Moving Averages - What do you use ?

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Old Feb 7, 2007, 7:28am   #1
 
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Moving Averages - What do you use ?

I am considering adding a couple of Moving Average lines to my daily Dow chart just to confirm where the market might be going in the short term. Could other members report back with comments about which MA's they use for confirmation/triggersand why. I do understand they are lagging indicators and should not be used in isolation, so what other indicators would you use with them ?

I look forward to your replies..........

Nick
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Old Feb 10, 2007, 10:37am   #2
 
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Quote:
Originally Posted by nkruger
I am considering adding a couple of Moving Average lines to my daily Dow chart just to confirm where the market might be going in the short term. Could other members report back with comments about which MA's they use for confirmation/triggersand why. I do understand they are lagging indicators and should not be used in isolation, so what other indicators would you use with them ?

I look forward to your replies..........

Nick
Hi Nick

Really surprised and disappointed that you haven't had a reply to your post yet. I was looking forward to some insight from others here and their thinking. wasp is the man to ask about MA's, hes using them in isolation I believe.

myself I am using a short period SMA, nothing else, for trend and trigger, dont worry about the lag, if it wasn't there they wouldn't work as they do.

If you haven't found these posts & articles on the subject yet, they are a place start for ideas and trading with MA's


wasps journal

http://www.trade2win.com/boards/trading-journals/20529-journal-trader-formally-known-wasp.html


Moving Averages

http://www.trade2win.com/boards/technical-analysis/8503-moving-averages.html


Indicators working on different time scales

http://www.trade2win.com/boards/first-steps/22873-indicators-working-different-time-scales.html


Hey Fx Pimp My Moving Average. Thud. Introducing Crouching Snake Hidden Y Fronts.

http://www.trade2win.com/boards/forex/21098-hey-fx-pimp-my-moving-average-thud-introducing-crouching-snake-hidden-y-fronts.html


The Power of a Simple Moving Average

http://www.esignallearning.com/educa...706/072806.asp


If you know of any others post em up on here, I would be grateful.

cheers

don
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Old Feb 10, 2007, 12:01pm   #3
 
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nkruger started this thread Thanks for those threads Don, that'll provide me with some reading over this weekend. If anyone else has some input please post it - Don't Be Shy !!

Nick
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Old Feb 10, 2007, 12:21pm   #4
 
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I use moving averages too as part of a trend following method, but I don't use them mechanically - ie there is a degree of subjectivity involved. The idea for this comes from Chick Goslin's 'Trading Day by Day' book, and for example if you use a 50-day MA for the long-term trend (as I do), you should learn to anticipate imminent trend changes.

It's a bit difficult to explain briefly but basically if the 50MA is down, but the price is now heading up, and the numbers dropping off the back of the MA calculation look like within the next few days they'll be lower than the new prices coming on the front end, then you can call the trend 'up' and act accordingly. It takes a bit of practice and I then use a MACD (with non-standard settings) for timing and will trade in the direction of the longer term trend (subject to anticipation). You can also apply 'anticipation' to the MACD. So it wouldn't work if you were looking for definitive triggers from indicators, but if you don't mind a bit of gut feel and intuition it works quite well.

I've posted an old random chart of Cocoa - while the 50MA is clearly down, and the circle shows the 'back end' of the data falling out of the 50MA, you can see that within a few days the prices fall quite sharply to around the level that the prices are now: one would anticipate that the 50MA line is going to shallow out considerably. If in the next few days the price started to rise significantly and my MACD trigger suggested a buy, and it moved out of the 850-820 range, then I would anticipate the 50MA turning up pretty quickly too, so would not allow the current falling MA to offset the MACD trigger - conversely if the price were to start to fall and I got a sell signal from my MACD then it would pretty quickly reinstate the negative momentum in the 50MA and that would be a strong sell signal for me.

The second trick is to find good trend following markets, which is essentially a function of volumes traded - ie currencies, interest rate and index markets will generally trend more reliably than individual stocks and so are more suited to MA type methodologies.
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Old Feb 10, 2007, 12:49pm   #5
 
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Nick,

take a look at the following threads.

http://www.trade2win.com/knowledge/a...the-dow-jones/

http://www.trade2win.com/boards/show...0&pagenumber=1

In the US Indicies board you'll find Weekly summaries on the Dow by Chartman, invaluable imo.

Cheers
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Old Feb 10, 2007, 4:22pm   #6
 
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Nick,
If you look at my journal, I am testing out a MA crossover system.

My other trading system uses two MA's (medium & long term) merely as a guide to the direction of the price trend. In both cases, I use exponential moving averages.
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Old Feb 23, 2007, 5:58pm   #7
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For my mechanical analysis I like to use 4-18-24 and 50 day moving averages.
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Old Feb 23, 2007, 7:10pm   #8
 
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bollingband is a key feature in ta. it combines standarddeviation and moving averages

everything else is more or less equal to bb.
every price model is based on averages in price and/or in volume.

the main difference of all models is the time frame.

the time frame is directly correlated to your absolute risk.

================================================== ====
i.e. my time frame is 1minute my absolute risk per position is 50$ to 100$
================================================== =======

Last edited by pssonice; Feb 23, 2007 at 7:14pm. Reason: adding one important issue
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Old Feb 26, 2007, 11:24am   #9
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For what it is worth in my experience trading off a MA alone won't really work or performance is not much better than cash (ie 8% approx return using 200 day exponential lag to buy or sell the FTSE)

Ideas I've worked on and seem to work well are to take short term moving averages and use them as defining the trend then take buying or selling chances in a market based on these lines intra day.

For example on the FTSE I take a 5 day simple MA and if the market is above it I wait for dips to buy with a stop at the 5 day sma, if FTSE is below it I'm looking to sell strength with a stop at the 5 day sma. It seems to work quite well but of course depends on sticking to it!

For intraday entry I use another lag usually 21 sma on 1 min chart and if buying a dip wait for a positive cross on this and confirmation from MACD and RSI to re enter on the long side.

In Pit bull by Buzzy Schwartz I think it was the 10 day sma he used to define a market and as far as he was concerned, if the market was above it it would be going higher, below it and it was going lower.

I like building my own in excel and playing around with them to see how they work.

For calculate a simple moving average (or lag as I like to call them!) simply add the last 'X' days and divide by 'X'.

To calculate an exponential lag is more complicated and I'd suggest looking at resources on seykota.com. There is great article on lags and even a project to work through building a system based on lag crosses.

Stephen McCreedy
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Old Feb 26, 2007, 11:46am   #10
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10 & 21 EMA's, 50 SMA
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Old May 12, 2007, 2:24pm   #11
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Old May 15, 2007, 9:52am   #12
 
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