Way of the turtle

Breakouts
Earlier in the book I discussed breakouts and showed how they
have an edge. A new high price is a strong indicator of the possi-
bility that a trend is beginning. The number of days used to calcu-
late the highest high or the lowest low for the breakout will
determine the type of trend you may be entering. Fewer days will
indicate the possibility of a shorter-term trend. A large number of
days will be more indicative of the possibility of a longer-term trend.
Breakouts work especially well when they are combined with other
indicators of overall trend, such as the Donchian Trend system,
which uses breakouts for both entry signals and exit signals and
moving averages to indicate the overall trend.
Moving Averages
Moving averages are continuously calculated averages of the price
for a specific number of days. The simplest type of moving average,
Turtle-Style Building Blocks
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called a simple moving average, is the average of the price for a spec-
ified number of days. The 10-day moving average of the close is the
average of the prior 10 days’ closes, and a 70-day moving average
of the high is the average of the previous 70 highs. 
There are other kinds of moving averages that are slightly more
complex, the most common being the exponential moving average.
This is an average that is computed by taking a portion of the pre-
vious day’s average and mixing it with a portion of the current price.
Figure 9-1 presents two moving averages: a 20-day exponential
moving average and a 70-day exponential moving average. 
You can see how the 20-day moving average follows the price
more closely and how it crosses the longer-term moving average in
mid-June, indicating the start of an up trend. This is a very com-