MACCI failures

[leovirgo]

Here I'd like to discuss about cycles and MACCI in particular. MACCI is commonly used as an oscillator where overbought condition could potentially lead to a down turn and the opposite for the oversold condition.

Let's see an example where overbought condition has lead to higher prices. Hopefully this explains why sellshort on MACCIs overbought won't work. It can be profitable to go long whilst MACCIs are overbought.

 

[Trader333]

In my view this will largely depend on whether a market is trending or range bound as to the likelihood of success. In other words if trending up then it would make sense to go long at what is considered OB.


Paul

 

[dcraig1]

Yes. I seems very clear to me that the solution is not the treadmill of an endless search for better cycle indicators.

But other things such as the pace at which the market is moving, the market delta, tick etc can help. And as Trader333 says - is it trending? Market delta is useful - it is very unusual for a trend to persist very long when the market delta is strongly in the other direction.

 

[leovirgo]

In my view this will largely depend on whether a market is trending or range bound as to the likelihood of success. In other words if trending up then it would make sense to go long at what is considered OB.


Paul

It was absolutely not trending as you can see in the chart. I have included 20-80MA and ADXR but there was no indication of a trend. It was clearly in a range.

 

[Trader333]

How does this appear in a higher timeframe ?


Paul

 

[Charlton]

It was absolutely not trending as you can see in the chart. I have included 20-80MA and ADXR but there was no indication of a trend. It was clearly in a range.

It depends upon how you look at it. Yes from 6th Dec to 15 Dec on your chart it would appear to be in a range. However at the hourly level there are what appear to be trends within that range.

If I apply the Ehler Instantaneous Trend Line on an hourly chart you will see that there are several sessions where the hourly chart was trending during the session. This is indicated by the two lines not crossing.

The MACCI readings of above 100 or -100 do not of themselves mean that you should go short or long. They are a warning that, if a market is in consolidation mode, that it might be edging towards the point of exhaustion. However one should look for other confirmation signals, such as MACCI turning and leaving the OB or OS regions or bar formations such as shooting candles or hammers.

For those who are not familar with MACCI, which is essentially a moving average of the CCI indicator the following link gives some further information.

http://forex.eazel.com/2006/06/16/cci-indicator/

With any inidcator it is worth going back to the basic formula and working through the calculations from scratch to see what happens to the value when the relationship between HIgh, Close, Open, Low (and volume where relevant) changes. This will confirm the circumstances in which the indicate performs well and when it does not. This knowledge will provide clues as to which other indicators or price action could be used for confirmation.

After completion of this post I now see that the price is turning down, MACCI has also turned down and exited the OB zone

 

[leovirgo]

However one should look for other confirmation signals, such as MACCI turning and leaving the OB or OS regions or bar formations such as shooting candles or hammers.

That's something I want to discuss- Oscillator condition vs Price action.

Price action here means the location of price in relation to a certain benchmark level. What might that be?

 

[Gob00st]

I think MACCI on a single time frame is not quite useful specially when its has been hard coded with (5, 6) parameter.

I think the Iraj's core theory here is the cyclic and we can only try to make a call with the help of multiple time frame analysis, so 1,3,5,10,30,60 MACCI is essential if anyone want to use this IMHO.

Gob00st

Here I'd like to discuss about cycles and MACCI in particular. MACCI is commonly used as an oscillator where overbought condition could potentially lead to a down turn and the opposite for the oversold condition.

Let's see an example where overbought condition has lead to higher prices. Hopefully this explains why sellshort on MACCIs overbought won't work. It can be profitable to go long whilst MACCIs are overbought.