# Moving Average



## Nero64 (7 June 2009)

I have been looking at heaps of charts lately and finding the 200 day MA to have some merit. A lot of stocks have broken the 200 MA and continued upwards. Some bounce off it and some well haven't reached it and others see it as resistance

What got me into MA as an indicator was the reading of Sam Weinstein's book. He drills it home on nearly every page. 

He recommends 30 Wk MA for investors and 10 Wk MA for traders. 

Just recently the XAO pulled above the 200 MA which some say is a bullish sign. 

Anybody prefer one MA tmeframe over another?


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## CanOz (7 June 2009)

At the end of the day the MA or EMA is only an indication of the trend right? Its a reference point, so to me, with all reference points it good to use the same one all the time.

I like the 200 MA, but also use a 50 MA and a 13EMA. Either way though its only an indicator of the trend for me.

Cheers,



CanOz


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## beamstas (7 June 2009)

I don't give moving averages much merit. Instead of giving a picture of what the price is doing now, it just lags behind and shows what the price has done in the past. 

Alot of funds use the 200day moving average as a filter.

As a stand alone thing, i'll use a simple system to demonstrate to you what the 200day moving average is like as a buying signal

1992 - 2009 on the ASX 300, here is the code i have used

//Buy when crossing 200day ma
//Sell when going back under the 200day ma

Buy = Cross(H,MA(C,200));
Sell = Cross(MA(C,200),L);
PositionSize = -5;

And here is the result







I hope that from this you can draw your own conclusion on the 200day moving average.

Personally i use a 40 day moving average filter on the XJO for systems design, it is robust and seems to work in most situations.

Cheers
Bradley


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## moXJO (7 June 2009)

I don't mind GMMA as a trend rider.


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## CanOz (7 June 2009)

moXJO said:


> I don't mind GMMA as a trend rider.




GMMA isn't bad for a nightly scan actually, i occasional used it this past year when looking for new setups. I would run the scan then eye ball the tickers it picked up.

Cheers,


CanOz


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## Tradesurfer (8 June 2009)

The 200 day can be a little lagging. I prefer the 50 day. The challenge with the 200 day is if you enter a trade on a cross above it (price bar closes today above 200 ma and yesterday it was below it), once you get a very strong trend price tends to create more and more distance above the 200 MA line. What winds up happening is that if you exit strategy is to sell when price crosses back below it you might give up quite a bit of profit. 

Don't get me wrong, a long holder of a stock would want to see price above the 200 MA certainly.

One thing to pay attention to is the slope of any moving average line. If price is in a downtrend and a candle or price bar moves above the average, if the line is still slanted or sloping down it may not be as high quality of an entry. In general, better breakouts happen when you've had a basing or flatening out period of a stock and it starts to run. 

I do you the 50 day moving average but tend to optimize entries with other indicators as well.

One interesting thing I was looking at was the 20 month moving average on the S&P 500 Index. Since 1994 price crossing above or below the 20 month moving average happened 4 times. 2 long signals and 2 sell(or short) signals.

Still think technical analysis is inferior to fundemental analysis?


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## beamstas (8 June 2009)

Tradesurfer said:


> One interesting thing I was looking at was the 20 month moving average on the S&P 500 Index. Since 1994 price crossing above or below the 20 month moving average happened 4 times. 2 long signals and 2 sell(or short) signals.
> 
> Still think technical analysis is inferior to fundemental analysis?




That's just curve fitting - the 20 month moving average has no predictive power at all.


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## tech/a (8 June 2009)

Nero64 said:


> I have been looking at heaps of charts lately and finding the 200 day MA to have some merit. A lot of stocks have broken the 200 MA and continued upwards. Some bounce off it and some well haven't reached it and others see it as resistance




This paragraph has covered every possibility



> What got me into MA as an indicator was the reading of Sam Weinstein book. He drills it home on nearly every page.




*STAN* Weinstein presented the M/A observation way back in 1988.When computers took up buildings and software was limited to Pak Man.

Technical analysis was limited to pad and pencil and hand drawn charts (In the most part).



> He recommends 30 Wk MA for investors and 10 Wk MA for traders.
> 
> Just recently the XAO pulled above the 200 MA which some say is a bullish sign.
> 
> Anybody prefer one MA timeframe over another?




Now 20 yrs later with technical analysis far in advance of the 80s and software which can actually test these Theories and Hypothesis coupled with interest in Tech analysis from a few Doctors of Mathematics like Howard Bandy much which has led the way in technical thinking is now finding its way into the technical scrap yard.

But hey many will still wear a "Mullet" and be happy with their life.
Even though 20 yrs of study has rendered the Mullet Obsolete.


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## Tradesurfer (8 June 2009)

With regard to curve fitting. I am in favor of selective curve fitting actually.

Since trends happen again and again, using indicators or oscillators that get the large piece of trends, curve fitting makes sense since you are setting up the opportunity to take advantage of trends when they happen.


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## beamstas (8 June 2009)

Tradesurfer said:


> With regard to curve fitting. I am in favor of selective curve fitting actually.
> 
> Since trends happen again and again, using indicators or oscillators that get the large piece of trends, curve fitting makes sense since you are setting up the opportunity to take advantage of trends when they happen.




I disagree TradeSurfer.
Patterns do occur, never exactly the same shape, never exactly the same length of time, never the same price action. All curve fitting achieves is showing you what you could have got during the past, but this is not indicative of future performance. 

When i design a system, i don't choose the best paramaters, i choose the most robust. If a 20month moving average works, then a 19month and a 21month moving average should give similar restuls, then a 18month moving average should give similar to the 19 months, and a 21month should give similar results to the 20 month. If 20month is the only good timeframe, then when the market changes (as it always does), even a tiny bit, you are going to be left with a broken system.

Regards
Brad


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## tech/a (8 June 2009)

Brad.

A trend is a trend.
Without a trend in the direction of your trading you wont profit.
I agree with Derek in as much as placing yourself in front of any indication of an emerging trend --regardless of timeframe--makes perfect sence.


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## beamstas (8 June 2009)

tech/a said:


> Brad.
> 
> A trend is a trend.
> Without a trend in the direction of your trading you wont profit.
> I agree with Derek in as much as placing yourself in front of any indication of an emerging trend --regardless of timeframe--makes perfect sence.




I disagree Tech,
If you had to be trading with a trend swing traders would never profit, there are 1000's of ways to profit from trading and trend following is not the only way.. Anyway that is another pandoras box of discussion not for today.

I am not questioning that using a moving average as a trend filter is a bad idea, i use one myself.

A 20month moving average - fine, if that's what you like use it, i have no problem with that, But i wouldn't go as far as to say that it is any better than a 15month or a 10month moving average, just because it has worked the last 4 times.

Brad.


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## moXJO (8 June 2009)

That’s why you need the awesomeness of multiple MMA, everyone knows more is better

On a serious note, I don’t mind using GMMA as a trend confirmation or possible turning points. Or as a guide for just sitting in long term trades. It has the added benefit of band width and turn over points. Needs to be used with the usual stops and trend line break rules if the bands are narrow. Imo they are not to shabby. You can tighten up losing to much, or leaving money on the table.


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## beamstas (8 June 2009)

Here is a simple test, using amibroker, on the XJO.


```
//Buy On a Cross of the 20month MA
//Short On a Cross under the 20month MA

Period = Optimize("MaLength",20,1,100,1);
MMA = MA(C,Period);
Plot(MMA,"20MonthMA",colorRed,styleLine);

Buy = Cross(C,MMA);
Sell = Cross(MMA,C);
Short = Sell;
Cover = Buy;

BuyPrice = MMA;
SellPrice = MMA;
ShortPrice = MMA;
CoverPrice = MMA;

shape = Buy * shapeUpArrow + Short * shapeDownArrow;
PlotShapes( shape, IIf( Buy , colorGreen, colorIndigo ), 0, IIf( Buy , Low, High));
```






Regards
Brad


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## Timmy (8 June 2009)

tech/a said:


> Without a trend in the direction of your trading you wont profit.
> I agree with Derek in as much as placing yourself in front of any indication of an emerging trend --regardless of timeframe--makes perfect sence.






beamstas said:


> I disagree Tech,




What's there to disagree with?
Whether you are trading for a tick profit or you are Mr. Buffet, or any frame in between, the price has to trend in your direction to enable you to take a profit.


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## beamstas (8 June 2009)

Timmy said:


> What's there to disagree with?
> Whether you are trading for a tick profit or you are Mr. Buffet, or any frame in between, the price has to trend in your direction to enable you to take a profit.




I guess then that depends on your definition of a trend. I always percieved the meaning of trend as the general direction in which the market is moving.
I always thought the market could move "against the trend" , and the market can chop around "not trending at all". 

I stand corrected.


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## Tradesurfer (8 June 2009)

Brad and others

with regard to my 20 month MA example. 

I was doing an interview with a reporter who had the belief that technical analysis would not have helped traders

a) prevent losses with the recent downturn

b) profit from the move (they didn't understand short selling)

Their other assumption was that technical analysis was only for short term daytraders.

I quickly put together a long term use for technicals with a simple 20 month MA which produced those 4 trades to help them see that wasn't the case and thought it was an interesting chart.



I agree that there isn't anything significant with the #20. The 50 day MA is a part of my proprietary indicator but only 1 component. And off course moving averages in itself are lagging. But as I said, my prop indicators only use it as a piece.

By selective curve fitting- I do favor it in that I have my own indicators that WILL capture the meat of large trends. I don't know which will offcourse wind up being large.

As an educator, trader, and technician I also hold the belief that I don't make predictions I simply follow price and I never know when an entry will yield a small loss or become a monster trending position. For me its all about playing the percentages and letting my winners run and putting in place systems to do just that while cutting losses small. A trend following system normally has many small losses and a winning percentage somewhere between 35-45%.


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## beamstas (8 June 2009)

Tradesurfer said:


> Brad and others
> 
> with regard to my 20 month MA example.
> 
> ...




Thanks for the response -- and well said.


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## tech/a (8 June 2009)

> I disagree Tech,
> If you had to be trading with a trend swing traders would never profit, there are 1000's of ways to profit from trading and trend following is not the only way




Other than Arbitrage,Id be really interested in *even one other way *to profit from the markets which doesnt involve a trend.
A move in price in either direction at any point of time is a trend in that direction.

We analyse and take trades *IN ANTICIPATION *of a move in our direction.
Not prediction---as those who have little knowledge of T/A presume.


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## fapturbo (8 June 2009)

Nero64 said:


> I have been looking at heaps of charts lately and finding the 200 day MA to have some merit. A lot of stocks have broken the 200 MA and continued upwards. Some bounce off it and some well haven't reached it and others see it as resistance
> 
> What got me into MA as an indicator was the reading of Sam Weinstein's book. He drills it home on nearly every page.
> 
> ...





Using Amibroker and Using the Rate of Change of the 200 Day Moving Average as a Trend Filter you can design a very good Trend Following Mechanical System


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## nathanblack (8 June 2009)

tech/a said:


> Other than Arbitrage,Id be really interested in *even one other way *to profit from the markets which doesnt involve a trend.
> A move in price in either direction at any point of time is a trend in that direction.
> 
> We analyse and take trades *IN ANTICIPATION *of a move in our direction.
> Not prediction---as those who have little knowledge of T/A presume.




i would have thought a trend requires past reference points. to have just one price(last traded price) u cant gain any trend information. to have 2points, the last traded and the price before that doesnt really provide a trend, it just telss us wether the price has gone up or down BUT doesnt create a trend.

trends definately occur over time and the longer the period used, the more accurate or reliable a trend is?

thats not to say you cant use the last 1hours prices to form a trend for that hour and then use that to ANTICIPATE future prices in coming hours.


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## fapturbo (8 June 2009)

nathanblack said:


> i would have thought a trend requires past reference points. to have just one price(last traded price) u cant gain any trend information. to have 2points, the last traded and the price before that doesnt really provide a trend, it just telss us wether the price has gone up or down BUT doesnt create a trend.
> 
> trends definately occur over time and the longer the period used, the more accurate or reliable a trend is?
> 
> thats not to say you cant use the last 1hours prices to form a trend for that hour and then use that to ANTICIPATE future prices in coming hours.




Taking the value of the 200 day moving average and comparing that to the value of the 200 day moving average 50 days ago gives a good filter.


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## bunyip (8 June 2009)

Trend traders......

Let's not try too hard to convince people who speak out against trend trading!
I say long live traders who can't see the benefits of trading with the trend! Their counter-trend trading creates the chart patterns and entry setups that enable us 'with the trend' traders to climb aboard the big moves that make the big profits.


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## tech/a (8 June 2009)

nathanblack said:


> i would have thought a trend requires past reference points. to have just one price(last traded price) u cant gain any trend information. to have 2points, the last traded and the price before that doesn't really provide a trend, it just tells us whether the price has gone up or down BUT doesn't create a trend.
> 
> trends definitely occur over time and the longer the period used, the more accurate or reliable a trend is?
> 
> that's not to say you cant use the last 1hours prices to form a trend for that hour and then use that to ANTICIPATE future prices in coming hours.




I can trade a single EOD bar all day with a 10 min chart and trade a trend on that 10 min chart just like and EOD chart. I can and do enter on pull backs set stops at support and sells at resistance.I can trade the same "trend" 5 times in a day ---yet the EOD bar looks innocuous.



bunyip said:


> Trend traders......
> 
> Let's not try too hard to convince people who speak out against trend trading!
> I say long live traders who can't see the benefits of trading with the trend! Their counter-trend trading creates the chart patterns and entry setups that enable us 'with the trend' traders to climb aboard the big moves that make the big profits.





Seriously do you honestly think that if you've taken a counter trend trade you'll NOT be trading a trend if profitable and be stopped out by a trend if not.
Think about it---I don't care what "Type" of trading you think your using you cant make a profit unless price moves in your direction.
A trend can be a single tick bar higher than the last.
Scalpers anticipate these small "trends" all the time


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## bunyip (8 June 2009)

tech/a said:


> Seriously do you honestly think that if you've taken a counter trend trade you'll NOT be trading a trend if profitable and be stopped out by a trend if not.
> Think about it---I don't care what "Type" of trading you think your using you cant make a profit unless price moves in your direction.
> A trend can be a single tick bar higher than the last.
> Scalpers anticipate these small "trends" all the time





What I '_honestly think_', Tech, (and I thought my post made that patently obvious) is that trading with the trend gives you the best possible chance of capturing the most profitable moves.
I'm sure you've read enough of my posts on this forum to know that I'm a trend trader who enters from pullbacks within the trend.

A trend is a trend in the timeframe you're following. If you have two timeframes trending in the same direction, say a daily and a weekly, or a one hour and a ten minute, and you trade from the shorter timeframe of the two, then you're chances of making money from a 'with the trend' trade are even better.
But whichever way you do it, you enhance your overall profitability by trading in the same direction that the market is, by your definition, trending.


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## fapturbo (8 June 2009)

bunyip said:


> What I '_honestly think_', Tech, (and I thought my post made that patently obvious) is that trading with the trend gives you the best possible chance of capturing the most profitable moves.
> I'm sure you've read enough of my posts on this forum to know that I'm a trend trader who enters from pullbacks within the trend.
> 
> A trend is a trend in the timeframe you're following. If you have two timeframes trending in the same direction, say a daily and a weekly, or a one hour and a ten minute, and you trade from the shorter timeframe of the two, then you're chances of making money from a 'with the trend' trade are even better.
> But whichever way you do it, you enhance your overall profitability by trading in the same direction that the market is, by your definition, trending.




Can I ask you something about entries mate??

How do you determine what is a pull back??

Where do you set your SL and how do you follow the Trend??


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## bunyip (8 June 2009)

fapturbo said:


> Can I ask you something about entries mate??
> 
> How do you determine what is a pull back??
> 
> Where do you set your SL and how do you follow the Trend??





If the trend in my timeframe is up by my definition, one bar with a lower top than the top of the previous bar, and a lower bottom than the bottom of the previous bar, constitutes a pullback.
I like to see pullbacks that are comprised of more than one bar. But even one bar is sufficient if it's a bottom reversal candle or it takes out the low of the last two bars.

I put my stop under the low of the pullback.

I trail the stop stop under each higher trough in the trend. I also have a couple of other criteria which, if met, will cause me to tighten the stop.


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## fapturbo (8 June 2009)

bunyip said:


> If the trend in my timeframe is up by my definition, one bar with a lower top than the top of the previous bar, and a lower bottom than the bottom of the previous bar, constitutes a pullback.
> I like to see pullbacks that are comprised of more than one bar. But even one bar is sufficient if it's a bottom reversal candle or it takes out the low of the last two bars.
> 
> I put my stop under the low of the pullback.
> ...




What determines the end of a pull back??

How many bars does it take that make a higher high and a higher low before you consider the pullback finished? One bar? Two bars with consecutive higher highs and lows?

Do you trade the next bar after the close of the bar that has a higher high and low for example?


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## Mr J (9 June 2009)

tech/a said:


> Brad.
> 
> A trend is a trend.
> Without a trend in the direction of your trading you wont profit.




The trend is a strong bias to overcome.



			
				nathanblack said:
			
		

> trends definately occur over time and the longer the period used, the more accurate or reliable a trend is?




I don't think it is more reliable. Trends must be considered within their time-frame, so a shorterm trend is just that.



			
				fapturbo said:
			
		

> What determines the end of a pull back??




I don't think there is a practical answer. My opinion is that the end is determined by a significant move in the opposite direction, and therefore it's only something we can know after the fact. It seems you want specifics, but I don't think they can be given, and I think that is where "art" comes into trading.


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## fapturbo (9 June 2009)

Mr J said:


> It seems you want specifics, but I don't think they can be given, and I think that is where "art" comes into trading.




I don't know about it being an "art"

I think trading needs to be mechanical with a proven method. It's the only way otherwise you are just gambling.


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## bunyip (9 June 2009)

fapturbo said:


> What determines the end of a pull back??
> 
> How many bars does it take that make a higher high and a higher low before you consider the pullback finished? One bar? Two bars with consecutive higher highs and lows?
> 
> Do you trade the next bar after the close of the bar that has a higher high and low for example?





The market itself determines the end of a pullback. 
But I think you're wanting me to be more specific by naming the criteria that tell me a pullback is finished and the trend has resumed, and it's now time to enter the trade.
I don't work like that. I place my buy order above the last bar while the pullback is still in progress, my aim being to get in as early as possible as the trend resumes. 
I first read of this strategy about ten years ago in Elder's Triple Screen Trading System. I tried it and it worked, so I've been using it ever since.
The trend resumption bar can be quite a powerful move and I want to get in near the start of that bar, rather than miss out on that move and get in on the next bar.
That's an aggressive entry but has the benefit of catching the blast off as the trend resumes via a bullish bar.
A more conservative entry would be to buy above the first decisively bullish bar after the pullback. While this is a viable entry strategy, its disadvantage is that you miss the entire move of this bullish trend resumption bar.

For a middle of the road appraoch that's half way between aggressive and conservative, you can put your buy order above the second last bar of the pullback, rather than above the last bar.


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## Frank D (9 June 2009)

You don’t need a trend to make money, as most swing traders who use 
limit entries are taking positions anticipating a change of trend.

That doesn’t mean that they have taken the trade based on a trend. 

A recent example.

Over the past 9 weeks the DOW has hit the 5-day highs 14 times.

That means that the daily trend has to be rising upwards into higher 
points.

8 of those 14 times or 57%, price has reversed back into the 5-day 50% 
level the same day or the next day.

To say *“ without a trend in the direction of your trading you won’t profit*” is simply ignorant of other pattern recognition methods.


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## tech/a (9 June 2009)

> To say “ without a trend in the direction of your trading you won’t profit” is simply ignorant of other pattern recognition methods.




*Rubbish.*

To profit regardless of which method you use including the Dilernia method---you need price to move from a low point to a higher point if long ---or from a high point to a lower point if short and remain above/below your entry at the time of exit.

Even a 1 tick move in your direction is a trend in that direction at/in that point in time.

Now on the point of Ignorance.
Could you point me to my "ignorance of "Other" pattern recognition methods"
For the life of me I cant see any relevance in that rather stupid comment --with regard to the topic-- being trends to make money.

Wakey wakey Frank its not an attack on methodology!
For such a deep thinker you've dived into the shallow end this morning.


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## Frank D (9 June 2009)

Tech/a

It is obvious that to profit it has to move in my direction, I’ve already 
stated that, but doesn’t mean I’m taking the trade when the trend is 
moving in my direction if I have placed a limit entry to go short at a 
5-day high.

The trade has to be rising upwards and I’m shorting a rising tick, not a 
falling tick.

You are trying to justify an obvious argument using a 1 tick trend as 
an example, when a limit entry is not waiting for any 1 tick move.

Your serve.


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## tech/a (9 June 2009)

> You are trying to justify an obvious argument using a 1 tick trend as
> an example, when a limit entry is not waiting for any 1 tick move.




No not at all.

You place your limit order in anticipation of a *TREND *change.
One of 2 things will happen.
The trend will change and you'll sell at a price which ensures profit.
Or it doesnt change and you either take a stop and lose some $$s or hold the position and still lose some $$s

Muted arguement.

I'll see you up the deep end.


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## beamstas (9 June 2009)

But wouldn't you say that you can still profit against the trend? 
I guess the question really boils down to "how long is a trend"

Or in other words

"How long is a piece of string?"

Can trends be cut into fractals? A large trend is made up of smaller trends each going their own seperate ways? 

Or how long does the price have to move before it becomes a trend? Can a trend follow say he is following a trend off of 1 tick?

Is all trading swing trading? Anticipating a trend?
Or is it all trend following? Waiting for a trend to develop? How long do you need to wait?
Can you profit against the trend at all?

There are alot of open questions that can be answered by different people in different ways.

Here is a picture of how i imagine profiting against a "trend" could happen. But then are you just profiting off a smaller trend that is part of a larger trend?


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## Chorlton (9 June 2009)

beamstas said:


> Here is a picture of how i imagine profiting against a "trend" could happen. But then are you just profiting off a smaller trend that is part of a larger trend?




Agreed!!!!  I believe that this is the point Tech is making....  Depends on what timeframe was is looking at......


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## julius (9 June 2009)

tech/a said:


> *Rubbish.*
> 
> Even a 1 tick move in your direction is a trend in that direction at/in that point in time.




You can't have a one-tick trend!

Price action is made up of a trend component + cyclical component + noise.

The trend component is an underlying, persistent bias to the direction of the price action. 

What's the difference between a trend and random noise if a single up tick is classed as a trend? This implies that there is no noise in the markets!


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## bunyip (9 June 2009)

beamstas said:


> But wouldn't you say that you can still profit against the trend?
> I guess the question really boils down to "how long is a trend"
> 
> Or in other words
> ...




If the trend is decisively up, those small moves against the trend are simply countertrend moves within that timeframe. They may well qualify as 'trends' if you change to a different timeframe, but when they occur within that timeframe you're looking at while the overall market direction is up, they're simply pullbacks in that timeframe, not trends.
That's how I see it anyway, and I won't waste my time arguing with anyone who sees it differently.
Yes you can trade these retracements, but due to their short duration and small percentage moves, you'd want to be fleet-footed to get in and get out with a profit after paying brokerage and allowing for slippage etc.
All three of the examples you've given would have been losing trades if you'd gone short on the bars  you've marked with green arrows.

I'm not saying it can't be done, I'm saying it's difficult to do and why would you bother - if the overall trend is decisively upward, then it's far easier and more profitable to trade in that direction than against it.


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## beamstas (9 June 2009)

bunyip said:


> I'm saying it's difficult to do and why would you bother - if the overall trend is decisively upward, then it's far easier and more profitable to trade in that direction than against it.




Exactly
Can't argue with that
Much prefer to take 1 long on that chart than 3 shorts!


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## tech/a (9 June 2009)

julius said:


> You can't have a one-tick trend!
> 
> Price action is made up of a trend component + cyclical component + noise.
> 
> ...





Why not?
Buy at $1.00 sell at $1.01
or SPI is 4011 sell 4012---50 contracts.
I'm bullish and I'm anticipating a trend up.

There is trending in noise.


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## Frank D (9 June 2009)

Tech/a

You haven’t demonstrated any statistical probability that the tick 
would move up.

So what’s your expectancy, what’s your stop?

In fact you’ve just been stopped out because it’s moved down to 4010.

Oh it’s hypothetical.

Now I know why you don’t scalp the SPI, because in the real world it’s not always black and white, There is a lot of* grey*

Black + White = Trend

*Grey*:- Entry + Exit + Stop = expectancy = Profits....

or in your case =  Loss

come and swim in the warm spot


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## Timmy (9 June 2009)

Noise, huh?  I'm off to tell every scalper in the world that they don't actually make any money, I may need a mouthguard.


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## nunthewiser (9 June 2009)

Frank D said:


> come and swim in the warm spot






 i like that


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## beamstas (9 June 2009)

Timmy said:


> Noise, huh?  I'm off to tell every scalper in the world that they don't actually make any money, I may need a mouthguard.




Just blast em


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## motorway (9 June 2009)

tech/a said:


> Why not?
> Buy at $1.00 sell at $1.01
> or SPI is 4011 sell 4012---50 contracts.
> I'm bullish and I'm anticipating a trend up.
> ...




Think of a series of tosses of a  biased coin

or the outcome on a series of bets on a  roulette wheel at a casino


There is one trend in operation 
regardless of runs for or against you

A trend is a tendency for something to move in a certain direction

No Tendency no TREND 

So there might be a trend at a tick level or there might not
there might be a trend at a larger scale  or there might not..

If there is a tendency there is trend

Movement itself is not a trend

a moving average is a very coarse
linear *filter *.

Filtration reveals trends ---->True

but moving average is at the bottom of the scale of what is optimal
and will tend to suggest more  trends when none exist
eg a series of tosses with a fair coin

That is why non linear filtering ( how ever you want to do it )
is superior... here we are not even considering  that trend cycle & noise (per julius ) are aperiodic, when you do, non linear becomes mandatory..


motorway


----------



## Frank D (9 June 2009)

This is my last post on this thread.

Everyone knows that you need a trend to make money. I’m not going 
to dispute that.

The best money made is always and has always been ride the trend as 
long as possible. I’m certainly not going to dispute that.

But using a 1 tick move in the market to describe a trend is just plain 
silly.

A move that goes from 4101-4102-4103-4102-4103,4102,4101, isn’t a 
trend

Ask any short term ‘scalper’ trading any those prices by entering and exiting
 3 point moves in the market certainly won’t use the term or call 
themselves a ‘trend trader’.

that's why we call it a 'tick' and not a trend.

So let’s all agree. 

To make money in the market you need a trend, 
but drop the 1 tick move to justify a trend, as it makes no sense in real
 time trading.


----------



## AlterEgo (9 June 2009)

bunyip said:


> The market itself determines the end of a pullback.
> But I think you're wanting me to be more specific by naming the criteria that tell me a pullback is finished and the trend has resumed, and it's now time to enter the trade.
> I don't work like that. I place my buy order above the last bar while the pullback is still in progress, my aim being to get in as early as possible as the trend resumes.
> I first read of this strategy about ten years ago in Elder's Triple Screen Trading System. I tried it and it worked, so I've been using it ever since.
> ...




Hi Bunyip,

As per your diagram, I understand that you would place your initial stop-loss just under bar 3 – is that correct? What would you do if bar 4 turns out to be a bearish candle like bar 2 (ie. moves up triggering your entry, then heads down closing below your entry price)? Do you exit immediately, or wait to see if the initial stop gets hit?

thanks


----------



## fapturbo (9 June 2009)

AlterEgo said:


> Hi Bunyip,
> 
> As per your diagram, I understand that you would place your initial stop-loss just under bar 3 – is that correct? What would you do if bar 4 turns out to be a bearish candle like bar 2 (ie. moves up triggering your entry, then heads down closing below your entry price)? Do you exit immediately, or wait to see if the initial stop gets hit?
> 
> thanks




Yes i was wondering this also.

Also one other thing. I get the entry using the highs of the canldes with limit buy orders.

Do you filter stock based on "Trend"

If so can you please describe how you determine if the "Trend" is trade worthy?


----------



## tech/a (9 June 2009)

To me a move in any direction is a trend.
To others it doesnt qualify as a trend definition.

Frank I'm keeping out of the warm end I dont like the colour of the water.


----------



## Tradesurfer (9 June 2009)

I went away for a little bit and missed a lot of posts.

I will say though that there could be an uptrend, downtrend, sideways trend(defined one), or just a mess. 3 of the four states of the market so to speak allow entries and exits using defined points.

With regard to the talk around pullbacks within a trend? The key is if you are trading daily price charts and you get a pullback to the trendline, those are potential areas to JOIN an ongoing trend and generally one might place their stop below that uptrending line(not directly on it but a little below) that chartists draw under the series of higher lows.

Now if you were looking at a 1 minute chart, then you might have seen a downtrend filling your screen so as someone else mentioned its important to focus on the time frame that you trade while knowing what the primary trends are in whatever market or stocks you are trading.

But to my earlier comment about really 4 states of the market, a sideways trend is a trend in my opinion which lends itself to other tactics such as slow stocastics overbought/oversold or entering on price pivots of the lower defining line and setting targets at the top of the range. But it is a trend.

I've also seen a lot of good comments with regards to exits. Really, a trade should never be taken unless there is a strategy to keep losses small. The proverbial line in the sand where one knows they are wrong and can get out.

With regard to scalping, same thing. Many traders might short at an intraday resistance high hoping to fade a move a couple points lower or vice versa. Traders can use a 1 minute bar and set a stop below the previous low etc etc. The challenge though with scalping is that since your winners may not be much greater than your losses, your winning percentage has to be much higher to remain profitable and your entries have to really be good. But I do plenting of this as well when I have the time.

this is a really good topic though and deserves the discussion.


----------



## fapturbo (9 June 2009)

tech/a said:


> To me a move in any direction is a trend.
> To others it doesnt qualify as a trend definition.
> 
> Frank I'm keeping out of the warm end I dont like the colour of the water.




That's my point what is a tradeable trend.

I dont think two consecutive bars constitutes a trend.

As you have mentioned Time Frames is important.

However if trading End of Day canldes there's no point talking about up tick and down tick.

What determines if a trend is worthy of trading??


----------



## tech/a (9 June 2009)

> To make money in the market you need a trend,
> but drop the 1 tick move to justify a trend, as it makes no sense in real
> time trading.




Just before I get out of the pool.
I would have thought that there could well be some Bots which could be designed (or already may be out there) for futures which could be profitable from high % winning one tick trades X so many contracts.

I dont know that its all that far fetched.


----------



## beamstas (9 June 2009)

One tick.. can it be a trend?

Example (on a tick chart)

5000
4999
4998
4997
4996
4995
4996
4995
4994
4993
4992
4991
4990

Personally, i'd say the trend is down, but then it comes back to the question i asked before "How long is a trend", Or as FapTurbo has said when is a trend worth trading?

If we use the definition

"_•The general direction, either upward or downward, in which prices have been moving._"
www.cftc.gov/educationcenter/glossary/glossary_t.html

Then that 1 tick can't be a trend, it is a counter trend move, as the general direction of the price movement is down.

But then if that chart was a monthly chart, there could be 20 up days within that 1 bar, so then it could be a trend for that one month, but the monthly trend is down.


----------



## fapturbo (9 June 2009)

beamstas said:


> One tick.. can it be a trend?
> 
> Example (on a tick chart)
> 
> ...





Before choosing a trending stock to enter what determines if the trend is worthy of trading. What makes xyz stock better than abc stock.


----------



## bunyip (9 June 2009)

Frank D said:


> This is my last post on this thread.
> 
> _*Everyone knows that you need a trend to make money.*_ I’m not going
> to dispute that.
> ...




Not quite everyone knows it Frank. Over my years on this forum I've had a couple of arguments with amateurs who speak against trading with the trend, and claim they're doing well as counter-trend traders.
A couple of others have shown such a lack of understanding of trends that they don't seem to know if they're trading with the trend or against it.

I don't argue with them any more - now I just regard them with amusement.
If someone can't see that swimming with the current is easier and more profitable than swimming against it, then I can no longer be bothered trying to convince them otherwise.


----------



## fapturbo (9 June 2009)

bunyip said:


> Not quite everyone knows it Frank. Over my years on this forum I've had a couple of arguments with amateurs who speak against trading with the trend, and claim they're doing well as counter-trend traders.
> A couple of others have shown such a lack of understanding of trends that they don't seem to know if they're trading with the trend or against it.
> 
> I don't argue with them any more - now I just regard them with amusement.
> If someone can't see that swimming with the current is easier and more profitable than swimming against it, then I can no longer be bothered trying to convince them otherwise.




Do you have a way of ranking a "trend" ??


----------



## tech/a (9 June 2009)

fapturbo said:


> Do you have a way of ranking a "trend" ??




Yes.
A strong trend has pullbacks of less than 38%
A good trend 50% or less.
A weak trend >50%


----------



## MRC & Co (9 June 2009)

tech/a said:


> Yes.
> A strong trend has pullbacks of less than 38%
> A good trend 50% or less.
> A weak trend >50%




But how does a tick have <50%, >50% or even a 50% retracement?  

This thread is deep in the territory of idle semantics, so far I think it made it's way to the warm water.

People won't learn a thing about making money from this chit chat.

Back to moving averages, don't use them.  Think simple trend structure would tell you a lot more.


----------



## fapturbo (9 June 2009)

MRC & Co said:


> But how does a tick have <50%, >50% or even a 50% retracement?
> 
> This thread is deep in the territory of idle semantics, so far I think it made it's way to the warm water.
> 
> ...




Moving Averages smooth out Price Movements, they give a very clear way of measuring a Trend. If you want to devise a Mechanical System you need a way of being able to code a "Trend"

Can you tell me of a method to do that??


----------



## bunyip (9 June 2009)

AlterEgo said:


> Hi Bunyip,
> 
> As per your diagram, I understand that you would place your initial stop-loss just under bar 3 – is that correct? What would you do if bar 4 turns out to be a bearish candle like bar 2 (ie. moves up triggering your entry, then heads down closing below your entry price)? Do you exit immediately, or wait to see if the initial stop gets hit?
> 
> thanks




That's correct - the stop would go under Bar 3. 
If my buy order is executed and then the bar closes below my entry but without hitting my stop, I don't exit the trade - I wait for the stop to be hit, which hopefully it won't be.
The stop is to shield me from catastrophic loss if the trade goes against me, but at the same time it should be far enough from entry to allow the trade a bit of wiggle room. If you bail out of the trade because it's closed below your entry, you're allowing it virtually no wiggle room at all.
After closing below your entry, the trade could well head the right way and put you in profit. You have to at least give it a chance to do that, rather than eliminate that chance by immediately closing the trade.
If your stop is hit, well, the loss will be only a very small percentage of your trading account if you're prudent with your money management.


----------



## beamstas (9 June 2009)

fapturbo said:


> Moving Averages smooth out Price Movements, they give a very clear way of measuring a Trend. If you want to devise a Mechanical System you need a way of being able to code a "Trend"
> 
> Can you tell me of a method to do that??




There are plenty of ways!
The relation of various highest high values or lowest low values to each other is one way


----------



## fapturbo (9 June 2009)

bunyip said:


> If your stop is hit, well, the loss will be only a very small percentage of your trading account if you're prudent with your money management.




What has the Stop Placement got to do with how much you decide to risk?


----------



## fapturbo (9 June 2009)

beamstas said:


> There are plenty of ways!
> The relation of various highest high values or lowest low values to each other is one way




Over what period??

A week?? Two weeks??


----------



## seasprite (9 June 2009)

MRC & Co said:


> Back to moving averages, don't use them.  Think simple trend structure would tell you a lot more.




What a load of toss. One MA will give nothing , however two or more at a crossover in the sp in an uptrend or downtrend will more or less indicate the sp direction, and it's this trend you play.


----------



## fapturbo (9 June 2009)

seasprite said:


> What a load of toss. One MA will give nothing , however two or more at a crossover in the sp in an uptrend or downtrend will more or less indicate the sp direction, and it's this trend you play.




Crossover is not the point.

Identifying a tradeable trend is the point.

What do you consider a tradeable trend??

How do you rank stocks based on trend??

Is stock xyz in a better trend than abc??


----------



## MRC & Co (9 June 2009)

seasprite said:


> What a load of toss. One MA will give nothing , however two or more at a crossover in the sp in an uptrend or downtrend will more or less indicate the sp direction, and it's this trend you play.




Sorry, I meant to say *I *don't use them.  

But why don't you try use the MACD while your at it, heard it's the goods too!


----------



## beamstas (9 June 2009)

seasprite said:


> What a load of toss. One MA will give nothing , however two or more at a crossover in the sp in an uptrend or downtrend will more or less indicate the sp direction, and it's this trend you play.




Seasprite, have you read this thread?
https://www.aussiestockforums.com/forums/showthread.php?t=15817



			
				fapturbo said:
			
		

> Over what period??
> 
> A week?? Two weeks??




I guess it depends what timeframe you are trading. If you are trading for 10months the HHV of this week and the one last week won't really help

I just coded this quickly in amibroker.. it does ok. im sure someone with more experience could write something better. this code doesn't use any moving averages.. just HHV values.. im sure it could be done ..












It's the best i can do in 10minutes..
(not perfect and maybe never will be)


----------



## fapturbo (9 June 2009)

beamstas said:


> Seasprite, have you read this thread?
> https://www.aussiestockforums.com/forums/showthread.php?t=15817
> 
> 
> ...





How about the rate of change of the moving average over a set period of time?

Do you think this would give a better indication of trend??

The slope of a moving average in other words. The higher the gradiant the better the trend.

Take the value of the moving average today and compare it to the value of the moving average "x" days ago.


----------



## seasprite (9 June 2009)

fapturbo said:


> How about the rate of change of the moving average over a set period of time?
> 
> Do you think this would give a better indication of trend??
> 
> ...




no , pick the trend before it begins.


----------



## beamstas (9 June 2009)

fapturbo said:


> How about the rate of change of the moving average over a set period of time?
> 
> Do you think this would give a better indication of trend??
> 
> ...




No probs, which one? 200day? or 50?
I'll compare it to what i just posted see if we can't get a better indicator of trend 

(see this thread is being constructive after all)


----------



## beamstas (9 June 2009)

beamstas said:


> No probs, which one? 200day? or 50?
> I'll compare it to what i just posted see if we can't get a better indicator of trend
> 
> (see this thread is being constructive after all)




Here you go
Same graph
(left the writing on it)
but using the 50day MA to define trend (ie the 50day MA higher today than it was yesterday?)

Again, very basic and fast coding


----------



## Chorlton (9 June 2009)

fapturbo said:


> How about the rate of change of the moving average over a set period of time?
> 
> Do you think this would give a better indication of trend??
> 
> The slope of a moving average in other words. *The higher the gradiant the better the trend.*




I would suggest (without any testing) that this would depend on the length of time that you would prefer to be in a trend.

Surely those with the steepest gradients have more chance of failing quicker than those which have a more steady gradient.

However, if you intend to trade very short-term then maybe there is some merit in this.


----------



## fapturbo (9 June 2009)

seasprite said:


> no , pick the trend before it begins.




Good luck doing that mate... the idea is not to pick 100 stocks and hope you get on one that trends.... nice try...

Identifying one that is trending already is key.


----------



## fapturbo (9 June 2009)

beamstas said:


> No probs, which one? 200day? or 50?
> I'll compare it to what i just posted see if we can't get a better indicator of trend
> 
> (see this thread is being constructive after all)




200 Day moving average today compared to the 200 Day moving average 50 days ago.. for long term trend.

Can't amibroker run optimisation test so that you can optimise the moving average period and the look back peroid??

How about rotate stocks you hold based on the fastest rate of change of the moving average.

So you are always holding the fastest moving stocks based on the rate of change of the moving average.

So take the ASX stocks for example and apply the rate of change of moving average filter to these stocks. Apply some sort of liquidity filter and volatility filter.

Then when one stock moves into the top 5 stocks we buy this one and then sell the one that drops out.

Keep rotating weekly. That is once a week check which ones are the fastest moving stocks and make sure you own them. Might be top 5 or top 10 or top 20 depending on Capital size. Maybe just top 2


----------



## >Apocalypto< (9 June 2009)

MRC & Co said:


> Sorry, I meant to say *I *don't use them.
> 
> But why don't you try use the MACD while your at it, heard it's the goods too!




i use moving averages and a MACD MRC on 15min time frames.

not the tools u use but how u use em.


----------



## seasprite (9 June 2009)

MRC & Co said:


> Sorry, I meant to say *I *don't use them.
> 
> But why don't you try use the MACD while your at it, heard it's the goods too!




my apologies


----------



## fapturbo (9 June 2009)

Chorlton said:


> Surely those with the steepest gradients have more chance of failing quicker than those which have a more steady gradient.
> 
> However, if you intend to trade very short-term then maybe there is some merit in this.




Trend is a trend right... 

The stronger the trend the better right??

Why would you be worried about it falling quicker when you are riding the trend for as long as you can??

Having a predefined exit you will not be worried about whether it will fall or not


----------



## MRC & Co (9 June 2009)

>Apocalypto< said:


> i use moving averages and a MACD MRC and i profit 4.5 nights out 5 on 15min times frame.
> 
> not the tools u use but how u use em.




Yep, and how much emphasis you give them.

I bet you use a lot of other reasons for your trades which give more weight.....


----------



## bunyip (9 June 2009)

fapturbo said:


> Yes i was wondering this also.
> 
> Also one other thing. I get the entry using the highs of the canldes with limit buy orders.
> 
> ...




I use the classic definition of a trend, i.e. higher peaks and higher troughs for an uptrend, lower peaks and lower troughs for a downtrend.
I like moving averages to confirm the trend. 
I agree with anyone who says moving averages are unnecessary. But unnecessary doesn't mean they're not useful.
As for which moving averages to use, I've borrowed some ideas from Dave Landry and Alex Elder.

Elder says that whatever timeframe you trade from, you should first identify the trend in a timeframe that's four to five times higher, then you go back to the shorter timeframe and trade in the direction of the trend of the longer timeframe.
A trader from daily charts would first identify the weekly trend, which is five times longer than a day. Then he'd trade the daily chart in the direction of the weekly trend.
A trader working from  15 minute charts would first identify the trend on an hourly chart, which is four times as long as 15 minutes. Then he'd trade the 15 minute chart in the direction of the hourly trend.


----------



## Chorlton (9 June 2009)

fapturbo said:


> Trend is a trend right...
> 
> The stronger the trend the better right??
> 
> ...




Depends....

If you were to follow the trend too closely you would capture the initial "steeper gradient" smaller trend but as it falls back you would get stopped out even though the trend may then continue upwards.

However, if the trend's gradient was less aggressive (but still constant and steadily rising) there would be a higher chance of capturing the larger trend resulting in better profits.

Of course this problem could be overcome by widening the trailing stop but that it another discussion.


----------



## fapturbo (9 June 2009)

Chorlton said:


> Depends....
> 
> If you were to follow the trend too closely you would capture the initial "steeper gradient" smaller trend but as it falls back you would get stopped out even though the trend may then continue upwards.
> 
> ...




Want to identify a tradeable trend first and determine how to select one stock over another.

Exit yes that's something different.


----------



## fapturbo (9 June 2009)

bunyip said:


> I use the classic definition of a trend, i.e. higher peaks and higher troughs for an uptrend, lower peaks and lower troughs for a downtrend.
> I like moving averages to confirm the trend.
> I agree with anyone who says moving averages are unnecessary. But unnecessary doesn't mean they're not useful.
> As for which moving averages to use, I've borrowed some ideas from Dave Landry and Alex Elder.
> ...




Now you are talking a language that can be quantified.


----------



## seasprite (9 June 2009)

fapturbo said:


> Now you are talking a language that can be quantified.




you are a pr0n star , and you know it.


----------



## bunyip (9 June 2009)

>Apocalypto< said:


> i use moving averages and a MACD MRC on 15min time frames.
> 
> not the tools u use but how u use em.




MACD _*MRC*_? What's the MRC part mean?

Care to tell us how you use it?


----------



## >Apocalypto< (9 June 2009)

MRC & Co said:


> Yep, and how much emphasis you give them.
> 
> I bet you use a lot of other reasons for your trades which give more weight.....




I will run you though an example.

This afternoons trade 

look at the box that is the lead up, signal and the trade signal.

The lead up...
The MACD showed a drawn out higher low at the base of a nice trend down. tails with double bottom on the price just outside euro open showed a sign of trend change.

Signal
price climbed up over the blue 13ema. the emas crossed with a nice strong angle. the price pulled back with resistance off the 13ema. The MACD made a lower bar. Look at the volume on the bar with the tail.

Trade signal.
next candle was a reversal with a close above last bar. The price has a habit of coming back into the mas after the cross. The MACD made a higher bar showing a trend continuation signal. the price had resistance on the 89 ema but the angle is flat showing no trend from down, it's discounted.

long at the close +12 pips. 

I use all of it rolled together. Price is as important as the MACD and the EMAs in this approach.


----------



## MRC & Co (9 June 2009)

bunyip said:


> MACD _*MRC*_? What's the MRC part mean?
> 
> Care to tell us how you use it?




LOL, because his post was directed at me.

Apoca, yep, you use the MACD and MAs in correlation with numerous other reasons, generally what is required.

Thx for the post.


----------



## >Apocalypto< (9 June 2009)

MRC & Co said:


> LOL, because his post was directed at me.
> 
> Apoca, yep, you use the MACD and MAs in correlation with numerous other reasons, generally what is required.
> 
> Thx for the post.




you're welcome.

I do agree that 100% indicator systems can work for a while but if u ignore price it's self then you will be doomed to fail.

I think EAs are working on proving that wrong.

cheers


----------



## bunyip (9 June 2009)

fapturbo said:


> What has the Stop Placement got to do with how much you decide to risk?





Nothing - money management determines the amount of risk.
I use the 2% rule to ensure that 2% loss of my trading account is the worst case scenario if my stop is hit.


----------



## fapturbo (9 June 2009)

>Apocalypto< said:


> I will run you though an example.
> 
> This afternoons trade
> 
> ...




How do you define the exit??


----------



## seasprite (9 June 2009)

fapturbo said:


> How do you define the exit??




you ask a lot of questions , why not define your exit.


----------



## fapturbo (9 June 2009)

seasprite said:


> you ask a lot of questions , why not define your exit.




I use round numbers Bar Highs and Lows as exits.

I dont use indicators. Price is the number one indicator.... All indicators follow price... Nothing leads price...

Sometimes divergence of indicators can give a warning of a trend reversal when price is making a higher high. However I prefer price to tell me it is reversing...


----------



## seasprite (9 June 2009)

fapturbo said:


> Nothing leads price...




you are confirmed as pathetic


----------



## fapturbo (9 June 2009)

seasprite said:


> you are confirmed as pathetic




If you have ever traded forex then you would know what i mean by round numbers, and bar highs and lows mate.



Some believe indicators are the way to go... I dont


----------



## beamstas (9 June 2009)

seasprite said:


> you are confirmed as pathetic




Huh? That was a bit harsh?
Anyway can you expand?
I'd like to know what leads price (other than a crystal ball)


----------



## >Apocalypto< (9 June 2009)

fapturbo said:


> How do you define the exit??




candle range for exit and profit target.


----------



## white_goodman (9 June 2009)

fapturbo said:


> I use round numbers Bar Highs and Lows as exits.
> 
> I dont use indicators. Price is the number one indicator.... All indicators follow price... Nothing leads price...
> 
> Sometimes divergence of indicators can give a warning of a trend reversal when price is making a higher high. However I prefer price to tell me it is reversing...




I agree 99%, the other 1% is believe is that historical indcators has its place... price action/candlestick patterns off moving averages... support and resistance can be likened to a historical indicator....why not have the best of both worlds, the deciding factor being price action tho


----------



## fapturbo (9 June 2009)

white_goodman said:


> I agree 99%, the other 1% is believe is that historical indcators has its place... price action/candlestick patterns off moving averages... support and resistance can be likened to a historical indicator....why not have the best of both worlds, the deciding factor being price action tho




It's a bit difficult to code price action.


----------



## Mr J (9 June 2009)

fapturbo said:


> I don't know about it being an "art"
> 
> I think trading needs to be mechanical with a proven method. It's the only way otherwise you are just gambling.




Anything can be art, as art is the application of skill. We are also gambling, as technically gambling means to place a stake on an uncertain outcome. A method is only proven after a reasonable period of success, but all that proves is that it was successful over that sample, and not that it is proven going forward.



			
				beamstats said:
			
		

> But wouldn't you say that you can still profit against the trend?




I would, as one man's pullback is another's trend .



seasprite said:


> no , pick the trend before it begins.




We can't though. You can get in before it begins and risk being run over, or you can sacrifice a slice of potential profit and gain a much better winrate by waiting for different levels of "confirmation".



			
				Chorlton said:
			
		

> If you were to follow the trend too closely you would capture the initial "steeper gradient" smaller trend but as it falls back you would get stopped out even though the trend may then continue upwards.




How to manage a trade is always a compromise.



			
				Apocalypto said:
			
		

> I use all of it rolled together. Price is as important as the MACD and the EMAs in this approach.




It's all price :.



			
				bunyip said:
			
		

> I use the 2% rule to ensure that 2% loss of my trading account is the worst case scenario if my stop is hit.




Unless there's a blackout in Sydney and IB goes down, while the SPI stays up!



			
				beamstas said:
			
		

> I'd like to know what leads price (other than a crystal ball)




Traders, but unfortunately I can't read them.


----------



## beerwm (10 June 2009)

fapturbo said:


> Nothing leads price...




why does everyone fight this so hard?

price can be predicted - not 100% right, 100% of the time.
but to a higher degree than random chance.

I cannot see how anyone is making money if they cant predict future prices.

if you couldnt predict price... why would u ever enter or exit a position?


----------



## motorway (10 June 2009)

While Price must Fluctuate

Price does not have to trend (up or down )

To have  a trend you need two units of fluctuation in the same direction.

eg HH & TT 

Prices trend because of waves of buyingandselling  ( this is the one thing there is no selling wave or buying wave there is only a buyingandselling wave )

We talk about buying and selling as if they were separate things that are not connected....

because trends occur because of buyingandselling
There is a movement up and down alternating

The direction of these ups and downs is the trend

Waves have peaks and troughs... 

A pullback is a small trend
of again at least two fluctuations 
That does not retrace the last trend movement by 100% or more
( tech's trend strength )
and does not lead to a congestion pattern ( can be expanding or dampening )


Prices cycle between trend and range ( a series of 1 unit fluctuations that alternate  HTHTHTHT or THTHTHTH)

The best predictor of a trend is the absence of one 
+ active ranging ( nothing to do with moving average or so many bars etc )

Why ? because the fluctuations in prices have/create, memory --> fear / hope

Trends are fractal , on one scale what is a 1 unit fluctuation might be a 4 unit fluctuation

Hence prices that are ranging on one scale
tend to be trending on another  particular scale

Define your unit of fluctuation  ( unit of risk and reward )

Identify strength and weakness ( Like what is the background --> season )
( eg retrace and duration etc )
Identify ranging or trend  ( OK  ranging  _can _also be called a sideways trend )

nothing to do with "time frame" or moving averages of "timeframes"

Two units of fluctuations = a trend
alternating single units = range

A trend on one scale is a range on another..
scale is an invariant ,always optimized ( will not work with timeframes---> invariant ,always non-optimized )

*The way up must be the same as the way down*


The building of expectation  ( ranging )
the repletion of expectation (trending up or down )

craving and satiety




motorway


----------



## fapturbo (10 June 2009)

motorway said:


> Waves have peaks and troughs...




Define Peaks and Troughs so that it can be quantified


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## kam75 (10 June 2009)

Nero64 said:


> I have been looking at heaps of charts lately and finding the 200 day MA to have some merit. A lot of stocks have broken the 200 MA and continued upwards. Some bounce off it and some well haven't reached it and others see it as resistance
> 
> What got me into MA as an indicator was the reading of Sam Weinstein's book. He drills it home on nearly every page.
> 
> ...




Hi Nero64

I'm a big fan of Weinstein's book and have been using his 30 week MA as a primary filter in my trading system to ensure stocks I buy are entering or already are in stage 2 (ie, above a rising 30 week MA).  It's a brilliant and simple way to ensure you put your money into stocks that have a potential to rise.  Stan's the man.

regards


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## beamstas (10 June 2009)

fapturbo said:


> Define Peaks and Troughs so that it can be quantified




You ask alot of questions..? 
Tell us the answer


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## bunyip (10 June 2009)

Mr J said:


> Unless there's a blackout in Sydney and IB goes down, while the SPI stays up!




My stop is put in place automatically when I enter the trade. Blackouts don't affect me.


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## bunyip (10 June 2009)

kam75 said:


> Hi Nero64
> 
> I'm a big fan of Weinstein's book and have been using his 30 week MA as a primary filter in my trading system to ensure stocks I buy are entering or already are in stage 2 (ie, above a rising 30 week MA).  It's a brilliant and simple way to ensure you put your money into stocks that have a potential to rise.  Stan's the man.
> 
> regards




I agree.
Not only does Weinstein's methodology give you a timely entry into stocks that are rising and are likely to rise further, it also takes you out before your profits can turn into brutal losses.
And it shows you how to profit on the short side when the trend turns bearish.

There have been many posts on this forum over the last 18 months from people who suffered catastrophic losses from the market slump.
Those big losses could have been avoided if they'd been familiar with Weinstein's strategy, and had implemented it.

Pity Manny Cassamatis from Storm Financial didn't read Weinstein.


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## bunyip (10 June 2009)

beerwm said:


> why does everyone fight this so hard?
> 
> price can be predicted - not 100% right, 100% of the time.
> but to a higher degree than random chance.
> ...




It's an interesting debate.....when you buy, are you predicting higher prices or aren't you? And can your prediction achieve an acceptable degree of accuracy? 
One school of thought is that you would only buy into an existing trend if your prediction was higher prices.
Another school of thought is that someone taking a position in an existing trend is predicting nothing, he's simply reacting to what prices are doing right now, without knowing or making any predictions about what they'll do in future. He simply takes a  position in the hope that the current price action will continue. He has the potential to make big profits if it does continue, or the prospect of a small loss if it doesn't.

I no longer enter into that debate. I simply say that you stack the odds in your favour by going with the highest probability. A new trend is likely to continue further in the same direction. It doesn't matter whether you call that a prediction or a probability or anything else.
You get a huge edge when you identify the dominant trend and then throw yourself in front of it.


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## motorway (10 June 2009)

bunyip said:


> It's an interesting debate.....when you buy, are you predicting higher prices or aren't you? And can your prediction achieve an acceptable degree of accuracy?
> One school of thought is that you would only buy into an existing trend if your prediction was higher prices.
> Another school of thought is that someone taking a position in an existing trend is predicting nothing, he's simply reacting to what prices are doing right now, without knowing or making any predictions about what they'll do in future. He simply takes a  position in the hope that the current price action will continue. He has the potential to make big profits if it does continue, or the prospect of a small loss if it doesn't.
> 
> ...




 Every Entry is a anticipation or it is blind gambling

In your example why not enter long in a down trend ?

We can not predict Outcomes
But we can anticipate Conditions

That is why you go long in the (early) uptrend
and why you plant Tomatoes at the end of Winter and not Summer.

You can anticipate and identify conditions

conditions are cyclical 

winter summer / Bear market Bull market


The outcomes are not predictable
So manage risk
and steer through to the outcome


------

If we are using an invariant like "unit of fluctuation" that means something
instead a variant like bars on a bar chart

All sorts of relationships can be objectively determined
by quantity,,

1 unit up  1 unit down  = range
2 units up 1 unit down = trend
4units up 3 down = still trend but weaker

1 unit up 5 down = collapse into downtrend

 peaks and troughs have an actual existence that have a singular location in Time and Space....

because you are using objective criteria 

You can define nothing real with x number of bars
you can not objectively define anything
because when you change the time scale 
The way up is no longer the same as the way down

relationships change--> variant

When you condense a 4 unit up and a 2 unit down move
into a 2 unit up and a 1 unit down ( double the unit of risk and reward )

You have The same pattern in the same location
in the same CONTEXT..

Invariant ---> completely real

If the 4 unit up took 2 weeks
and the 2 down took 1 day

when you move to a monthly chart
the pattern and its context and relationships is no longer visible

You would need to chart every up and down move in its own time frame
and then condense those muti time frames by the same %

Then you would have an objectively invariant chart
where peaks and tops have existence
and do not alter when the frame is changed

The fluctuations on the tape have  definite location in time and space
that means everything can be objectively defined as long as the way up is the same as the way down..

motorway


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## kam75 (10 June 2009)

bunyip said:


> Those big losses could have been avoided if they'd been familiar with Weinstein's strategy, and had implemented it.
> 
> Pity Manny Cassamatis from Storm Financial didn't read Weinstein.




Yeah the fund managers should get themselves a copy.


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## Mr J (10 June 2009)

fapturbo said:


> Define Peaks and Troughs so that it can be quantified




They can be, but obviously it means using clear rules rather than subjective intepretation.



			
				bunyip said:
			
		

> I no longer enter into that debate. I simply say that you stack the odds in your favour by going with the highest probability. A new trend is likely to continue further in the same direction. It doesn't matter whether you call that a prediction or a probability or anything else.




I'd liken it to inertia.


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## fapturbo (10 June 2009)

beamstas said:


> You ask alot of questions..?
> Tell us the answer




A peak has to describe the highest point between two levels.

As a trough has to describe the lowest point between two levels.

Which levels??

How about a definition of a short term change in direction.

Short Term Up Trend and a Short Term Down Trend. 

Then the Peak would be the highest point between the Change from short term up trend to short term down trend.

Likewise the Trough would be the lowest point between a Short Term Down Trend and a Short Term Up Trend.

Short Term Up Trend we could use the bars highs and lows and we could say that a short term up trend is when there is two or more consecutive bars that have higher highs. 

Short Term Down Trend could be when there is at least two consecutive bars that have lows that are lower.

Once we have a change from one Short Term Trend to another then we can check to see what the highest/lowest price is between. 

Then when we can find the highest price this can be the Peak. The lowest price can be the Trough.

Yes or No ???


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## beamstas (10 June 2009)

fapturbo said:


> A peak has to describe the highest point between two levels.
> 
> As a trough has to describe the lowest point between two levels.
> 
> ...




I know what a peak and what a trough is, the question you asked is how to quantify it?


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## fapturbo (10 June 2009)

beamstas said:


> I know what a peak and what a trough is, the question you asked is how to quantify it?




Thought I just did 

Code so that check for what i said??


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## Mr J (10 June 2009)

A real life example is less clear fapturbo. The line between a peak, trough and noise varies for everyone. The same chart will be interpreted differently by different traders. Then we must also consider the context, as what we identify a peak in one chart we may lablel as noise on another.


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## tech/a (10 June 2009)

You cant use peak and trough code for system testing as each is dynamic.
You dont know a peak or a trough is in place until well after they are formed.
Zigzag is the most common indicator used to formulate peak and trough.


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## fapturbo (10 June 2009)

tech/a said:


> You cant use peak and trough code for system testing as each is dynamic.
> You dont know a peak or a trough is in place until well after they are formed.
> Zigzag is the most common indicator used to formulate peak and trough.




A trough is formed as soon as there is two consecutive bars which have higher highs. Assuming there was a Short Term Down Trend in place previous to this. That is assuming there was at least two bars prior to this that had lower lows.

The trough does not move once it is set.

What is a trend? Isn't it a series of higher Peaks and higher Troughs??

We could use the troughs and peaks as levels on the chart to trade from?

For example if price goes below or closes below a previous trough for example we trigger a short??


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## tech/a (10 June 2009)

I understan what you are saying so these 2 charts show a "setup"
One short and one long.
If trading is above the peak shown then a long is triggered
and trading below the low trough then a short is triggered.

The "setups" are on the FAR right of the chart.

This is how you see it?


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## fapturbo (10 June 2009)

Something like this...

Once we have a trend in place we look for set up like this to trade.


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## fapturbo (10 June 2009)

tech/a said:


> I understan what you are saying so these 2 charts show a "setup"
> One short and one long.
> If trading is above the peak shown then a long is triggered
> and trading below the low trough then a short is triggered.
> ...




Yea that would be it.


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## fapturbo (10 June 2009)

Chart of XJO

Next Peak is not known yet as there is not a pattern of two consecutive lower lows.


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## tech/a (10 June 2009)

So we would be looking to go long here?


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## tech/a (10 June 2009)

Short here?


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## Mr J (10 June 2009)

I imagine so Tech. Pretty standard price action trading. I prefer earlier entries, obviously at the expense of less "confirmation".

My point Fapturbo, is that the lows and highs aren't always clear. There is always an area where you could label it as a pivot, or simply noise. It can change how you treat the subsequent pivots and affect your trades.


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## fapturbo (10 June 2009)

tech/a said:


> Short here?




Yes that would look like a scenario of Close/Cross below a "Trough" as I have defined them.

Does that sound feasible??

Obviously we only are looking for entries in the direction of the "Trend"

So the trend filter would filter stocks that meet the required trending condition. Then we look for a Cross/Close below a "Trough"

Go short below the trough


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## imiyakawa (10 June 2009)

trade10.com/Moving_Average.html
investopedia.com/university/movingaverage/default.asp


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## tech/a (10 June 2009)

The point I'm making is that this is a great theory.
However in practice because peak and troughs are dynamic this often occurs.
More often than we would like.
The question is which timeframe?
There are answers which can be added to the simplicity of the hypothesis---which is "Common Theory".
Higher highs/higher lows---Great which ones are going to stick?---long enough to make profit.


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## fapturbo (10 June 2009)

tech/a said:


> The point I'm making is that this is a great theory.
> However in practice because peak and troughs are dynamic this often occurs.
> More often than we would like.
> The question is which timeframe?
> ...




Which time frame... well that would be the daily time frame for trading stocks on the ASX.

You highlight one example of many many examples.

The chart you supply may also have gone down... as long as we achieve positive expectancy that's all that matters.

I can give you plenty of examples. The question is though can we test a system using such Peaks and Troughs using a Momentum filter to profit from Shares.

Stock "X" must have a momentum > than rate of change of moving average Y over Z look back.


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## tech/a (10 June 2009)

> I can give you plenty of examples. The question is though can we test a system using such Peaks and Troughs using a Momentum filter to profit from Shares




Its the XJO

Yes we could both post many winning and just as many losing trades.
But no you cant test it due to the dynamic nature of Peaks and Troughs.
When youve tested and designed as many methods as I have you'll know what I mean.
Those experienced in systems design will know exactly what I'm talking about.

This may help a little.

http://www.trade10.com/zig_zag.htm


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## Mr J (10 June 2009)

> Does that sound feasible??




You're asking? Yes, it is a completely logical entry, but I think it is a struggle. Why? Because if you're waiting for a break of support or resistance (i.e. the last LL or HH), you're usually getting into it late. Sometimes not, but it usually is the case. Getting in late means you'll need a large stop, and you have left money on the table for the comfort of extra "confirmation". Doing this will often put you entering just before or as the wave is turning. I'll draw up some examples to show you what I mean.


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## fapturbo (10 June 2009)

tech/a said:


> Its the XJO
> 
> 
> But no you cant test it due to the dynamic nature of Peaks and Troughs.
> ...




Can you go into more detail about what you mean by it cant be tested because it is dynamic??

What do you mean by dynamic??

Peaks and Troughs do not move on the chart. Once it is set it stays in place.

Hence it is a fixed reference point and as such it can be tested as an entry point.

Is that what you are getting at by saying it is dynamic??


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## fapturbo (10 June 2009)

Mr J said:


> Doing this will often put you entering just before or as the wave is turning. I'll draw up some examples to show you what I mean.




I know what you mean. But how do you know when a pull back is finished?? You may say i'll enter as the pull back nears the previous trough. But can you code that?? Confirmation is important. What confirms a "Trend"

A lower low??


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## tech/a (10 June 2009)

fapturbo said:


> Can you go into more detail about what you mean by it cant be tested because it is dynamic??
> 
> What do you mean by dynamic??
> 
> ...




I thought I had made my point above and with the link above.

Just start trading your/this common hypothesis and you'll soon see what I mean.
If you test it you'll get brilliant results simply because all past Peaks and troughs will and are set in stone.
The next or most current one is dynamic and not set until well after the fact.
This is where the in experienced get smashed.


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## beamstas (10 June 2009)

fapturbo said:


> Can you go into more detail about what you mean by it cant be tested because it is dynamic??
> 
> What do you mean by dynamic??
> 
> ...




I've heard stories..
Of Designing systems using zig zag..
On paper the systems look great..
Something any critic would hate..
In reality they fall over in the first week..
This type of system has fooled Many a trader
Because it's the master of the repainter..


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## fapturbo (10 June 2009)

tech/a said:


> I thought I had made my point above and with the link above.
> 
> Just start trading your/this common hypothesis and you'll soon see what I mean.
> If you test it you'll get brilliant results simply because all past Peaks and troughs will and are set in stone.
> ...




The next peak or trough does not concern me.

The previous peaks and troughs are the one that im interested in.

I still don't quite understand what you mean


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## Mr J (10 June 2009)

fapturbo said:


> I know what you mean. But how do you know when a pull back is finished?? You may say i'll enter as the pull back nears the previous trough. But can you code that?? Confirmation is important. What confirms a "Trend"
> 
> A lower low??




You can't know when the pullback is finished. We're constantly treading a fine line between getting in too early and getting in too late. We want to get in early to maximise profit potential and minimise our stop. At the same time, obviously don't want to enter too early, we want something tangible to suggest that the odds are in our favour. Too early and we'll ruin our winrate by jumping in during noise/chop; too late and we'll have a horrible R:R. Either of these will ruin our chance to profit over the longrun.

Confirmation? This is only my opinion, but I believe that a trend is usually only confirmed well past the point of a good entry. I believe that is the trick to trading - finding probable pivots before the market confirms them. At least with this style of trading.



> I've heard stories..
> Of Designing systems using zig zag..
> On paper the systems look great..
> Something any critic would hate..
> ...





I believe zig zag trading, riding waves, or whatever you want to call it, is a great approach. It exploits the inherent characteristics of the way our markets work, so it can be applied to any market and won't suddenly become unprofitable. It also scales well and works across different timeframes.



			
				tech/a said:
			
		

> The next or most current one is dynamic and not set until well after the fact.




I don't think this is true. He's entering on confirmation that the current pivot is in fact a new pivot. If he's looking to ride a LH->LL wave, the LH is confirmed as soon as a new LL is made, and this is when he enters.


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## fapturbo (10 June 2009)

Mr J said:


> I don't think this is true. He's entering on confirmation that the current pivot is in fact a new pivot. If he's looking to ride a LH->LL wave, the LH is confirmed as soon as a new LL is made, and this is when he enters.




The premise is that there is a trend in tact.

Then we enter the trend as a new low is confirmed by the close/cross below the previous low.

The exit is defined by an ATR based trailing Stop or a Days High Trailing Stop

Testing over historical data to determine what has worked best in the past...

No guarantess that it will work in the future... However having something that has proven to have worked previously is better than having something that has proven to blow your money before... agree??


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## tech/a (10 June 2009)

> The next peak or trough does not concern me.




Me neither.
Its the CURRENT Peak or Trough which cannot be certain---certain enough to trade off.

We have peaks and troughs at the right hand edge.
Whats this set up indicate?
Long? Short?


----------



## beamstas (10 June 2009)

Back on topic
Here is the XJO, Green Bars the Close is above the 40day MA, Red bars the Close is Below the 40day MA. 
This filter was suggested to me by someone on another forum, and it seems to work well.

It keeps you out of any nasty down moves, and in nice upmoves.


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## johnnyg (10 June 2009)

tech/a said:


> Me neither.
> Its the CURRENT Peak or Trough which cannot be certain---certain enough to trade off.
> 
> We have peaks and troughs at the right hand edge.
> ...




Possible Long.


----------



## fapturbo (10 June 2009)

tech/a said:


> Me neither.
> Its the CURRENT Peak or Trough which cannot be certain---certain enough to trade off.
> 
> We have peaks and troughs at the right hand edge.
> ...




What is your point??

This is not testing a system by looking at one or two charts??



close/cross below previous trough is entry... exit is via a fixed stop and trailing SL based on system criteria. System criteria which is tested over all stocks that pass the system criteria.

observing one or two charts will not give sufficient data to test.


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## tech/a (10 June 2009)

johnnyg said:


> Possible Long.




Why's that you have lower highs and lower lows?
Thats against the hypothesis.



fapturbo said:


> What is your point??
> 
> This is not testing a system by looking at one or two charts??




You asked for clarification of the dynamic nature of the CURRENT peaks and troughs.Why are you confused?



> close/cross below previous trough is entry... exit is via a fixed stop and trailing SL based on system criteria. System criteria which is tested over all stocks that pass the system criteria.




Fine this is just an entry criteria---always knew that.



> observing one or two charts will not give sufficient data to test.




Ive tested many peak and trough methods ALL are BRILLIANT.
ALL cannot be traded live as the last peak and or trough is dynamic.
You'll go broke.
Only trying to help---you are welcome to believe and trade as you wish.

How about now is the trade clearer?


----------



## fapturbo (10 June 2009)

tech/a said:


> Why's that you have lower highs and lower lows?
> Thats against the hypothesis.
> 
> 
> ...




This is the sort of thing I'm talking about as far as entries go... GU 30Min TF clearly trending... Buy above previous Resistance 

I still don't understand what you mean by the last peak or trough is dynamic. Can you explain a bit further sorry...

Like I've said the last trough is what matters and that is where entry is based on.

The most important aspect to any mechanical system is the exit criteria. This is not defined. This is what needs to be tested. The entry is less important.

If we are trend following then the most important premise is, "is there a trend"


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## tech/a (10 June 2009)

Clean out of explaination.
Youll just have to learn from experience.


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## beamstas (10 June 2009)

The last point on the zig zag indicator will always repaint, so you can only ever use the second last one. If using a 5% swing then the previous point can change at any time until there is another 5% swing in the opposite direction.. So to use a zig zag is not very practical.

Buying on a higher high and lower low.. maybe this can be coded, maybe not, but again, the last low will always repaint until another high and low is made after it... and by that time you've probably missed the boat :bowser:


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## fapturbo (10 June 2009)

entries are clearly represented....

what is the problem??


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## Mr J (10 June 2009)

fapturbo said:


> No guarantess that it will work in the future... However having something that has proven to have worked previously is better than having something that has proven to blow your money before... agree??




Maybe you can get it to work, but I just don't think you'll usually get a good price, and in any activity in which the aim is to profit, a good price is crucial.  I do believe that there's a sweet spot, i.e. not too early and not too late, and we have to find that sweet spot to be successful.

The strategy isn't useless as I do something similar myself, I just don't wait that long to enter. I suggest watching the price action around the pivots to give you earlier signals.



tech/a said:


> Me neither.
> Its the CURRENT Peak or Trough which cannot be certain---certain enough to trade off.




Until price breaks past the previous higher high or lower low, at which point the current peak or trough is confirmed to be a peak or trough. This is when Fapturbo would be entering (assuming we've had a run of LL+LHs, or HL+HHs). However, at that point the current peak or trough becomes a past peak or trough, as the break to a new LL or HH starts the prediction of the current peak or trough.

Not certain enough to trade off? Trading off a current peak or trough is exactly what I do. I aim to identify it just as it has happened, and get in on the early part of the move of that wave. I must misunderstand you though as this is far from unique. I'm sure most traders aim to try and catch a pivot and ride it to the next pivot.



johnnyg said:


> Possible Long.




You'd be going against the trend there. We've just had two minor lower highs and lower lows, which was possibly a major lower high in itself, and on its way to make a new low for the chart.


----------



## tech/a (10 June 2009)

No problem.
Click to expand


----------



## fapturbo (10 June 2009)

tech/a said:


> Clean out of explaination.
> Youll just have to learn from experience.






What experience are you referring too??


----------



## beamstas (10 June 2009)

fapturbo said:


> What experience are you referring too??




LOL!


----------



## fapturbo (10 June 2009)

tech/a said:


> No problem.
> Click to expand




Come on mate... please I dont see your point with the chart....

Trend Trend Trend.... Is that chart you show me trending ??


----------



## tech/a (10 June 2009)

fapturbo said:


> What experience are you referring too??




Your own.

If your experiencing profitability then you'll keep doing what your doing.
if you dont you'll either stop or be forced to stop through lack of funds.

You get confused easily/often


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## fapturbo (10 June 2009)

beamstas said:


> LOL!




Experienced at trading or experience at coding... 

Because I dont see how being experienced has anything to do with developing a system unless you are referring to coding experience


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## tech/a (10 June 2009)

The chart Ive been refering to is OSH.
Wouldnt say its been trending all that well over the last 10 yrs.
click to expand.


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## Mr J (10 June 2009)

> Trend Trend Trend.... Is that chart you show me trending ??




There are a number of trends in there. Looks fine to me. However, if you were entering upon "confirmation", you would have done poorly.


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## fapturbo (10 June 2009)

Mr J said:


> There are a number of trends in there. Looks fine to me. However, if you were entering upon "confirmation", you would have done poorly.




This is a problem.... "number of trends"



What do you define as a tradeable "trend"


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## johnnyg (10 June 2009)

Mr J said:


> You'd be going against the trend there. We've just had two minor lower highs and lower lows, which was possibly a major lower high in itself, and on its way to make a new low for the chart.




Without going off topic, here's another very similar chart. With exactly the same setup. 2 minor lower highs and lower lows.


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## tech/a (10 June 2009)

fapturbo said:


> Experienced at trading or experience at coding...
> 
> Because I dont see how being experienced has anything to do with developing a system unless you are referring to coding experience




You wont get argument from me.
Every peak and trough system I have seen designed has been spectacularly profitable.

And everyone of them have failed in walk forward testing out of sample.
Experience in how to use the analysis your coding is important.

It appears your itching for someone to suggest your less than competent.
Strange?

Night all.


----------



## johnnyg (10 June 2009)

Which turns into this.

Just my way of looking at charts.


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## fapturbo (10 June 2009)

A stock that looks like this would be a much better candidate for a trend following system...


Using the rate of change of the 200 day moving average as a filter we filter out many potential stocks that are just going sideways...


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## tech/a (10 June 2009)

> What do you define as a tradeable "trend"




All you can do is place yourself in a position to take advantage of a trend through analysis and resultant anticipation.
So you cut your losses if proven incorrect and let them run if proven correct.
All trends are tradeable.


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## fapturbo (10 June 2009)

tech/a said:


> All you can do is place yourself in a position to take advantage of a trend through analysis and resultant anticipation.
> So you cut your losses if proven incorrect and let them run if proven correct.
> All trends are tradeable.




You are still not helping too much... quantify "trend"


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## tech/a (10 June 2009)

fapturbo said:


> A stock that looks like this would be a much better candidate for a trend following system...
> 
> 
> Using the rate of change of the 200 day moving average as a filter we filter out many potential stocks that are just going sideways...




*Your kidding arent you.*
This stock has fallen around 95%
yet has risen 400% in a period of going sideways???

I'm off to bed sick of circular rubbish.
Night all.
Define trend?
Think you should be revisiting your own definition.
Clearly its lacking as shown below.


----------



## fapturbo (10 June 2009)

OSH trending??


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## fapturbo (10 June 2009)

Quantify "Trend"


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## Mr J (10 June 2009)

fapturbo said:


> This is a problem.... "number of trends"
> 
> 
> 
> What do you define as a tradeable "trend"




There are plenty of trends there.


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## Mr J (10 June 2009)

johhnyg said:
			
		

> Without going off topic, here's another very similar chart. With exactly the same setup. 2 minor lower highs and lower lows.




Yes, and they could be labelled differently. It could be a downtrend, or it could simply be the formation of a larger uptrend. Charts tell multiple stories, and I tend to look at all of them. One man's noise or chop is another's trend. There are many timescales at work, all doing different things, and therefore many ways to read them. I look for each, so when I saw your graph I saw two. There could be more, but without seeing more of the chart it is impossible to say. There are also the very small movements there that I didn't bother to point out, but it's still something I look for.


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## fapturbo (10 June 2009)

Mr J said:


> There are plenty of trends there.




Yes there might be plenty of trends as you put it....

But can you tell me how you code a trend so that you can mechanically test it using software against historical data...

It appears Tech will not bother to elaborate...


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## Mr J (10 June 2009)

I'm not a programmer. I really do think you need to get an earlier entry though. Riding the waves is a great strategy and it does work provided you can get a good, early entry.


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## korrupt_1 (10 June 2009)

Has been interesting to read how other people have been using MA....

I occasionally use 30SMA to find tradable setups.

I treat MA's as a resistance level and hope that it will bounce off it. Stop loss is usually set at a lower low (for longs) or a higher high (for shorts). Take profit level will need to be a level where R:R is atleast 1:1 (ideally 1:2 would be best)

The way I interpret this is that once the MA starts trending, there's a good chance that any retrace will be contained by the MA and send the price right back in the direction of the trend.

I've found 30SMA to be a nice number, but it really depends on the instrument you are trading as one set of MA will not suit another instrument.

I also incorporate EW to see if the wave pattern has exhausted itself and is ready for a retrace...

Below is an example of 1hr AUD/USD with 30SMA... a few winners and some losers in there, but with good SL, you should still be ahead over this timeframe.


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## tech/a (11 June 2009)

I've never been interested in quantifying trend for Test purposes.
I know trend brings profit so I want to be in a position which has a high probability of placing me in front of an emerging trend---anticipation.

So as much as you'd like me to say a Moving Average can be used to define a trend---I personally am not interested---in my style of discretionary trading---with classifying a trend.

I like to see where a chart is with relation to its trading life and for that I turn to Elliott.---cant code that either.

Why do you need to quantify or qualify a trend for testing purposes.
Profit occurs in a trend we dont need to prove that.

Even with system testing I'm looking to enter before a trend has matured and exit when its at a likely expiry date.
Which in many cases has been an E/M/A.

With discretionary trading I only have one aim.

*ELIMINATE RISK.*

Once done Profit takes care of itself.


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## fapturbo (11 June 2009)

tech/a said:


> Why do you need to quantify or qualify a trend for testing purposes.




Strange idea that you would not want to define it for testing if you plan to develop a trend following system....


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## tech/a (11 June 2009)

No not at all.
All I have to do is enter as one developes and stay on one as long as I can.
I dont need to define a trend.
Strange that you feel it necessary to indentify a trend before it happens so you can test wether you can make money trading it.(a trend).

Techtrader doesn't define a trend and went from $30k to $360K in the 5 years I traded it.
Its all on radges site if you wish to spend a few hrs studying it. ( Radge's site is down at the moment for maintenance).


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## fapturbo (11 June 2009)

tech/a said:


> No not at all.
> All I have to do is enter as one developes and stay on one as long as I can.
> I dont need to define a trend.
> Strange that you feel it necessary to indentify a trend before it happens so you can test wether you can make money trading it.(a trend).
> ...




I think you misunderstand what i want to be able to do...

I don't want to find one as it develops. I want to find one that is trending already... hence the need to define it...  Trend Following premise is that there is already a trend in place... we care not how advanced it is... because we don't know when it will finish....

You seem to think that you can trade a trend that doesnt even exist yet because you take a trade anticiapating a trend...

How can you identify a trend before it happens as you put it... that's just plain stupid...

Idea is simple.

Find a stock that is already in a trend...  Compare that stock to the next stock that is already in a trend also. Rank the trend by speed or strength.

Trade the stock that has a stronger trend.

If you find this idea confronting then I guess you better stick to trying to find stocks that aren't trending yet and buy those....


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## Sean K (11 June 2009)

I look for higher lows and highs. 

MAs just confirm. 

Add in some upward and horizontal S&R to see a trend. 

Volume going up is good. Volume down bad.


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## tech/a (11 June 2009)

fapturbo said:


> I think you misunderstand what i want to be able to do...
> 
> I don't want to find one as it develops. I want to find one that is trending already... hence the need to define it...  Trend Following premise is that there is already a trend in place... we care not how advanced it is... because we don't know when it will finish....
> 
> ...





Pretty common theory.
Advanced Get Elliott Wave call it an XLT trade.
Leon Wilson used Relative Strength Comparisons in his similar methodology.
The top down approach could also fit in with most of your idealogy. Your not the first to trade this way.

Simply trade a new high/low over X periods this will ensure your in a part of a trend at least.



> How can you identify a trend before it happens as you put it... that's just plain stupid...




A lot of what I do is stupid to most.
I quite like being left of mainstream.



> You seem to think that you can trade a trend that doesnt even exist yet because you take a trade anticiapating a trend...




Urr yeh!
Thats the idea.
Do it every day.

Here is one I just closed out of at .94c
See if you can pick the Non trend point of the trade.


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## fapturbo (11 June 2009)

tech/a said:


> Pretty common theory.
> Advanced Get Elliott Wave call it an XLT trade.
> Leon Wilson used Relative Strength Comparisons in his similar methodology.
> The top down approach could also fit in with most of your idealogy. Your not the first to trade this way.
> ...





I think your idea of a trend and my idea of a trend are different....


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## tech/a (11 June 2009)

As I havent defined my interpretation of a trend all I can presume is your anticipating my interpretation.


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## nunthewiser (11 June 2009)

tech/a said:


> As I havent defined my interpretation of a trend all I can presume is your anticipating my interpretation.





bet you cant say that 5 times fast after 6 beers


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## Cartman (11 June 2009)

nunthewiser said:


> bet you cant say that 5 times fast after 6 beers




depends how fast the beers are ingested Nun :


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## Mr J (12 June 2009)

Have to admit I've found some use for MA's in automating some trading. I wouldn't use them as support or resistance, just a way of keeping the system out of trouble.


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## bunyip (15 June 2009)

fapturbo said:


> What experience are you referring too??




If you don't have any experience, I suggest you get some by just trading a trend, buying the pullbacks if it's an uptrend, shorting the rallies if it's a downtrend.
Just get in and have a go with a demo account or paper trading or whatever until you prove to yourself that your system works.
Forget about all this testing and quantifying that you seem intent on doing.
You already know how to identify a trend.....it's an uptrend if the price action is generally heading from the bottom left corner towards the top right corner of your screen. 
It's a downtrend when price is generally heading from top left corner towards bottom right corner.
That's most of what you need to know about trends. Now look for the dips and rallies, and trade them only in the direction of the trend.

All this testing and quantifying that you want to do is unnecessary.....you'll only confuse yourself. 
Leave the complexity out of your analysis, cut it back to the bare bones, and get in and trade it. That's the best kind of testing you can possibly do.


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## mattswrxy (18 June 2009)

Great posts, very informative.


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## fapturbo (19 June 2009)

bunyip said:


> If you don't have any experience, I suggest you get some by just trading a trend, buying the pullbacks if it's an uptrend, shorting the rallies if it's a downtrend.
> Just get in and have a go with a demo account or paper trading or whatever until you prove to yourself that your system works.
> Forget about all this testing and quantifying that you seem intent on doing.
> You already know how to identify a trend.....it's an uptrend if the price action is generally heading from the bottom left corner towards the top right corner of your screen.
> ...




Sure thing mate.... If you can't see the value of quantifying a "Trend" then never mind


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## tech/a (19 June 2009)

Ever thought of quantification by angle/speed of trend?

Yeah I know--quantify it.
I dont need or want to but if its your thing---just a thought.


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