Slope vrs SMA

JJJJ

I have been looking at SLOPE as a new indicator, and am trying to determine the difference and significance of SLOPE vrs SMA. In some cases, they are similar and other cases totally opposite. They would seem to to be essentially the same. Can anyone help describe the differences ?

lmkwin

In the ChartSchool, there are articles on pretty much everything technical analysis. The ChartSchool link is located at the top of the page, right under where you can enter a Symbol.
Slope is explained here
https://school.stockcharts.com/doku.php?id=technical_indicators:slope

Moving Averages are explained here
https://school.stockcharts.com/doku.php?id=technical_indicators:moving_averages

They aren't the same thing.

You can also access information using the Magnifying Glass in the upper right corner. The Magnifier is actually quite a remarkable feature in my opinion. You can put in a Symbol and hit enter. When the results show, mine defaults to Support Articles, click the dropdown and you can select a number of different options for the symbol.
One that I find interesting is to use the Symbol option at the bottom of that listing. So, let's say you put in AAPL. Select the Symbols option. On the right is a link to "mentions". Click on that. A page will open that shows the Symbol Details, All Predefined Scans that mention AAPL in the last week, All Public ChartLists that have AAPL mentioned, All of your ChartLists that have AAPL, All commentary from the Blogs that mention AAPL. I think it's a neat feature.

markd

The Chart School slope article does not explain the calculation, but you can find it here, if it helps:

https://www.tradingtechnologies.com/xtrader-help/x-study/technical-indicator-definitions/linear-regression-slope-lrm/

In general, Slope and MA often track together (or at least similarly), as long as prices have a directional movement up or down. But, when price flatten out into a range, the MA will flatten with it, but Slope will turn toward zero (in other words, turn down if prices had been rising, up if price had been falling).

That's because Slope tries to find the line that best fits the pattern of closes (i.e. the line that produces the smallest sum of differences between the line and each close - least squares) and THEN calculates the "rise over run", or angle of the line - the slope - by dividing the difference in height (rise) between the beginning and end points by the length between the two points (the run). As prices flatten out, the height diminishes to zero, so the plotted slope values change course toward zero. But the MA doesn't change direction, it stays flat because prices stay flat, so the two get out of sync for a while.

JJJJ

OK I think I see the difference. Now which of these is best to use as a trigger for buying a stock? Is a slope above zero and rising the strongest indicator vs just a rising SMA ?

lmkwin

in the link below, they use price and SMA for "trigger" and Slope to confirm prior consolidation.

https://support.stockcharts.com/doku.php?id=scans:advanced_scan_syntax:consolidation_breakouts

As far as what's better? You'd have to define what "better" is, and why it has to be decided between Slope vs SMA activity. Why not Fast Stochastics vs 22 week Middle Price Channel cross up? Or PMO vs Bollinger Band cross? I think that the better entry point is on a Dynamic CSS Pattern on the point and figure chart. Better is very subjective. I think whatever fits your system and is something that you can actually act upon is better than something that isn't helpful in decision making processes.

markd

I would say neither one is a trigger, if by that you mean a signal to enter a trade. MAs can be used that way - for instance enter long or short on a cross above or below an MA. Slope can not, at least not directly, because price and Slope have different scales (I suppose you could put a moving average on slope and trade the crossovers, but that would introduce a double lag, so it might not work out). Instead, they are more or less "permission to consider a long", if either one is rising, or "permission to short" if either is falling. The trigger would then be some other indicator crossing a critical level, e.g. some appropriate Stochastic crossing above 20 for a long, or crossing below 80 for a short.

JJJJ

Hey all... thanks for the feedback. I will analyze responses. I have a better feel for the differences.
JJJJ