Moving average cross-overs

[darth trader]

I came across a site that sells software that tells you what the closing price will have to be today in order to give a moving average crossover.

Well 50 quid seemed a lot of money to pay for that (and some other odd bits and pieces) so I worked it out using third form arithmetic and here it is in case anybody wants to use it.

If you use a 10 day moving average and you are looking for a buy signal, today's closing price must be greater than or equal to the 9 day moving average.

In general the method is to use an n-1 day moving average close for an n day moving average/price cross over. This follows simply from the definition of a simple moving average.

I like the idea because you can check for the cross-over at 15:00h and buy in before the open the next day.

If anybody finds a way of identifying buy candidates in the current market let me know - but if course it works with shorting too.

Darth.

 

[BarNov]

Darth ...coincidentally I was just going thru Sharecope data mining and cam across a filter that I built months ago .. but don't remmeber uisng. It uses 3 MAs (10,30 & 60) .. and reports on shers that have just crossed at Close of day (limited to FTSE350 stocks).

The idea being (using 3MAs) to BUY when the 10 crosses over the 60 .. and then close when the 10 closes back down through the 30.

The current list of potential BUYS is : -

RBOS, JPR, ING, CCC, MGGT and BVS

The potential list od SELLs is: -

PWG, PNN and MSLH

Have alook and see what you think. Again .. I'm looking for a more experienced/knowledgable view/opinion.

Thnaks in advance

Paul.

 

[Uncle]

Paul have you got these the right way round. If so from my observation looks like the system you refer to is lagging the market to the point of missing opportunites in these volatile times.

 

[BarNov]

Uncle .. yes I think are lagging indicators .... th eonly reasoin I posted on this thread was that they refered to MAs ... and wanted some input from Darth et al.


Could you explain what opportunities may have been missed re: the BUYS that the MAs show ???

As the crosovers of the shres I've quoted have only just occurred ... wouldn't that imply that there is still some good opportunities ???

I'm worried that I've been mis-interpreting something here ....

Thanks in advance.

Paul.

 

[darth trader]

Well, you are brave - using the sharescope data mining feature to get successful buy/sell signals is no mean feat! I gather that they are going to bring out a new tool in the fullness of time but I have recently invested in metastock in order to do this kind of calculation.

Your method reminds me of the 3 m.a technique described in Murphy's Technical Analysis of the Futures Markets.

He talks about a system devised by R.C Allen that uses 4,8 and 18 moving averages (5,10 and 20 are popular too) but a buy alert is given when the 4 crosses over the 8 and confirmed when the 8 crosses over the 18.
In a down trend the order is reversed.

The advantage is that you will receive fewer whipsaws than with one or two ma's but at a cost of not getting in too early.


I'm sure that it will work and will certainly keep you out of many poor trades.


Merrill Lynch published some analysis on moving averages and here is a brief summary of their findngs:

a) simple moving averages are better than exponential or weighted.
b) two moving averages give better results than one moving average for 10 markets out of 17 tested.
c) 3 moving averages worked best in only 4 cases out of 17.

Good trading,
Darth.

 

[BarNov]

Darth ... thanks for the reply .. the Merril findings make interesting reading.

Could I ask 2 questions : -

1) I sense a low opinion of Sharescope ... why ????

2) What trading strategies do you use and what indicators do you use ???

The reason I ask .. is one I'm trying to learn, I'm also interested to see if Sharescope can provide the same signals you are looking for .... and thirdly I'm wondering whether to consider other software products i.e. Metastock

Thanks in advance

Paul.

 

[ChartMan]

BVC was picked by my "phase and macd" turnaround EDS on the 8th. I cant see how this could be called a "lagging selection"......perhaps the others are, but BVC is about as early as you could call it....

 

[Hill Farmer]

Darth,

when was the Merrill Lynch work published and what's the title? I'd be interested in obtaining a copy. Thanks.

 

[darth trader]

my information is from murphy, but the original was published in "computers can help you trade the futures markets" in the 1978 commodity year book by the commodity research bureau, jersey city.

It's obviously old now but was an extensive (for its time) look at moving averages.

Appel has some interesting views too in 83 ways to beat the market.

 

[darth trader]

Sharescope is an excellent product and includes data source and lifetime membership. However it is at the low end of the market.

I have previously posted my views on sharescope, omnitrader and metastock so try doing a search for the thread.

I use momentum based indicators for stocks in trading ranges and i'm still testing trend following systems but like moving average cross, macd, trix as indicators for short term trades.

You can do some interesting things with on balance volume, negative and postive volume index and related indicators.

I recommend Achelis A-Z for background information. This is also online at www.equis.com and is a must read.

There is no end to what you can do and I just enjoy doing it for its own sake.

I suspect that maybe the simplest systems are the best for automation and that a lot of it comes down to cross verification and judgement.

Good Luck.