50 period MA ok for stop loss?

[dr.blix]

hi,

is this a good period to use for stop loss limits?

are there optimal periods that relate to volatility?

ta.

 

[KillPhil08]

You'll find that when a candle hits the 50ma it rebounds quite fast. Whether it will hold or not is anyone's guess. Try some backtesting to find out how often this will get hit during your trading strategy.

50ma would be good for trendtrading. But in all honesty, ditch the indicators.

 

[shadowninja]

What 'e said. I use MAs as a rule of thumb. Like a windsock.

 

[dr.blix]

i monitor buy/sell ratios on L2 and use price S+R as my primary indicators, but i'm just trying to get a plan/strategy together that involves a market driven stop loss gauge.

i've had huge drawdowns recently so in typical '**** about tit' fashion i want to get stops nailed correctly.

would using DP support points (correlated with chart S+R beforehand) as stops be better?

 

[shadowninja]

Backtest trades and see how many times it straddled the 50 MA before heading off in your trade's direction versus how many times it reversed and was a good place to have a stop.

 

[2be]

i monitor buy/sell ratios on L2 and use price S+R as my primary indicators, but i'm just trying to get a plan/strategy together that involves a market driven stop loss gauge.

i've had huge drawdowns recently so in typical '**** about tit' fashion i want to get stops nailed correctly.

would using DP support points (correlated with chart S+R beforehand) as stops be better?

I have found 50 EMA or 50SMA on M5 TF indicating the direction of a current cycle well, however I do use the gearing between M5, M15 and H1 and keep an eye on H4 and the daily. On H1 I use 72EMA and on H4 I use 89SMA. On all TFs I use 21 EMA. This way I am trying to discern the rythm of the market by observing the cycles on the different TFs and how do they relate to one another. G/U has been offering good rewards, providing one is not married to a position, but at the same time allows for the trade to breath, especially with such volatility. I have found that it is better to go in the direction of the cycle indicated on the H1 TF, though M15 cycles have been also good, in relation to M5 entires and exits. Utill about six months ago I would never think that I would be trading using M5 TF, but in the rescent volitile market M5 TF seems to allow for a more precise entry, as I do pay attention to the market structure, rythm and cycles.
Keep the good pips flowing into your account.
Happy trading,
2be

 

[Biobob]

I'm pretty new to all this, but I tend to find the 8ma works well............. certainly for day trading...........

 

[2be]

I'm pretty new to all this, but I tend to find the 8ma works well............. certainly for day trading...........

If it works well for you - do not change it.
There are many sucessful approaches to trading. 8MA is relatively close to the price action, and 50MA is removed further, providing depth to interpret the current price position in relation to the direction of the larger market move.
Can you imagine traders 40 or so years ago plotting MAs by hand on their paper charts, I think they must have paid more attention to the most important - price bars, and it paid them well.

 

[dr.blix]

thanks for the info chaps, good idea on the back testing ninja, and some interesting ideas on different time frames 2be thanks...not played with time frames yet, just 1M chart and 20 and 50 period MA's.

one question though, why would you need to use different time frames if you're already using different period MA's on a 1M or 5M chart...would the MA's already in use not be enough to show the trend?

i suppose it would depend on the volatility/liquidity of your instrument, but i would have thought you'd get stopped out a lot using an 8 MA?

 

[2be]

thanks for the info chaps, good idea on the back testing ninja, and some interesting ideas on different time frames 2be thanks...not played with time frames yet, just 1M chart and 20 and 50 period MA's.

one question though, why would you need to use different time frames if you're already using different period MA's on a 1M or 5M chart...would the MA's already in use not be enough to show the trend?

i suppose it would depend on the volatility/liquidity of your instrument, but i would have thought you'd get stopped out a lot using an 8 MA?

The matter of different TFs is related to the gearing between the lower and a highier degree of the market structure. It is present in the interpretation of the Eliott Waves, the price action on the different TFs, in using historic cycles like Delta and so on. The idea is to be aware of the direction of the market on a highier degree structure, whatever one uses, and use this observation on a lower degree strucure. TFs fall well within this concept of gearing. The minimum is to have two insights to compare though it migth be more but not too many (3 or 4 shall do well), eg, M5 and M30 TFs when the ratio is 1 to 6. Alexander Elder has explained this principle well in one of his books, and I am sure he is not the only author to write about gearing. Lets say that the direction on the M30 is decisively up, and the 50EMA on M5 is turning up, it it likely for the move up to continue for some time as it is less likely for the direcion to change on M30 then on M5. It is purely the matter of degree of probability. I like this approach as it is a dynamic way to assess the market and it brings the market's momentum to my attention in a way that is tradable. Adding to it a simple and workable understanding of EW, fibs and S/R principles will create a basis of a good trading strategy.
Hope I have explained this simple and logical priciple of gearing well enough to get your interest in studying it further.
Best wishes and many good trades,
2be

 

[dr.blix]

thanks 2be, i appreciate you taking time to explain that, it does indeed sound like an important element to factor into a strategy.

best,

bryan