Two moving averages and the macd

This is a discussion on Two moving averages and the macd within the General Trading Chat forums, part of the Reception category; Originally Posted by tomorton Yes, experiment is right, it won't take long. A 50 or 100 is good for confirming ...

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Old Oct 5, 2017, 10:55pm   #9
 
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Originally Posted by tomorton View Post
Yes, experiment is right, it won't take long. A 50 or 100 is good for confirming what is the long-term trend: personally I find the 200 so long its unresponsive. You can take the risk of a counter-trend trade against this trend but you'd have to have a damn sure set-up for the short-term win.

A short MA crossing a somewhat one is good for XO signals, 6/21 will give you plenty as they are both so short, sometimes just a few days apart, and many will not follow through even with the underlying long-term trend in your favour.

XO's aren't a complete strategy in themselves - its the uptrend that's important in making price go up, not the MA XO entry signal.
Thanks again tomorton. Sorry, last post from me strange question, what's the XO signal?
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Old Oct 5, 2017, 11:49pm   #10
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Originally Posted by crashburn1975 View Post
Hi everyone. I am just starting out in trading and I have some experience although I class myself as a novice and I am still studying the different methods. I am having difficulty with one area in particular and I cannot seem to find an answer anywhere.

The macd indicator has a default of 12 short, 26 long and 9.

When using the macd indicator what is the best time frame in terms of using two moving averages on the chart above macd i.e. 6,21, or 50, 100 and so forth?

Whatever moving average time frame you use, should the macd always be kept in the default settings?

Sorry if this sounds technical or confusing, hope I got that out right.

Would appreciate any feedback. Thanks.
If you choose to embark on this path you need to know what kind of territory you are stepping into. Don't focus on the tree as you are actually stepping into a forest.

MA and MACD are by nature lagging indicators. You need to understand the conditions in which they work well and the conditions in which they are just practically useless. Curve fitting settings is a dead end because the basic premise is that history repeats and will somehow project likewise into the future. The market is a living organism of investor making decisions. While people are driven by greed and fear in their decision making, the news and fundamentals driving investments decisions are different across instruments and markets. Curve fitting assumes history repeats in the same manner and a one size fits all approach across different markets.

I recommend you read the book "Technical analysis for the trading professionals" by Constance Brown. The book discussed in great length how to use oscillators, and what their limitations are.

As a caveat, my opinion is biased as I am not a fan of indicators.
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Old Oct 6, 2017, 7:10am   #11
 
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crashburn1975 started this thread
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Originally Posted by Brumby View Post
If you choose to embark on this path you need to know what kind of territory you are stepping into. Don't focus on the tree as you are actually stepping into a forest.

MA and MACD are by nature lagging indicators. You need to understand the conditions in which they work well and the conditions in which they are just practically useless. Curve fitting settings is a dead end because the basic premise is that history repeats and will somehow project likewise into the future. The market is a living organism of investor making decisions. While people are driven by greed and fear in their decision making, the news and fundamentals driving investments decisions are different across instruments and markets. Curve fitting assumes history repeats in the same manner and a one size fits all approach across different markets.

I recommend you read the book "Technical analysis for the trading professionals" by Constance Brown. The book discussed in great length how to use oscillators, and what their limitations are.

As a caveat, my opinion is biased as I am not a fan of indicators.
Hi Brumby

Many thanks for that information especially the book recommendation.

Regards
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Old Oct 6, 2017, 8:11am   #12
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Thanks again tomorton. Sorry, last post from me strange question, what's the XO signal?

XO shorthand for cross-over.
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Old Oct 15, 2017, 3:41pm   #13
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I would recommend ditching the MACD and MAs as all you are doing is outsourcing your decision making to a lagging indicator. Does price move because the macds are crossing? Does an institution choose to buy, right now, this very instant, because price has touched an Ma? Of course not. The signals these indicators generate work sometimes because by the law of averages (a real one!) then price will occasionally move at the same time as one of the 'signals' that these indicators generate. But do these indicators predict a price move? No. Not a chance.

I would recommend looking at how to identify when/where trapped traders are and then trade against them. Volume profile and market theory is the way to go. Some of the language is definitely overly flowery but if you want to make it then understanding the dynamics of price, volume etc is vital.
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Old Oct 15, 2017, 6:37pm   #14
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I would recommend ditching the MACD and MAs as all you are doing is outsourcing your decision making to a lagging indicator. Does price move because the macds are crossing? Does an institution choose to buy, right now, this very instant, because price has touched an Ma? Of course not. The signals these indicators generate work sometimes because by the law of averages (a real one!) then price will occasionally move at the same time as one of the 'signals' that these indicators generate. But do these indicators predict a price move? No. Not a chance.

I would recommend looking at how to identify when/where trapped traders are and then trade against them. Volume profile and market theory is the way to go. Some of the language is definitely overly flowery but if you want to make it then understanding the dynamics of price, volume etc is vital.
That's quite interesting. Would you be willing to explain where and how we can find the trapped traders ?

According to our sherlock holmes wannabe who is called darkie, there are some trapped short traders in DAX at the red line locations. Would you agree with this assessment and would you recommend trading against them ? I am thinking of trading against them myself, but my gut tells me that's the wrong thing to do. Also data on bund suggest a reversal in DAX. I have gone through your posts and believe you are knowledgeable on bund. So I am curious of you views on both bund and DAX.

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Last edited by EnlightenedJoe; Oct 15, 2017 at 6:51pm.
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Old Oct 15, 2017, 7:05pm   #15
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That's quite interesting. Would you be willing to explain where and how we can find the trapped traders ?

According to our sherlock holmes wannabe who is called darkie, there are some trapped short traders in DAX at the red line locations. Would you agree with this assessment and would you recommend trading against them ? I am thinking of trading against them myself, but my gut tells me that's the wrong thing to do. Also data on bund suggest a reversal in DAX. I have gone through your posts and believe you are knowledgeable on bund. So I am curious of you views on both bund and DAX.

Click the image to open in full size.
Hey there, what time frame do you trade-is it daily/weekly?
Yes there could well be trapped traders in the dax as those people who are short (ltop of swing to the left of current price) will be hurting if they are still positioned short.But they might not be short still.

Large traders use stops that are always clustered above major highs and lows. They use them to close out large positions and open up new ones in the other direction. Stop hunting is actually liquidity hunting! Or, of course, price just keeps on going. That's trading for you.

In terms of finding out where trapped traders are, look at failed 1-2-3 patterns, or M and W patterns (think it might be called a teacup pattern?!). Why does price take off when it hits a certain zone in these patterns? Clue-people are trapped.

Apologies but no charts on my phone!
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Old Oct 15, 2017, 7:17pm   #16
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Originally Posted by EnlightenedJoe View Post
That's quite interesting. Would you be willing to explain where and how we can find the trapped traders ?

According to our sherlock holmes wannabe who is called darkie, there are some trapped short traders in DAX at the red line locations. Would you agree with this assessment and would you recommend trading against them ? I am thinking of trading against them myself, but my gut tells me that's the wrong thing to do. Also data on bund suggest a reversal in DAX. I have gone through your posts and believe you are knowledgeable on bund. So I am curious of you views on both bund and DAX.

Click the image to open in full size.
Just had a quick look at the bund as was long on Friday. Look at the 5 min chart and look at about 3.10.and 3.35pm. Price tried to move lower and it couldn't. People were selling.and when it didn't.move lower? Trapped traders. I was helped as I use cumulative delta which showed lots of traders selling at.market price so I had this extra info. You need to have volume info-futures has this. Spot fx doesn't.
Look up cumulative delta. Heavy selling and price is at support and doesn't move lower. What does that tell you. I've just handed you the keys to the mint
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