"From the 5-year weekly gold chart below, it is interesting to note that the 150 MA has been an excellent indicator of the gold price trend compared to the 200 MA. My point is that it is often a good idea to try different length moving averages to determine which works best with different instruments.

"Since the major correction which ended in October 2009 there have been four subsequent reversions to the 150 MA and if this is a good predictor, then the current correction should soon find support at around the $1310 level. However, I note that the last top formation was rounded, unlike the fairly sharp shapes at the tops of previous corrections. Is there any technical significance in this rounded shape top please?"

Eoin Treacy's view Thank you for these observations which I'm sure will be of interest to other subscribers. The reason we tend to use the 200-day MA is because it is roughly equivalent to a year's trading history. It is also so well known that investors often look at it to provide a potential area of support or resistance and therefore its popularity can sometimes be a self-fulfilling prophecy. I agree that moving average optimisation can be a useful endeavour as investors attempt to gauge entry points on reversions towards the mean. This is why we have created so much optimisation functionality in the Chart Library. Simply click on the Charting tab above any chart to explore the available functionality.

At Fullermoney, we tend to stress the 200-day MA as a trend smoothing device. We become more cautious as an overextension become evident and look for buying opportunities on reversions towards the mean with consistent medium-term uptrends. Relatively long-term MAs such as the 150-day or the 200-day are more useful for setting entry points rather than exit points. Selling once a reversion has already occurred is far from optimal. Likewise, placing stops close to important MA levels greatly increases the potential that they will be triggered.

In reference to your point on gold, you are correct that gold has been prone to spiking higher over the last few years and the most recent has been a more gradual topping process. Overextensions relative to a trend mean can be unwound in a number of different ways so I am less worried about the shape of this top, which has Type-2 characteristics as taught at The Chart Seminar. At this point, a clear upward dynamic will be needed to indicate demand is returning to dominance and to confirm support in the region of the 200-day MA.

Incidentally, here are some instruction on how to create a chart template that includes both the 150-day and 200-day MAs:

(Step 1) The first step is always to make the desired changes to the original chart. For this example, choose your instrument from the menus or the search. Click on the Charting tab in the charcoal bar above the chart. A pop up window will open. Add the moving averages by clicking on the Analysis dropdown menu and selecting Moving Averages. Three boxes will appear, enter 150 and 200 in their respective boxes.

(Step 2) Once you have completed Step 1, you will need to save your changes. To Save the template click on 'Save' in the aquamarine bar at the top of the pop up window. A box will appear where you can give it a name. Next hit OK. Your new Preset Template has now been saved.

(Step 3) How do I retrieve the template now that I have saved it? Refresh the page. Once you have refreshed the page, the new template will have been added to your list of Presets in the Chart menu in the upper right hand corner of the page. To employ this template in future, simply choose an instrument, click on the Chart dropdown menu and select the desired template.

This item from the Forum "How Do I Create Preset Templates of my favourite parameters?" may also be of interest.