping strategies. Traders with longer-term investment horizons may find longer timeframe versions more relevant.

How should I interpret significant positive or negative changes from the 20-period SMA on a 2-minute chart?

• Significant positive changes suggest upward momentum and potential buying opportunities, while significant negative changes indicate downward momentum and potential selling opportunities. However, always use additional indicators for confirmation.

How can I adjust the filter for stocks with different levels of volatility?

• Adjusting the percentage change threshold based on a stock's volatility can help tailor the filter's sensitivity, allowing traders to focus on significant momentum shifts while filtering out noise in highly volatile stocks.