Are there any ways if you are daytrading using MA crossovers to see if a stock is trading in a trending fashion (as opposed to being choppy) ? Like some technical indicator that would indicate that the crossover that a stock is making will follow thru and not get you whipsawed? Or is there a way to identify to see if a stock is making a false MA crossover breakout in which as soon as a stock breaks out it will revert back to it's original trend?
Daytrading stocks using MA crossovers..identifying if stock is intraday trending
JTrader
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Hi baron
this may be useful.
ADX – Directional Movement
The Directional Movement System is a fairly complex indicator developed by Welles Wilder and explained in his book, New Concepts in Technical Trading Systems.Most indicators have one major weakness - they are not suited for use in both trending and ranging markets. The key feature of the Directional Movement System is that it first identifies whether the market is trending before providing signals for trading the trend.
Directional Movement System measures the ability of bulls and bears to move price outside the previous day's trading range. The system consists of three lines:
The Positive Direction Indicator (+DI) summarizes upward trend movement;
The Negative Direction Indicator (-DI) summarizes downward trend movement;
and the Average Directional Movement Index (ADX) indicates whether the market is trending or ranging.
Have a look at - http://www.incrediblecharts.com/tec...al_movement.htm
jtrader.
this may be useful.
ADX – Directional Movement
The Directional Movement System is a fairly complex indicator developed by Welles Wilder and explained in his book, New Concepts in Technical Trading Systems.Most indicators have one major weakness - they are not suited for use in both trending and ranging markets. The key feature of the Directional Movement System is that it first identifies whether the market is trending before providing signals for trading the trend.
Directional Movement System measures the ability of bulls and bears to move price outside the previous day's trading range. The system consists of three lines:
The Positive Direction Indicator (+DI) summarizes upward trend movement;
The Negative Direction Indicator (-DI) summarizes downward trend movement;
and the Average Directional Movement Index (ADX) indicates whether the market is trending or ranging.
Have a look at - http://www.incrediblecharts.com/tec...al_movement.htm
jtrader.
Last edited:
JTrader
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Hi baronzemo
just thought that ADX may be an indicator that could be combined with MA's, with some strategy in force, on a mechanised or discretionary basis, in order to choose actual MA crossovers that will have a higher probability of capturing significant moves. If ADX indicated that the market was ranging for example, you may be less keen to enter a trade based on an MA crossover, as ADX is not showing a trending market..................................
Cheers
jtrader.
just thought that ADX may be an indicator that could be combined with MA's, with some strategy in force, on a mechanised or discretionary basis, in order to choose actual MA crossovers that will have a higher probability of capturing significant moves. If ADX indicated that the market was ranging for example, you may be less keen to enter a trade based on an MA crossover, as ADX is not showing a trending market..................................
Cheers
jtrader.
baronzemo said:
I use m/a's to the exclusion of any other "indicator" in my trading. In my experience, using the faster m/a to identify entry and also as your stop, and using your slower m/a to confirm direction it is possible to find low-risk entry-points for high-probabilty trades. Look at 5 min charts for stocks like KLAC, SNDK and AAPL and observe the price-action using m/a's (eg 9.5 period + 34 period SMA's) together with "hammers", "shooting-stars" "and/or wedge patterns at round numbers, 30, 50 and 70 cents.
If both m/a's are lined up beneath or above price action, and the current movement of the stock is in the same direction, you have empirical evidence of trend. If they don't or are flat - esp cutting through the current price action - then you know to stay on the sidelines.
IMO based on many months of wasted effort, if you stick with m/a crossovers, you will get sucked into trying to find supporting evidence from other indicators. Trouble is, the indicator you select will almost invariably be based on the same data source as the m/a's themselves - so in fact it doesn't help. It just adds to the confusion. The key to all this is to find LOW-RISK ENTRY POINTS. If you are wrong - so be it and move on. So long as you aim for gains of 3 x your risk per trade you shouldn't go broke. Gains of 1 x risk or less is a sure way to the poorhouse.
I am replying to you as I remember going through the exact same thought-processes some time back.
Good luck,
raider1
Hi baronzemo,baronzemo said:
Good question. As always in trading matters it seems that every good question leads to many others!
I understand what you mean, but you can still use the 5min chart to IDENTIFY the set-up and probable target. I simply then flip to 1min chart to fine-tune the entry and stop. Once in the trade I generally use the m/a to keep me in, or exit on 1st closing m/a penetration.
The problem with 1min charts is that any set-ups identified on that timeframe are not so reliable. Better to have both the 5 min and 1 min charts setting-up at the same time. I also use 10min and 15min charts to identify set-ups. I find these even more reliable.
An example from today's session was AAPL. Just after 10:00am, AAPL retraced to the previous session high which coincided with support from the 9.5 period m/a on the 10min chart. Flipping to the 1min chart at the same time, you can see a nice hammer at 10:06am. Two tradeable signals coinciding. As the m/a's lined up nicely on the 10min chart from the previous session, I stayed with the trade on that chart until it reached the session high when I went back to the 1min chart and exited when the price broke the 9.5 period m/a @ $75.20.
Hope that helps.
raider1
Not all Moving Verages are created equal
Moving avegarges and the trend are like the chicken and the egg problem. here's my take on it:
WHAT CAME FIRST, THE MOVING AVERAGE OR THE TREND?
As you probably know, moving averages by definition are a lagging indicator. They combine today's level with levels of the past few periods. Therefore, moving averages are a lagging indicator of the trend. A moving average pointing up tells you the trend as of "N" PERIODS AGO ago was up. It does not tell you what the trend is NOW. In a market with long lasting trends very often the thend as of "N" periods ago is the same as the trend now but if you count on that being true as a rule, you are making a very serious and risky assumption. In a choppy market with quick moves up and down, by the time your moving averages generate a signal, a move in the opposite direction has already started, you are too late.
NOT ALL MOVING AVERAGES ARE CREATED THE SAME
Now in the situation above, imagine you could somehow further improve the MA to be a little less of a lagging indicator and a little more of an "up to date" indicator. That would eliminate a tremendous amount of risk you are undertaking by assuming the trend as of a few periods ago is the same as the trend as of now. There have been many attempts at creating "smart" moving averages. Exponential, adaptive, volume wighted, Vidya, etc.etc. I believe the best effort in this respect are Jurik's set of moving averages. On their web site they have a detailed comparison of the traditional and "smart" moving averages attempting to prove how much any analysis based on averages would benefit by switching to their "smart" averages. I haven't personally had the time to explore and compare. These MA indicators are sold for most popular technical analysis products.
may be if you replace simple moving averages with "smart" moving averages and add some other indicators to filter out false signals in sideway markets, you may have something. The best trading strategies are not always the most complex.
baronzemo said:
Moving avegarges and the trend are like the chicken and the egg problem. here's my take on it:
WHAT CAME FIRST, THE MOVING AVERAGE OR THE TREND?
As you probably know, moving averages by definition are a lagging indicator. They combine today's level with levels of the past few periods. Therefore, moving averages are a lagging indicator of the trend. A moving average pointing up tells you the trend as of "N" PERIODS AGO ago was up. It does not tell you what the trend is NOW. In a market with long lasting trends very often the thend as of "N" periods ago is the same as the trend now but if you count on that being true as a rule, you are making a very serious and risky assumption. In a choppy market with quick moves up and down, by the time your moving averages generate a signal, a move in the opposite direction has already started, you are too late.
NOT ALL MOVING AVERAGES ARE CREATED THE SAME
Now in the situation above, imagine you could somehow further improve the MA to be a little less of a lagging indicator and a little more of an "up to date" indicator. That would eliminate a tremendous amount of risk you are undertaking by assuming the trend as of a few periods ago is the same as the trend as of now. There have been many attempts at creating "smart" moving averages. Exponential, adaptive, volume wighted, Vidya, etc.etc. I believe the best effort in this respect are Jurik's set of moving averages. On their web site they have a detailed comparison of the traditional and "smart" moving averages attempting to prove how much any analysis based on averages would benefit by switching to their "smart" averages. I haven't personally had the time to explore and compare. These MA indicators are sold for most popular technical analysis products.
may be if you replace simple moving averages with "smart" moving averages and add some other indicators to filter out false signals in sideway markets, you may have something. The best trading strategies are not always the most complex.
