Australian (ASX) Stock Market Forum

Moving Average

So we would be looking to go long here?
 

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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.
 
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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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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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.

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.
 
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
 
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.
 
Its the XJO


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



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

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??

:confused::confused:
 
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??
 
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??

:confused::confused:

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.
 
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??

:confused::confused:

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..
 
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.

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 :confused::confused:
 
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..
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..

:D
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.
 
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??
 
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?
 

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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.

ss20090610210029.png
 
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?

What is your point??

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

:confused::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.

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