FetteredChinos
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Price action only chaps.. not even volume (too misleading for my liking - besides, it only confuses things further! one more thing to think about and analyse)
all indicators lag far too much, and most of them show the same thing. however, all are based upon the same thing - the price!
Keep methods simple..
remember, a trading strategy is not just for christmas.
all indicators lag far too much, and most of them show the same thing. however, all are based upon the same thing - the price!
Keep methods simple..
remember, a trading strategy is not just for christmas.
Hi jtrader,
If you're thinking of using a moving avg. crossover
as a buy/sell signal - forget it pronto !!
At best any moving avg. is a LAGGING indicator, and in a fast
moving market by the time the crossover has occured the
market has gone way ahead - leaving you with a few crumbs
left on the table.
However, i do use, at the EOD, the 3 day / 5 day mov. avg.
as Support / Resistance. Frequently, in an uptrend, the day's
LOW will consistently be on or just above the 3 day avg.
Since last Wed. when the 3 day mov. avg. crossed below the
5 day avg. the Dow hasn't closed ABOVE either the 3 or 5 day
mov. avg. - and i won't consider going long until there are 2
daily close above the 3 day. avg.
I also use. in order to get the big picture, the 50 day avg.
because since the rise in the Dow which began last March,
there have been several instances of the Dow bouncing off
this avg. - and i reckon another one is overdue.
If you're thinking of using a moving avg. crossover
as a buy/sell signal - forget it pronto !!
At best any moving avg. is a LAGGING indicator, and in a fast
moving market by the time the crossover has occured the
market has gone way ahead - leaving you with a few crumbs
left on the table.
However, i do use, at the EOD, the 3 day / 5 day mov. avg.
as Support / Resistance. Frequently, in an uptrend, the day's
LOW will consistently be on or just above the 3 day avg.
Since last Wed. when the 3 day mov. avg. crossed below the
5 day avg. the Dow hasn't closed ABOVE either the 3 or 5 day
mov. avg. - and i won't consider going long until there are 2
daily close above the 3 day. avg.
I also use. in order to get the big picture, the 50 day avg.
because since the rise in the Dow which began last March,
there have been several instances of the Dow bouncing off
this avg. - and i reckon another one is overdue.
It is important to remember that there is more than one way to trade use MAs.
I use a 5 min chart and exponential MAs, (obvously live streaming charts)
1. MA crossovers. Redragon is right in that MAs do give a lagging signals, however they can still be used effectively. The lower the MA the closer it tracks the price, so for crossovers I tend to use a low MA (eg 6) and choose a second MA 2 -3 times its value (12 or 18). When the lower MA crosses the highr value it gives a signal.
I also like to combine this with price action, using previous highs/lows to exit trades.
2. Support/Resistance. Often the price will change direction when it hits an MA. I use much higher value MAs for this kind of trading (100+)
3. Pull away. Choose MA (eg 15) when the price moves x number of points away from the MA look for a trade in the opposite direction. eg When FTSE 100 moves 20pts away from 15MA I look for a reversal from a point of support or resitance.
In some cases the same MAs can be applied to different stocks, but you should not assume this is always the case!
I apply these rules successfully to a more thorough stratergy with rules for exits/trade sizes etc.
hope this helps
(my first post on T2W by the way)
AK
I use a 5 min chart and exponential MAs, (obvously live streaming charts)
1. MA crossovers. Redragon is right in that MAs do give a lagging signals, however they can still be used effectively. The lower the MA the closer it tracks the price, so for crossovers I tend to use a low MA (eg 6) and choose a second MA 2 -3 times its value (12 or 18). When the lower MA crosses the highr value it gives a signal.
I also like to combine this with price action, using previous highs/lows to exit trades.
2. Support/Resistance. Often the price will change direction when it hits an MA. I use much higher value MAs for this kind of trading (100+)
3. Pull away. Choose MA (eg 15) when the price moves x number of points away from the MA look for a trade in the opposite direction. eg When FTSE 100 moves 20pts away from 15MA I look for a reversal from a point of support or resitance.
In some cases the same MAs can be applied to different stocks, but you should not assume this is always the case!
I apply these rules successfully to a more thorough stratergy with rules for exits/trade sizes etc.
hope this helps
(my first post on T2W by the way)
AK
FetteredChinos
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Just as a matter of interest Chinos, what do you personally understand by price action and what do you look for ?
Chien de Dow,
my interpretation of price action may differ from what other people think, but then the way i trade normally is kind of unusual.
i look to see how one bar/candle relates to those immediately before it.
without giving too much away, i personally feel that too much emphasis is placed upon the closing point of a bar/candle. instead the points which have more impact are the highs/lows. after all, for example, the high/low point of a candle is usually at a level which the market tested and then rejected. we may not know the reason for this, but the mass opinion was that this level wasnt acceptable.
a close of a bar is just a temporal cut-off, ie a trading level when the bar rolled over into the next one. this doesnt give much insight into the markets view of this level.
this is why i base my trades on the relationship between highs and low of related bars.
its a simple method, and i was using in on the FTSE to good effect last year.
its not the greatest system, but it does allow me reasonable profits from a reasonable system (hit rate about 65%-75% )
hope this helps a bit
FC
Chien de Dow,
my interpretation of price action may differ from what other people think, but then the way i trade normally is kind of unusual.
i look to see how one bar/candle relates to those immediately before it.
without giving too much away, i personally feel that too much emphasis is placed upon the closing point of a bar/candle. instead the points which have more impact are the highs/lows. after all, for example, the high/low point of a candle is usually at a level which the market tested and then rejected. we may not know the reason for this, but the mass opinion was that this level wasnt acceptable.
a close of a bar is just a temporal cut-off, ie a trading level when the bar rolled over into the next one. this doesnt give much insight into the markets view of this level.
this is why i base my trades on the relationship between highs and low of related bars.
its a simple method, and i was using in on the FTSE to good effect last year.
its not the greatest system, but it does allow me reasonable profits from a reasonable system (hit rate about 65%-75% )
hope this helps a bit
FC
FetteredChinos
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re:moving averages
Having followed Bonsai's sterling work on his FTSE threads over the past 8 (??) months, I can also see merit in his use of MA's and MACD.
as far as i can tell, he doesnt use cross-overs (does anyone?) to trade successfully. but rather uses a long term MA (510 i think) to make sure that he only takes trades in the direction of the longer term trend, and also trades off the patterns shown by his MACD.
eg the MACD making a higher low makes him look out for an opportunity to go long.. vice versa for a short.
either way, i still think he uses the price itself to initiate a trade, the signals just alert him to the possibility of one being on the cards.
I may of course be hopelessly wrong, but that is my take on his methods, and he does employ them to fantastic effect
Im sure Bonsai can offer his own opinion though
FC
Having followed Bonsai's sterling work on his FTSE threads over the past 8 (??) months, I can also see merit in his use of MA's and MACD.
as far as i can tell, he doesnt use cross-overs (does anyone?) to trade successfully. but rather uses a long term MA (510 i think) to make sure that he only takes trades in the direction of the longer term trend, and also trades off the patterns shown by his MACD.
eg the MACD making a higher low makes him look out for an opportunity to go long.. vice versa for a short.
either way, i still think he uses the price itself to initiate a trade, the signals just alert him to the possibility of one being on the cards.
I may of course be hopelessly wrong, but that is my take on his methods, and he does employ them to fantastic effect
Im sure Bonsai can offer his own opinion though
FC
jtrader, difficult for me to explain. I was using Indexia who use "a proprietary formula in it's calculation using adaptive filtering techniques and hence adjust the weights according to the movement of figures." Or Google "weighted moving averages" for an English explanation :cheesy:
Good luck
Good luck
FetteredChinos
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no worries DD,
although it does make me think a bit more about the whole use of Moving averages based upon end of day. this may not be relevant when using large values for an MA (eg 100/200 etc):-
the cash price of the index(either the actual cash or the SB version of it) is based upon the futures to a greater degree. ie if the futures go up 10 points, chances are the cash will do likewise.
however the futures market is open longer hours than the cash index. (cash closes at 4.30, futures at 5.30 if i recall)
therefore the actual price the cash market closes is very much a moving target, as there is still an hours "trading" to go. so in shorter timeframes, what is the point in basing a moving average on a figure that does not paint the whole picture of the day?
or am i reading too much into this?
FC
although it does make me think a bit more about the whole use of Moving averages based upon end of day. this may not be relevant when using large values for an MA (eg 100/200 etc):-
the cash price of the index(either the actual cash or the SB version of it) is based upon the futures to a greater degree. ie if the futures go up 10 points, chances are the cash will do likewise.
however the futures market is open longer hours than the cash index. (cash closes at 4.30, futures at 5.30 if i recall)
therefore the actual price the cash market closes is very much a moving target, as there is still an hours "trading" to go. so in shorter timeframes, what is the point in basing a moving average on a figure that does not paint the whole picture of the day?
or am i reading too much into this?
FC
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