Two moving averages and the macd

[crashburn1975]

Hi everyone. I am just starting out in trading and I have some experience although I class myself as a novice and I am still studying the different methods. I am having difficulty with one area in particular and I cannot seem to find an answer anywhere.

The macd indicator has a default of 12 short, 26 long and 9.

When using the macd indicator what is the best time frame in terms of using two moving averages on the chart above macd i.e. 6,21, or 50, 100 and so forth?

Whatever moving average time frame you use, should the macd always be kept in the default settings?

Sorry if this sounds technical or confusing, hope I got that out right.

Would appreciate any feedback. Thanks.

 

[piphoe]

My best MA's are my two eyeballs and what's b/w my ears. I NEED little else.

 

[dbphoenix]

Hi everyone. I am just starting out in trading and I have some experience although I class myself as a novice and I am still studying the different methods. I am having difficulty with one area in particular and I cannot seem to find an answer anywhere.

The macd indicator has a default of 12 short, 26 long and 9.

When using the macd indicator what is the best time frame in terms of using two moving averages on the chart above macd i.e. 6,21, or 50, 100 and so forth?

Whatever moving average time frame you use, should the macd always be kept in the default settings?

Sorry if this sounds technical or confusing, hope I got that out right.

Would appreciate any feedback. Thanks.

Before risking any money, plot your MACD with a variety of MA pairs in order to find out whether or not any of them tell you what you need to know quickly enough for you to do anything about it. Since the MACD and MAs "indicate" the same thing, it is more likely that you will receive conflicting signals than confirming ones. Nonetheless, if these signals appear too late for you to benefit from them, you may want to pursue other investigations.

 

[crashburn1975]

Hi, many thanks for that information. Ok, time to test things out. Still wondering about about the default periods on macd though, should these generally remain unchanged?

Thanks anyway.

Before risking any money, plot your MACD with a variety of MA pairs in order to find out whether or not any of them tell you what you need to know quickly enough for you to do anything about it. Since the MACD and MAs "indicate" the same thing, it is more likely that you will receive conflicting signals than confirming ones. Nonetheless, if these signals appear too late for you to benefit from them, you may want to pursue other investigations.

 

[crashburn1975]

My best MA's are my two eyeballs and what's b/w my ears. I NEED little else.

Well, yes, I am very much the same but I do like to focus on an indicator or two

 

[tomorton]

Hi crash.

I like trend-following and I like to use 2EMAs to confirm trend. When price and the 20EMA are above the 50 and the 50 is sloping upwards, that's an uptrend. Its not necessarily an uptrend to buy into but its worth a closer look. No off-chart indicators add anything to this set-up.

A closer look would reveal lots more info direct from price bars, both daily and weekly and its easy to build a short check-list of what TA criteria must be showing as "green lights" so you can know when to buy but also know which uptrend out of any number is stronger.

 

[crashburn1975]

Hi crash.

I like trend-following and I like to use 2EMAs to confirm trend. When price and the 20EMA are above the 50 and the 50 is sloping upwards, that's an uptrend. Its not necessarily an uptrend to buy into but its worth a closer look. No off-chart indicators add anything to this set-up.

A closer look would reveal lots more info direct from price bars, both daily and weekly and its easy to build a short check-list of what TA criteria must be showing as "green lights" so you can know when to buy but also know which uptrend out of any number is stronger.

Hi tomorton

Many thanks for that information, that's really helpful. I'm just deciding what moving averages to use i.e. short term 6/21, mid term 50/100. Guess I'll just have to experiment but I am interested in long term profits rather thank making a quick buc as they say Thanks again.

 

[tomorton]

Yes, experiment is right, it won't take long. A 50 or 100 is good for confirming what is the long-term trend: personally I find the 200 so long its unresponsive. You can take the risk of a counter-trend trade against this trend but you'd have to have a damn sure set-up for the short-term win.

A short MA crossing a somewhat one is good for XO signals, 6/21 will give you plenty as they are both so short, sometimes just a few days apart, and many will not follow through even with the underlying long-term trend in your favour.

XO's aren't a complete strategy in themselves - its the uptrend that's important in making price go up, not the MA XO entry signal.

 

[crashburn1975]

Yes, experiment is right, it won't take long. A 50 or 100 is good for confirming what is the long-term trend: personally I find the 200 so long its unresponsive. You can take the risk of a counter-trend trade against this trend but you'd have to have a damn sure set-up for the short-term win.

A short MA crossing a somewhat one is good for XO signals, 6/21 will give you plenty as they are both so short, sometimes just a few days apart, and many will not follow through even with the underlying long-term trend in your favour.

XO's aren't a complete strategy in themselves - its the uptrend that's important in making price go up, not the MA XO entry signal.

Thanks again tomorton. Sorry, last post from me strange question, what's the XO signal?

 

[Brumby]

Hi everyone. I am just starting out in trading and I have some experience although I class myself as a novice and I am still studying the different methods. I am having difficulty with one area in particular and I cannot seem to find an answer anywhere.

The macd indicator has a default of 12 short, 26 long and 9.

When using the macd indicator what is the best time frame in terms of using two moving averages on the chart above macd i.e. 6,21, or 50, 100 and so forth?

Whatever moving average time frame you use, should the macd always be kept in the default settings?

Sorry if this sounds technical or confusing, hope I got that out right.

Would appreciate any feedback. Thanks.

If you choose to embark on this path you need to know what kind of territory you are stepping into. Don't focus on the tree as you are actually stepping into a forest.

MA and MACD are by nature lagging indicators. You need to understand the conditions in which they work well and the conditions in which they are just practically useless. Curve fitting settings is a dead end because the basic premise is that history repeats and will somehow project likewise into the future. The market is a living organism of investor making decisions. While people are driven by greed and fear in their decision making, the news and fundamentals driving investments decisions are different across instruments and markets. Curve fitting assumes history repeats in the same manner and a one size fits all approach across different markets.

I recommend you read the book "Technical analysis for the trading professionals" by Constance Brown. The book discussed in great length how to use oscillators, and what their limitations are.

As a caveat, my opinion is biased as I am not a fan of indicators.

 

[crashburn1975]

If you choose to embark on this path you need to know what kind of territory you are stepping into. Don't focus on the tree as you are actually stepping into a forest.

MA and MACD are by nature lagging indicators. You need to understand the conditions in which they work well and the conditions in which they are just practically useless. Curve fitting settings is a dead end because the basic premise is that history repeats and will somehow project likewise into the future. The market is a living organism of investor making decisions. While people are driven by greed and fear in their decision making, the news and fundamentals driving investments decisions are different across instruments and markets. Curve fitting assumes history repeats in the same manner and a one size fits all approach across different markets.

I recommend you read the book "Technical analysis for the trading professionals" by Constance Brown. The book discussed in great length how to use oscillators, and what their limitations are.

As a caveat, my opinion is biased as I am not a fan of indicators.

Hi Brumby

Many thanks for that information especially the book recommendation.

Regards

 

[tomorton]

Thanks again tomorton. Sorry, last post from me strange question, what's the XO signal?

XO shorthand for cross-over.

 

[bootsyjam]

I would recommend ditching the MACD and MAs as all you are doing is outsourcing your decision making to a lagging indicator. Does price move because the macds are crossing? Does an institution choose to buy, right now, this very instant, because price has touched an Ma? Of course not. The signals these indicators generate work sometimes because by the law of averages (a real one!) then price will occasionally move at the same time as one of the 'signals' that these indicators generate. But do these indicators predict a price move? No. Not a chance.

I would recommend looking at how to identify when/where trapped traders are and then trade against them. Volume profile and market theory is the way to go. Some of the language is definitely overly flowery but if you want to make it then understanding the dynamics of price, volume etc is vital.

 

[EnlightenedJoe]

I would recommend ditching the MACD and MAs as all you are doing is outsourcing your decision making to a lagging indicator. Does price move because the macds are crossing? Does an institution choose to buy, right now, this very instant, because price has touched an Ma? Of course not. The signals these indicators generate work sometimes because by the law of averages (a real one!) then price will occasionally move at the same time as one of the 'signals' that these indicators generate. But do these indicators predict a price move? No. Not a chance.

I would recommend looking at how to identify when/where trapped traders are and then trade against them. Volume profile and market theory is the way to go. Some of the language is definitely overly flowery but if you want to make it then understanding the dynamics of price, volume etc is vital.

That's quite interesting. Would you be willing to explain where and how we can find the trapped traders ?

According to our sherlock holmes wannabe who is called darkie, there are some trapped short traders in DAX at the red line locations. Would you agree with this assessment and would you recommend trading against them ? I am thinking of trading against them myself, but my gut tells me that's the wrong thing to do. Also data on bund suggest a reversal in DAX. I have gone through your posts and believe you are knowledgeable on bund. So I am curious of you views on both bund and DAX.

 

[bootsyjam]

That's quite interesting. Would you be willing to explain where and how we can find the trapped traders ?

According to our sherlock holmes wannabe who is called darkie, there are some trapped short traders in DAX at the red line locations. Would you agree with this assessment and would you recommend trading against them ? I am thinking of trading against them myself, but my gut tells me that's the wrong thing to do. Also data on bund suggest a reversal in DAX. I have gone through your posts and believe you are knowledgeable on bund. So I am curious of you views on both bund and DAX.

Hey there, what time frame do you trade-is it daily/weekly?
Yes there could well be trapped traders in the dax as those people who are short (ltop of swing to the left of current price) will be hurting if they are still positioned short.But they might not be short still.

Large traders use stops that are always clustered above major highs and lows. They use them to close out large positions and open up new ones in the other direction. Stop hunting is actually liquidity hunting! Or, of course, price just keeps on going. That's trading for you.

In terms of finding out where trapped traders are, look at failed 1-2-3 patterns, or M and W patterns (think it might be called a teacup pattern?!). Why does price take off when it hits a certain zone in these patterns? Clue-people are trapped.

Apologies but no charts on my phone!

 

[bootsyjam]

That's quite interesting. Would you be willing to explain where and how we can find the trapped traders ?

According to our sherlock holmes wannabe who is called darkie, there are some trapped short traders in DAX at the red line locations. Would you agree with this assessment and would you recommend trading against them ? I am thinking of trading against them myself, but my gut tells me that's the wrong thing to do. Also data on bund suggest a reversal in DAX. I have gone through your posts and believe you are knowledgeable on bund. So I am curious of you views on both bund and DAX.

Just had a quick look at the bund as was long on Friday. Look at the 5 min chart and look at about 3.10.and 3.35pm. Price tried to move lower and it couldn't. People were selling.and when it didn't.move lower? Trapped traders. I was helped as I use cumulative delta which showed lots of traders selling at.market price so I had this extra info. You need to have volume info-futures has this. Spot fx doesn't.
Look up cumulative delta. Heavy selling and price is at support and doesn't move lower. What does that tell you. I've just handed you the keys to the mint

 

[EnlightenedJoe]

Just had a quick look at the bund as was long on Friday. Look at the 5 min chart and look at about 3.10.and 3.35pm. Price tried to move lower and it couldn't. People were selling.and when it didn't.move lower? Trapped traders. I was helped as I use cumulative delta which showed lots of traders selling at.market price so I had this extra info. You need to have volume info-futures has this. Spot fx doesn't.
Look up cumulative delta. Heavy selling and price is at support and doesn't move lower. What does that tell you. I've just handed you the keys to the mint

Let's not be too fast with mint keys. I implied in my post I was inside the mint already.

Do you suppose bund will have an impact on DAX ?

I trade no limits. So days, weeks, months, years, are all OK.

Suppose there are confirmed shorts in DAX at those locations, should I trade against them ?

 

[EnlightenedJoe]

CNN is reporting "Austria lurches right". I imagine that would be good enough BS to collapse DAX on open.

 

[bootsyjam]

Well bund and dax are sometimes correlated, sometimes not. I have no idea what will happen tomorrow, I would guess that bund might push higher after the Austrian result but I don't really know. I tend to wait to see what price and volume tell me.

 

[darktone]

live from inside the mint