I hope I am not appearing argumentative, I am not attacking Skate or his system just offering an alternate view if anyone has the interest and energy to learn to chart.
Sorry Skate, I hope you don't mind me littering your thread but just to make it clear for everyone to see how I draw my short term trendlines (all trendlines actually) I do it on end-of-day prices so I can really get fine precision to really know when a price has moved out of a support line. This is the same 4-month daily chart only now drawn with EOD.
At this time of the year, we tend to do a bit of soul searching to establish if we could have done better.
I like trend trading, that is why I rely very heavily on the 200dsma. If the 200dsma is moving upward and the price of a stock has moved above the 200dsma, but not too far above, of course, just a wee bit as this is where mistakes can be made if the price is too far above the 200dsma as it could fall back to re-test the 200dsma. If you see your stock falling by 20%-50% as it re-tests the 200dsma, it can take serious balls to stay in the trade. Then given you didn't buy in too far above the 200dsma, just hang out in that stock until it falls below the 200dsma again, there you have your auto buy and sell trigger. If it is travelling sideways then don't enter until the 200dsma line starts to curve up again. No drama, no stress, very time economical, very easy signal in and out with minimal trading. That is how I traded for years when I was working and bringing up kids and very time-poor. It works really well and I rarely had a stock that lost money.It’s tough to be a trend follower
The truth is, most traders give up or don’t take the next signal after a series of losses & have trouble pulling the trigger after a multitude of losing trades in a row. The main advantage of trading a trend trading strategy is simplicity, jumping on & off trends. Trading this way doesn’t require a lot of time to manage & works best on longer time frames.
@Skate I think that some may take your statement the wrong way. An indicator is what it is and if a person requires a particular functionality that is provided by an SMA then that indicator is extremely useful to them.Summary
Forget about using a simple moving average (SMA) & go directly for the big gun as the DSMA’s responsiveness runs rings around all other types of moving averages, hands down.
@Skate 's posts are always read with interest.
You said it yourself, the start of trends can only be identified in hindsight. All attempts to identify them at the time will be an exercise in probability. We may be correct at the time or we may not.
All your back tests have conclusively shown that it doesn't matter if we can't identify the exact start of the trend. If we manage the exits well we can create a positive edge. This is the most important aspect of a profitable trading system.
@Skate I think that some may take your statement the wrong way. An indicator is what it is and if a person requires a particular functionality that is provided by an SMA then that indicator is extremely useful to them.
The SMA as an indicator
Moving averages basically calculate the average price of a certain number of periods to smooth out the price action with a visual representation of the overall directional movement. Moving averages can be used to generate trading signals but not so much with trend trading as the lag of the indicators is the killer.
Moving averages are known to be lagging indicators
All moving averages lag behind movements in price. A faster MA has less lag when compared to a slower MA. Moving averages also work well as filters & it's primarily used in Index Filters & buy filters.
The SMA is not so simple to trade
The SMA might be simple to calculate but isn’t as simple to trade. But I'm first to admit it's the most popular of all indicators in trading. But like most indicators, it isn’t a cure-all for trading. Choosing the right moving averages adds reliability to all technically-based strategies but is best confined as an indicator, rather than a signal generator.
Summary
Far too many traders have tried to use the simple moving average for "Buy & Sell" signals. There are some traders who might be able to pull this off using "multiple moving averages" for the trigger, such as "Guppy's Moving Averages" but on average it rarely works as expected. To that point, save yourself some time & heartache & just stick with using "moving averages" to determine the strength of the move, & restrict using them to generate "buy & Sell" signals.
No on the contrary Skate, I must disagree, the SMA is not a lag because it is a watched signal/indicator, a trigger for the dozens, hundreds or thousands of traders waiting for an entry indicator/signal/whistle blow/ trigger/gunshot/ whatever you want to call the point where the trader commits his money. Many people try to get very clever with MAs thinking they will get an edge. If you are using a less used MA, you will have a less-used entry/exit point. The best edge anyone can ever have is to know when the majority of traders are going to commit to a trade, that is why I use the 'simple' MA as that is the standard-setting on Stockcharts, the 50dsma and 200dsma. More traders would use Stockcharts than any other chart system around. I want to be right in the thick of the herd so I can get the go signal as it happens.The SMA as an indicator
Moving averages basically calculate the average price of a certain number of periods to smooth out the price action with a visual representation of the overall directional movement. Moving averages can be used to generate trading signals but not so much with trend trading as the lag of the indicators is the killer.
Uurgh, they are just like bloody party streamers all over my charts. I tried them out for about a minute when Colin added them to the indicators list until the untidiness and unnecessary junk got in my way. Pretty but and you can create your own colour scheme, whoohoo!??Guppy's Multiple Moving Averages
As trend trading strategies go, using "Guppy's Multiple Moving Averages" would be a suitable choice as it's easy to follow & understand. The relationship between the 12 exponential moving average (EMA) tells the story of long & short-term buyers.
No on the contrary Skate, I must disagree, the SMA is not a lag
Choosing the right moving averages adds reliability to all technically-based strategies but is best confined as an indicator, rather than a signal generator.
EMA is a lagging indicator.
Using lagging indicators is like chasing shadows against a wall.....
Most standard indicators are lagging ones. Doesn't anyone use a leading indicator? The lagging ones like MAs and EMAs are pretty useless IMHO.
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