How's this? A simple MA crossover strategy

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Old Dec 29, 2004, 8:07pm   #1
pb
Joined Apr 2004
How's this? A simple MA crossover strategy

Finally: a strategy I can call my own...I mean, can you believe it?

This is something I've been working on for past few months. It's a simple strategy with a strong visual component. All comments about enhancements (or to say it's a pile of cr*p) are very welcome.

The technical setting is as follows:
1. Daily chart
2. Fast MA: 5 day WMA
3. Slow MA: 12 day WMA
4. MACD-H (10, 21, 7)
5. Sharescope stop-loss line (trailing from below and above) at 2.3%.

These settings can be tweaked. I've chosen them simply because they feel 'alright'.

Markets to trade: a selection of UK stocks. I'd like to concentrate on the following 10:
AZN, AV., BG., BATS, GSK, HSBA, KGF, REL, RBS and SBRY. These will form my entire trading portfolio.

Go long (and cover shorts) when at least two of the following happen:
a. A bullish MA crossover is about to occur
b. The fast MA has turned up
c. The closing price has gone above the Sharescope stop-loss line
d. MACD-H is about to become positive

Exactly opposite for short positions.

Maintain a 2ATR stop loss, risking 2% at any time on any position. Add positions every 2ATR movement in your favour, i.e., you don't add a position until all prvious positions are profitable or at break-even point.

The condition of 'at least two' occurring is a filter. The Sharescope stop loss line acts almost like a parabolic SAR line.

I have no resource to back test it, I don't think you can back test it, because it would be pretty difficult to program as there are discretionary elements. Also I plan to add some candlestick patterns in the entry/exit criteria.
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Old Dec 29, 2004, 8:45pm   #2
Joined Aug 2004
Quote:
Originally Posted by pratbh
Finally: a strategy I can call my own...
Excellent; I hope it works well for you.

Quote:
Originally Posted by pratbh
This is something I've been working on for past few months.
Then you are brave indeed to post it here inviting "enhancements" from people who haven't traded it at all and don't really know anything about it: I hope you won't take them too seriously or find them too off-putting!

It looks very interesting to me, and not unrelated to the way I used to trade (and reasonably profitably) when I first started a few years ago.

I have no enhancements to suggest (sorry) but if you feel like being drawn into a chat about it, I'd be interested to know:-

1. Why you're using WMA's rather than EMA's or SMA's?

2. How you came to choose those parameters for the MACD-H? (Presumably you've played around with various different settings and this one looked the best in some way?).

3. Whether you've also tried the same thing with a longer periodicity of WMA (e.g. 10 and 24 days instead of 5 and 12? Would presumably give fewer trades with a higher strike-rate but maybe less profitable overall?).

4. Why you plan to concentrate on those 10 stocks in particular (i.e. is it mostly because those are the stocks you want to trade and this system was designed around them, or because this was the system you designed and it seems to work better with those stocks than with anything else?)

Your 2ATR stop-loss and 2% risks, adding further increments of 2% after each is breaking even or in profit sounds clever to me. Maybe not quite so "simple" after all!

I certainly agree that you can't realistically back-test it, but you can always forward-test it on paper if you want to? Presumably you've been doing one of these things anyway, to some extent, to have decided that it's your "chosen system"?

I don't subscribe to Sharescope any more and have no need of it for my current trading, so I can't easily look at it myself ... rather wish I could, though. Wish you very good luck with it and with any potential enhancements!
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Old Dec 30, 2004, 9:11am   #3
 
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Joined Mar 2003
i think you will get better results trading these on the snap back on support and resistance levels.i u are trading cfd,you will be paying interest on the amount,so although these technical indecators show that the stock is overbought etc,it does not imply that it will move.correct me if i am wrong.
get the s/r levels from the weekly,trade the bounce.stop just under the s/r level.you might have to wait for the s/r levels,you will fare better
you muist clear the spread.this tactic you mentioned does not guarantee.with s/r levels,you are playing on euphoria and capitlation,ie human emotion,you should get bigger moves
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Old Dec 30, 2004, 9:55am   #4
Joined Jul 2003
pratbh - top marks for posting your system. Takes courage...

What's the relationship between the sharescope 2.3% StopLoss line and your 2ATR StopLoss? Which one triggers the exit?

You mention one of the entry criteria as being "a. A bullish MA crossover is about to occur" {my emphasis}. I've travelled that path myself and could write a book on the signals that were 'about' to do what I thought they would do - but didn't.

You need to be absolutely clear and precise in all your criteria or you will start making subjective interpretations and worse still, decisions based on those subjective interpretations and expectations.

As for enhancement, looks pretty 'busy' already, but you could try putting in slow stoch with 80/20 bars. Only going Short on a turn down below the 80 and Long on a turn up above the 20.
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Old Dec 30, 2004, 10:16am   #5
TWI
 
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pratbh,
Congrats, I hope it will make you lots of money in 2005.
Thoughts/Comments;
I echo Bramble in that I have found that unless the rules are very clear cut you will start to get subjective in your decisions. Maybe that is something that works for you however and in that case stick with it. If for example the MA cross is "about to" occur so you place the position and then it turns around and MACD widens once again do you immediately exit or stick with your defined exit criteria, same goes with the MACD-H?

Personally I do not have a any experience with the sharescope 2.3% thing. Would somebody mind explaining what this is? does 2.3% refer to % of last price?

It could be back tested providing "about to" is defined as a fixed value for the MACD on the WMA's and MACD-H
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Old Dec 30, 2004, 11:16am   #6
pb
Joined Apr 2004
pb started this thread Thanks very much for the replies. I will try to answer them one by one.

First Roberto
==============
To give you a little bit of background, so far I have been very profitable in stocks and rather bad in spread betting. I decided that instead of monitoring hundreds of stocks, I should be focusing on a chosen few. I work for Norwich Union, so I decided that I'd only trade AV. from now on. The whole system is built around how Aviva tends to behave and its average daily range. All the parameters are based on my experimenting with historical charts of AV. to see what setup 'feels right'.

I have since added more stocks to my SB portfolio, mainly liquid stocks who tend to behave well against my system.

I noticed that these WMAs generate quicker entry/exit signals compared to EMAs. The parameters of MACD-H are chosen so that the MA crossover happens roughly at the same time as the MACD crossover. Again, they are a result of my playing with different values to suit AV.

I have tried longer period of MA's but being an active (and impatient) man, I need more trades per month than a longer term MA system can catch. Just my personality.

The concept of not adding any positions until all previous positions have at least broken even is not entirely my original discovery. I faced this problem while dabbling with the Turtles method all of 2003. In Turtles, you add a position every N/2 advance while each position has a stop loss 2N away. Therefore in theory, you can have 3 positions and then the market can reverse taking out all 3 positions each at a loss. I recently came across the strategy of not adding positions until all others are >= 0, and have adopted it since.

Next dentist
============
I tried trading on the back of S/R. The main problem I fouund is that the nearest S/R might be too far away for my tiny SB account. If I follow the 2% stop loss rule, then my position size quite often becomes infinitesimally small. However, it's a valid method and I know many people trade it. I just need more money to trade it meaningfully.

Regarding spread, the method is designed around stocks which don't move very fast, but trade in a broad range (well most of the time :-). I envisage my average trade to last for 4 weeks and net on average 30 points, after spreads.

Next, Bramble
=============
There is no relationship between the 2ATR stop loss and Sharescope 2.3% stop loss line. I use the SS stop-loss line just as one additional entry filter, it's got nothing to do with my 2ATR stop losses placed in the market. Think about the SS stop-loss line as a parabolic SAR line and how such a trailing line generates an entry signal when broken. I played with Elder's Safe-zone stops, but had no idea how I can integrate that graphically with Sharescope.

About the 'about to occur statement': by that I mean a day when, for a long entry, the fast MA has turned up and has just touched the slow MA, but not yet actually crossed over. For the MACD-H, I check that, for a long entry, the MACD-H is only very slightly negative, and the MACD value line has just touched the signal line, but has not yet actually crossed it.

I didn't include stoch for a purpose, just to keep the number of indicators to a minimum. But thanks for the suggestion.

Finally, twalker
================
You got me there! I honestly don't know how they calculate the SS stop-loss line. I just played with various settings to see which one feels OK.

I have attached a chart for everyone's benefit. In the main chart, the green line is the SS stop-loss line.
Attached Thumbnails
av.gif  

Last edited by pb; Dec 30, 2004 at 1:28pm.
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Old Dec 31, 2004, 11:06am   #7
Joined Oct 2001
Hi Pratbh, good post ,try this for the MACD 3-10-16
regards
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Old Dec 31, 2004, 11:56am   #8
pb
Joined Apr 2004
pb started this thread Twiggy,
Thanks. Will check it out tonight.

Roberto,
You mentioned you used to trade profitably with a similar strategy and presumably don't use it any more. Was there any serious drawback of the strategy?
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Old Jan 1, 2005, 10:46am   #9
 
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Joined Jul 2003
pratbh
if you add adx set at 6
if you look at chart ulvr
the positive was rising, and is now running flat
the negative is running low
indicating that at the moment, no negative signs
but positive is still high at 40 but flat
if the negative starts to turn up
and positive starts to turn down
then the run up may be slowing down
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Old Jan 1, 2005, 2:17pm   #10
Joined Aug 2004
Quote:
Originally Posted by pratbh
Roberto, You mentioned you used to trade profitably with a similar strategy and presumably don't use it any more. Was there any serious drawback of the strategy?
I don't think so. I think I got off to a lucky start with it because the indices (on which I used it) were trending well at the time. It gradually became a little less profitable for me at about the same time that I developed an interest in cutting down on indicators and starting to understand price patterns, that's all. I didn't abandon it after a series of disasters or anything like that. My impression is that with sensible position-sizing and money management it will be profitable on anything "sufficiently trendy".
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Old Jan 16, 2005, 2:21pm   #11
 
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Joined Dec 2004
Quote:
Originally Posted by pratbh
Finally: a strategy I can call my own...I mean, can you believe it?

This is something I've been working on for past few months. It's a simple strategy with a strong visual component. All comments about enhancements (or to say it's a pile of cr*p) are very welcome.

The technical setting is as follows:
1. Daily chart
2. Fast MA: 5 day WMA
3. Slow MA: 12 day WMA
4. MACD-H (10, 21, 7)
5. Sharescope stop-loss line (trailing from below and above) at 2.3%.

These settings can be tweaked. I've chosen them simply because they feel 'alright'.

Markets to trade: a selection of UK stocks. I'd like to concentrate on the following 10:
AZN, AV., BG., BATS, GSK, HSBA, KGF, REL, RBS and SBRY. These will form my entire trading portfolio.

Go long (and cover shorts) when at least two of the following happen:
a. A bullish MA crossover is about to occur
b. The fast MA has turned up
c. The closing price has gone above the Sharescope stop-loss line
d. MACD-H is about to become positive

Exactly opposite for short positions.

Maintain a 2ATR stop loss, risking 2% at any time on any position. Add positions every 2ATR movement in your favour, i.e., you don't add a position until all prvious positions are profitable or at break-even point.

The condition of 'at least two' occurring is a filter. The Sharescope stop loss line acts almost like a parabolic SAR line.

I have no resource to back test it, I don't think you can back test it, because it would be pretty difficult to program as there are discretionary elements. Also I plan to add some candlestick patterns in the entry/exit criteria.

The words "about" trouble me. Too subjective. Quite often a MA or a MACD come close to crossing and do not. What is the measurement of "about". If you say DID cross, then there is no doubt or subjectivity.
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Old Jan 16, 2005, 3:22pm   #12
Joined Aug 2004
Quote:
Originally Posted by jtimpson
The words "about" trouble me. Too subjective. Quite often a MA or a MACD come close to crossing and do not. What is the measurement of "about". If you say DID cross, then there is no doubt or subjectivity.
Must say that I agree entirely with this, Pratik. MA's that are "about to cross" can actually turn into a "bounce" rather than a cross, which would be tradable (in some systems, anyway) in the opposite direction! The risk of jumping the gun on your MA crossover, if it's an intrinsic part of your system, is not only that you'll open a trade without the signal, but that you'll open one in the opposite direction to the preferred one.
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Old Jan 18, 2005, 10:35pm   #13
Joined Mar 2001
Hi, good luck with your strategy.. the use of the Shaescope STOP LOSS Line with SL held both up and down was a basic idea I muted many moons ago .. called BarNov's FTSE250 Indexicator.

But I hadn't got as far as looking at othet indicators to assist me weedle out the whipsaws. The only real thoughts I had oir received from other people's input was to perhaps use a 3EMA of 5EMA as a slight filter.

The use of the StopLoss line works much better with shares/indiuces that have low volatility.

Paul.
http://www.trade2win.com/boards/show...?t=2641&page=1
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