Hello,
I'm looking for some ideas about trading Forex using moving averages. Normally I don't find using moving averages to be all that useful. Like all technical indicators, moving averages are simply price distortions. They can be useful distortions mind you as they can help filter out the random noise, but I think that over all they are inferior to simply comparing price to past price. For example, say I were to use a 200-day SMA as a trend filter taking only longs if the price was above it's 200-day SMA and only shorts if the price was below it's 200-day SMA, that might be a useful filter but my tests suggest it's not as effective as simply saying the trend is up if the price opens higher than it did a 100 days ago and down if the price opens lower than it did one 100 days ago. The past price seems to work better than the average (or distorted/filtered) price.
But one thing I found moving averages to be useful for was 'timing trades'. I wrote a system about trading using moving averages on my blog.
The way I found them to be useful was in a system where you compared price to past price to determine the direction of the long term trend, taking only long trades when the trend was up and only short trades when the price was down, and then used delayed moving averages to set entry and exits levels on orders to attempt to enter and exit at relatively favourable prices.
Longs are entered in uptrends when the price hits (Yesterday's Low+The Day Before Yesterday's Low)/2 and the long trades are exited when the price hits (Yesterday's High+The Day Before Yesterday's High)/2.
Shorts are entered in downtrends when the price hits (Yesterday's High+The Day Before Yesterday's High)/2 and exited when the price hits (Yesterday's Low+The Day Before Yesterday's Low)/2.
The entry and exit orders are adjusted at the end of each day.
The results of the back testing looked fairly promising and are included on my blog.
What do you guys think of the concept of 'fishing' for favourable prices like this? And, more importantly, what are your reasons for thinking what you do. I.e. why should or shouldn't aiming for relatively favourable prices as a trading concept work?
I'm looking for some ideas about trading Forex using moving averages. Normally I don't find using moving averages to be all that useful. Like all technical indicators, moving averages are simply price distortions. They can be useful distortions mind you as they can help filter out the random noise, but I think that over all they are inferior to simply comparing price to past price. For example, say I were to use a 200-day SMA as a trend filter taking only longs if the price was above it's 200-day SMA and only shorts if the price was below it's 200-day SMA, that might be a useful filter but my tests suggest it's not as effective as simply saying the trend is up if the price opens higher than it did a 100 days ago and down if the price opens lower than it did one 100 days ago. The past price seems to work better than the average (or distorted/filtered) price.
But one thing I found moving averages to be useful for was 'timing trades'. I wrote a system about trading using moving averages on my blog.
The way I found them to be useful was in a system where you compared price to past price to determine the direction of the long term trend, taking only long trades when the trend was up and only short trades when the price was down, and then used delayed moving averages to set entry and exits levels on orders to attempt to enter and exit at relatively favourable prices.
Longs are entered in uptrends when the price hits (Yesterday's Low+The Day Before Yesterday's Low)/2 and the long trades are exited when the price hits (Yesterday's High+The Day Before Yesterday's High)/2.
Shorts are entered in downtrends when the price hits (Yesterday's High+The Day Before Yesterday's High)/2 and exited when the price hits (Yesterday's Low+The Day Before Yesterday's Low)/2.
The entry and exit orders are adjusted at the end of each day.
The results of the back testing looked fairly promising and are included on my blog.
What do you guys think of the concept of 'fishing' for favourable prices like this? And, more importantly, what are your reasons for thinking what you do. I.e. why should or shouldn't aiming for relatively favourable prices as a trading concept work?
