MA Cross-Over Strategy for the Newbie

TraderNumber7

Well-known member
376 45
Often times, we see a post that reads something like this:

Hello T2W!

I'm a total Newbie and I'm ready to learn how to trade successfully. I want to know how I can use a simple Moving Average Cross over System, to consistently make profits. I'm open to suggestions and I am ready, able and willing to learn. What MA periods should I use and what time-frame is best to trade?

Thanks,
Newbie
--------------------------------------

My answer to the Newbie is this: If you want to use simple MAs, then you need to become a Tactical Combat Trader. Which means that you have to go to Tactical Combat Trader School, where you can teach yourself to become a fighter, survivor and winner.

Using the MA:

The period for each MA is 21 and 7 respectively. The MA type almost doesn't matter, but go ahead and use EMA. Set both EMAs to calculate their respective lines on Close. Set 7 to Fast and 21 to Slow. Set Fast line to color Green. Set Slow line to color Red and plot both MAs on the M1 chart.

Use a demo account (a no brainer), until you can consistently pull down at least 30 pips a day (minimum). This is not hard, nor is this difficult, AFTER you've understood the reasons behind why this works. Until you discover those reasons, it will be difficult to handle the losing trades that will come with such a method.

The fact of the matter is that in order for this to work at optimal levels, you need additional indicators and/or knowledge that I am not able to give you. However, after you spend some time with this "method," you will come to realize exactly what those indicators should measure and what information they need to tell you, in order to optimize this method into a trading strategy. If you get really good, then you won't need any indicators at all, but that will require that you spend a lot of time, working this methodology.

This is Trading 101 and it does not get much more simple than this for the Newbie. This method, if used correctly and if studied long enough, can teach you about Timing, Direction and Magnitude and give you some leads on how to start thinking outside the box on price behavior. Probability and Money Management Modeling, are different components and should be learned separately.

Basic charts needed:


  • Monthly
  • Weekly
  • Daily
  • 4 Hour
  • 1 Hour
  • 30 Minute
  • 15 Minute
  • 5 Minute
  • 1 Minute

Chart type:


  • Candle Stick

Optimal trade logic: (very rare)

Long if;
Monthly Candle = Green
Weekly Candle = Green
Daily Candle = Green
4 Hour Candle = Green
1 Hour Candle = Green
30 Minute Candle = Green
15 Minute Candle = Green
5 minute Candle = Green
and if;
Green line crosses Red line
Short if;
Monthly Candle = Red
Weekly Candle = Red
Daily Candle = Red
4 Hour Candle = Red
1 Hour Candle = Red
30 Minute Candle = Red
15 Minute Candle = Red
5 minute Candle = Red
and if;
Red line crosses Green line
General trade logic: (high frequency - skills development)

Long if;
Green line crosses Red line
Short if;
Red line crosses Green line
NOTES: (you need to read each one very carefully)

*** Set your trading platform to execute all market orders with a 5 pip Stop. Exit net positive positions when opposing trade logic triggers opposing order - before - position turns net negative. (assume the spread as lost capital and the cost of doing business)

*** At the outset, it should be easy to see that rarely will the market generate Trade Logic conditions that are always optimal and that conform to the first set of rules above. However, plenty of entries will existed under the General category of trade logic. The not so obvious lesson here, is that the General trade logic will net you the most significant education (in the shortest period of time) in Price Behavior and the absolute need for proper Money Management in any form of trading. Remember, this is Trading 101. If you learn the lessons well in real-time, you will learn a lot about how to properly enter the market and how to properly exit the market.

*** To learn the lesson well, stick to the M1 chart for all entries and exists. The M1 Price Behavior will burn into your visual memory - that's good. Eventually, you will learn that Price "Behaves" the exact same way in all time-frames and that will make it abundantly easier for you to learn how to enter and exist on larger charts. The M1, is a very fast Teacher and having the added pressure of trying to exit every position with net positive gains, will accelerate the lesson even further. It will focus your mind on the most efficient reversal and continuation patterns that the market provides on a routine basis.

*** This is a manual trading methodology and a physically intensive process - do not allow outside distractions in your trading office. Your mental focus, will determine your level of success and/or failure. Don't allow disruptions, or you will miss the point of the entire exercise. Always remained focused on M1 and your Fast -vs- Slow lines.

*** Google the terms: MFE and MAE as they relate to trading. For each trade, note the respective MFE/MAE in absolute value and in Ratio form, where you divide MFE by MAE to obtain the ratio. The smaller the ratio, the more your skills are improving and the more you are learning about Real Magnitude. Keep a log of this data - Excel is preferable as you can do analysis on the data later.

*** This process is for your learning and skills development. This is to show you that you can consistently net profits in the currency markets -IF- you learn the lessons that Magnitude has to teach. The concept of Magnitude will become readily apparent to you, as you progress through this process.

*** Keep in mind that this is NOT an optimized Trading System and your results will NOT therefore, be optimal. Optimal "conditions" for the "trade logic" were given, to help you better understand the need for Directional synergy in higher time-frames, as you develop your own Trading System down the road. (very important)

*** This is NOT a "grail" methodology. However, with the proper skills added, one can turn this method into a profitable Trading System - with a lot of work, creative thinking and outside the box solutions. None of which can be given to you through a post on the internet!

*** The actual Trading System employing a more advanced version of this methodology (one of three different trading systems that I have developed), does not use a Stop. The 5 pip stop that you see above is psychological training tool for you. Your brain needs to understand that if you trade the correct currency pair, during the right part of its Directional Life-Cycle, your winners will outweigh your losers, nearly all the time. When I run this particular system, I use multiple-pairs with unique characteristics in relation to each other, so I don''t need a Stop. This "method" is NOT that advanced Trading System, so use the Stop level as stated above.

You can and will (if you stick with it) learn a lot not only about yourself as a trader, but about the daily life-cycle of your currency pair. If I were a new trader, I would spend quite a considerable number of hours in front of my computer screen each day using this set-up, until I could predict the M1 Price Behavior of my currency pair at will.

*** This trading "methodology" DOES NOT tell you where price is going for the next billion number of pips, nor does it need to. This methodology will teach you one of the most important lessons that any new trader can learn about currency pair trading: Why Magnitude is so important to consistently being profitable. The reason this is such a good tool for learning, is because every major Bull or Bear run, starts with M1.
----------------------------------------------------

I call this method, Trade Combat Maneuvering (similar to Aerial Combat Maneuvering), where you learn to keep your adversary in front of you at all times. You might not understand that terminology right now, but after many hours engaged with the market this way - you will.

Welcome to Tactical Combat Trader School. You will teach yourself how to push your tactical trading skills to the limit. You will teach yourself how to fight and how to survive. You will teach yourself how to fight and how to win.

If you graduate, you get to join the 65th Aggressor Squadron, where harassing other traders in the market is considered sport. ;)

Let me know if you need some help in setting up your HUD (trading screen). Remember, the hard-deck for this training HOP is 5 pips. No more, and no less. Let the trade logic be your Limit for now, until you acquire more combat data in the form of MFE/MAE absolute and ratio performance.

In a more advanced step, you will take the MAE/MFE data and start comparing that to the increasing uniformity in the charts with the optimal trade logic rules. To optimize performance, you will need to take a more advanced step and go inside the MFE/MAE data to locate the point at which that ratio begins to get smaller, as you use more Directional synergy in the charts of the optimal trade logic rules.

The goal is to work your way towards finding the optimal Directional synergy in the charts, by using MFE/MAE historical data. This is as advanced as I will be able to take the discussion about how to trade using only two MA's. The rest belongs to my system and I'm not giving that away. However, with some outside the box thinking, you can build your own.

Now, get those charts and MAs set up properly! Newbies need to learn how to survive - first. Your best offense, is a better defense. And, that is what this will teach you. No defense - no long term success. That's the nature of this business. You need Dog Fighting skills.
 

TraderNumber7

Well-known member
376 45
Nubes:

Let me know when you have your flight suits on and are ready to go. And, don't forget to wear your g-suit. The g that M1 pulls can be hard at times, but the duration will be low. I want to make sure we keep the blood in your head, where it belongs. ;)

This is not for babies, whiners, moaners or complainers. This is for Nubes who are ready to strap it on, and get some skills under their belt. If you think you have the right stuff - then step it up and grunt like you mean it.
 

theroguetrader

Well-known member
407 36
what about 8/21 SMA


when the fast MA crosses over the slow MA either up or down, wait for a " safe " entry after the cross - in the direction of the trend -

if the trend expands, trail the pullbacks & ride it as far as it will pop !!
 

wackypete2

Legendary member
10,229 2,055
This is not for babies, whiners, moaners or complainers. This is for Nubes who are ready to strap it on, and get some skills under their belt. If you think you have the right stuff - then step it up and grunt like you mean it.

Good opening post, but this statement is the very first step to get past.

Peter
 

TraderNumber7

Well-known member
376 45
what about 8/21 SMA


when the fast MA crosses over the slow MA either up or down, wait for a " safe " entry after the cross - in the direction of the trend -

if the trend expands, trail the pullbacks & ride it as far as it will pop !!


Reads good. Not much difference in the MA ratio spread and letting it pop is always a good idea.

However:

- How does one define this thing called the "trend?"
- How does one define "safe entry?"

Trading well, is all about making good decisions that lead to price movements that will expand enough in the direction of your trade to comfortably egress from the position with a profit that actually moves the needle on your goals. Those 'decisions' are predicated on understanding the definitions given to the inputs the trader uses in their trade logic.

Newbie Trader Tip:

Whenever language or terms enter into your trading decision that are not clearly defined, that's a Red Flag on the Trade Logic. Since trading is mission critical, red flags in trade logic are not allowed by protocol. It is not that you have a bad idea. However, until you can accurately and completely define the language or the terms that produce the Red Flags, when something goes wrong, you won't have metrics to help you figure out what went wrong, why it went wrong and most importantly, whether or not it can be fixed, without ruining some other aspect of the Trade Logic. That trader tip is probably worth a million dollars - at least.

Always be able to define the terms of the logic used to enter, hold and exit positions. Even if the definition is dead wrong! It give you some place to go, when the time comes to evaluate a bad trade. There will be times when some trades, in hindsight, were just not repairable. A 100% accurate trading system or algorithm is extremely difficult to create. Impossible? Who knows. Extremely difficult? Yes.

Give it some thought - then define the terms, so that your trade logic contains no gaps.

That "safe" moment that you refer to, is one (1) component of a larger pattern that is part of the crux of this exercise. But, you need to be able to see the whole pattern. It is part of the Double-Bottom pattern, but that in and of itself, is part of an even larger pattern structure that I'll get into later, once all the Newbies check in and get their flight gear on. This is for the Newbies who want to get out of the 95% washout club and into the 5% Aggressor Squadron.

BTW - if you attempt to code an EA on this, just realize that you are going to get slammed because there are components that I have not yet layered into the trade logic as of yet. First, you have to learn some Dog Fighting skills and that will in turn, help you to build an effective EA. So, hold off on any EA for now - this is NOT ready for an EA at this stage - not by a long shot.
 

TheBramble

Legendary member
8,394 1,170
I’m sorry that I don’t have the energy to come up with the equivalent in Anti-Aircraft Gunnery metaphors to shoot you down sir, but you’re leading newbies into your Top Gun flight school fantasy (bet that flight suit is real shiny and tight, eh?), when all they want is something that they can trade the markets with. Plus, with respect, your method is deeply flawed in that although you openly state “rarely will the market generate Trade Logic conditions that are always optimal” what that means is you leave a gaping chasm for subjective interpretation of what, if it isn’t optimal, is a ‘go’ Ice Man. Perhaps the bait you leave with your last post on ‘more to come’. I bet there is.

You sure you’re not TradeVector reincarnated from his last crash? LOL

Anyhow, if anyone really wants to trade an MA-X, what is wrong with having just one MA and the Price?

You need to wang in a few more bits & bobs like volatility (which you can establish with price deviation from one MA anyway) and prior trend in the timeframe you’re trading, but getting them hung up on multiple timeframes using the same method in each is just going to confuse the bazookas out of ‘em.

Nothing like a little friendly fire in the morning, smells like, victory.
 
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forker

Senior member
2,688 500
Actually Larry Williams used a simple Moving average in the bonds to determine trades I think it was the snp. If the moving average was higher than yesterday in the bonds he would buy the snp at the open and sell at the close. He said that test account on that strategy made over 100k over the year. While this isn't a crossover its a strategy based on a moving average.
 

TheBramble

Legendary member
8,394 1,170
My point really. It doesn't have to be complicated.

Unless you're in the business of selling systems of course.
 

TheBramble

Legendary member
8,394 1,170
I spent years, quite literally, trying to find out how I could get in/out at tops/bottoms.

And then it dawned on me: I wasn’t in the business of hitting tops and bottoms (that would be nice and if you have cracked it, do let me know…) I was in the business of making a profit. And that simply meant having a high probability of most of my trades taking a slice out of whatever action was occurring.

And the ones that weren’t going to line my purse with gold I needed to have let me know as quickly as possible so as to cause as little damage to my account as possible.

I look back at the end of the day’s play at all the action that those damned Gannites and Ellioticans had at the very tops and bottoms (wealthy as Croesus, every man jack of them) and I look at the much smaller segments of each of those moves I manage to grasp. And I feel really, really good about that.

You look back, (always in retrospect) at that beautiful 150 pip move over the last few hours and at those 3 or 4 M15 bars that netted you just a 50 pip profit. But that 50 pips profit was for a 20 pip risk and at a 2% capital risk per trade this represents a 5% capital increase in your account.

Of course it would be fine and dandy to get in and out at the tops and bottoms, every time, without a hitch, but my point is you can make out just fine with grabbing smaller segments of the on-going action.
 

forker

Senior member
2,688 500
I agree that looking for tops and bottoms is pandoras box and will get anyone trying to find them nowhere. That being said, the market is a complex beast yet the fundamental logic in how participants engage with it is 1 dimensional in nature. To get into the market you send and order through, its filled and to get out you do the same. The complexity at it's core is nothing more than order flow. So while picking tops and bottoms is a mugs game it is very possible that simple techniques such as an MA crossover that isn't trying to pick tops and bottoms but displays the direction of order flow can be used as part of a strategy. Now admittedly that's superfluous and one need only price to see the direction of order flow. Some people just need more information than what's needed and that does come at a price of lag. In the case of any indicator, lag has implications on trade timing which ultimately means missed trades in [n] cases.
 

TraderNumber7

Well-known member
376 45
I’m sorry that I don’t have the energy to come up with the equivalent in Anti-Aircraft Gunnery metaphors to shoot you down sir, but you’re leading newbies into your Top Gun flight school fantasy.....

I spent years, quite literally, trying to find out how I could get in/out at tops/bottoms.

blah...blah...blah...

You have no clue about what this thread is about, yet you have a negative comment to make about it. How dumb is that. People who negatively comment on things they know nothing about, are quite foolish people, to say the least.

The rest of your comments are so off-topic, flawed and dead wrong that I don't find them even remotely worthy of my time in rebuttal. Just keep watching - maybe you'll figure it out later - if you are capable.
 

TraderNumber7

Well-known member
376 45
I agree that looking for tops and bottoms is pandoras box and will get anyone trying to find them nowhere.

I question the reading & comprehension skills of both of you. Obviously, you either have not read and thus your comments define themselves as foolish. Or, you have read and do not understand, thus once again your comments define themselves as foolish. Either way, both of your comments are foolish, because they have absolutely zero to do with the actual topic.

Now, either post something in direct rebuttal, which I don't know how on earth you do, because there is nothing to rebut yet, or go open up your own thread and prove to the world that something you don't understand, can't be done.

In the meantime, this thread is for those want to learn how its done - not pontificate about how something that has not yet been fully outlined to them, can't be done.

Clueless, people.
 

forker

Senior member
2,688 500
Well I think we have established you cannot accept any opinion that doesn't play banty ball with yours. While neither of us insulted your views, you find it suitable to insult ours. If you cannot except other opinions then what are you doing here? Nobody likes an @sshole that only considers himself.
 

TheBramble

Legendary member
8,394 1,170
This is TradeVector., Ha ha ha....

Stirring military music...the roar of jets....salutes all over the place....the throbbing pulsing G-suit doing it's work as you whizz round in...the tea-cup merry-go-round.
 
 
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