Speculative Stock Portfolio

[willoneau]

Notice how all those MA's would have closed your positions if used as an exit, then continued up.
The smoothed MA cross over the linear has potential looking at that chart but needs to be tested.
Not as an exit but maybe a guide to trend direction as a filter.

 

[willoneau]

Any thoughts on a filter for sideways markets?

 

[willoneau]

I agree. If you wait for a 105 day cross from the start of a bear market before you exit, you've missed the boat.

You will not know the start of the bear market until your already in it. But by then you should probably have no trades on and be in cash waiting.

 

[Zaxon]

now the question I want to decide for myself, do I use the EMA and have to wait longer for the exit signal and a slightly lower exit price or do I use the SMA and get closed out more often on the stocks journey?

In my own research, I have found the choice between EMAs vs SMAs isn't definitive. In one historic situation, the EMA would have been the right choice. In another, the SMA would have been. I don't think there there is a "right" answer as to which MA is better.

My effort is more spent on the number of days applied to the moving average. For instance, choosing a 50 day SMA vs a 100 SMA will have a much bigger impact on your outcomes compared with choosing a 50 day SMA vs a 50 day EMA.

 

[willoneau]

I agree Zaxon, that is why I wouldn't use any as an exit trigger.

 

[Zaxon]

Any thoughts on a filter for sideways markets?

Yes. A sideways market could be defined by when the price trades within a bounded area of the moving average. For instance +/- X% of the MA.

 

[willoneau]

Yes. A sideways market could be defined by when the price trades within a bounded area of the moving average. For instance +/- X% of the MA.

So how would you turn that into a filter trigger?

 

[willoneau]

So say once price closes a N% above the MA you would start taking trades and it closes N% below you would stop?
Another thought, having a different N% above to below ?
Although if the market started to move up slowly it might not go above the N% so you wouldn't be opening positions.

 

[willoneau]

A break out above N-bars high could be a trigger to start using a MA again as a filter.

 

[Zaxon]

So how would you turn that into a filter trigger?

It would have to have a length of time parameter. For instance, if a share price remained within +/-5% of a 200 day MA for 5 days, it tells you very little. But if it remained range bound for a year, you'd probably say it was a sideways trending market. So the number of days it's range bound around an MA confirms your conviction of the type of market it is.

The number of days range bound, the MA days, and the percentage would be left up to whether you're a shorter term trader vs long term investor.

 

[Ann]

In my own research, I have found the choice between EMAs vs SMAs isn't definitive. In one historic situation, the EMA would have been the right choice. In another, the SMA would have been. I don't think there there is a "right" answer as to which MA is better.

My effort is more spent on the number of days applied to the moving average. For instance, choosing a 50 day SMA vs a 100 SMA will have a much bigger impact on your outcomes compared with choosing a 50 day SMA vs a 50 day EMA.

I agree with what you are saying Zaxon. I am drilling into these MAs much closer than I would have in the past. I have been a long term buy and hold in the past so my MAs were set for long term. The difference between EMA and SMA was not a major issue over the longer term. However wanting to trade on a shorter term basis as in months not years I am looking closer at some of the finer points of MAs and also more regular use of the oscillators and other indicators as my view of a chart will effectively be short term and close up, so various shorter term indicators will be of more use to me now. Not that I am going to ignore the long term view, I need to know if there are any ancient falling overheads bearing down on me.

 

[willoneau]

I agree with what you are saying Zaxon. I am drilling into these MAs much closer than I would have in the past. I have been a long term buy and hold in the past so my MAs were set for long term. The difference between EMA and SMA was not a major issue over the longer term. However wanting to trade on a shorter term basis as in months not years I am looking closer at some of the finer points of MAs and also more regular use of the oscillators and other indicators as my view of a chart will effectively be short term and close up, so various shorter term indicators will be of more use to me now. Not that I am going to ignore the long term view, I need to know if there are any ancient falling overheads bearing down on me.

Would be interested to know the reason you are reducing your time frame?

 

[willoneau]

It would have to have a length of time parameter. For instance, if a share price remained within +/-5% of a 200 day MA for 5 days, it tells you very little. But if it remained range bound for a year, you'd probably say it was a sideways trending market. So the number of days it's range bound around an MA confirms your conviction of the type of market it is.

The number of days range bound, the MA days, and the percentage would be left up to whether you're a shorter term trader vs long term investor.

Using say a 30 or 50 bar high break out would be similar but i wasn't thinking of it as a time filter which is an interesting thought Zaxon.

 

[Ann]

Would be interested to know the reason you are reducing your time frame?

I recently retired and have more time to devote to it now. I may end up useless at it and go back to long term, tail between my legs but I want to give it a decent go. I enjoy the whole process and made a promise to myself that one day I would spend much more time working the market.

 

[willoneau]

I don't use any fundamental analysis, so my question is how helpful will that be on the lower time frames if you use it ?

 

[Ann]

I don't use any fundamental analysis, so my question is how helpful will that be on the lower time frames if you use it ?

I am not sure if this was a question for me Will... I don't use fundamental analysis other than identifying what the business is and checking the overarching influence. Is a company influenced by the price of a commodity, if so I need to know the price of that commodity and which direction is it traveling. I try to work out what is likely to have an external influence over a company but it is very basic stuff and tends to always come back to a chart ultimately. Anytime I have tried to use FA it has ended in tears.

 

[Zaxon]

However wanting to trade on a shorter term basis as in months not years

That's an interesting journey you're going on investing to trading. I've recently split my portfolio in twain, with half being longer term, and the other half shorter. However, unlike you're adventurous self, I use the same method for both, just a different time frame.

 

[Zaxon]

I don't use any fundamental analysis, so my question is how helpful will that be on the lower time frames if you use it ?

Fundamental analysis is really in the realm of the longer term investor. Shorter term works on sentiment/momentum. Traders can use fundamental "events", however. An earnings report would be an example.

 

[tech/a]

You can certainly use T/A longer term

(1) Develop a longer term system——Here in my opinion Oscillators
Have a place.
(2) Trade with a discretionary plan and use T/A for trade management
(3) Use Fundamental analysis and use T/A for trade Management.

 

[aus_trader]

Very good discussion so far and I think the important outcome in terms of MA's is to possibly use it as a market filter applied to an index. For individual stocks it may also be used as a filter to stay with a trend but not a good tool for trade management in my opinion. The main reason MA's are not particularly good for trade management in terms of Stop Losses etc is that they behave poorly in range bound or sideways price movement. Therefore the MA based SL will be hit as soon as the price goes sideways or stalls for a while