An idea about moving averages...

F

frostengine

I'm trying to figure out if its possible to develope a trading system around this....

Lets say you take somethign simple such as 5 day SMA and 10 day SMA......

And you have another piece of data called difference
difference=SMA10-SMA5....

So the difference between the two is your primary information... what if you can predict with a minimum of 85% accuracy whether tomrorw the difference between SMA10-SMA5 is going to grow larger or grow smaller....you cannot be certain by how much the difference will grow or shrink.. but you do know if its going to grow or shrink.....

Is there anyway to use this information to help your trading?

What sort of ways would you consider trading based on this information? if its even helpful AT ALL
 
You mean something along the lines of a moving average convergence divergence indication? Nope never heard of such a thing as a MACD.
 
I'm not asking whether or not macd is useful or not.... i'm asking whether or not being able to predict if the differnece will shrink or grow in the next day is useful..........

Keep in mind you have no idea HOW much the differnece will move, only what direction it will move..so using it to predict something such as crossover would not be feasible......
 
Quote from ChaosNSX:

You mean something along the lines of a moving average convergence divergence indication? Nope never heard of such a thing as a MACD.
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Man, you're becoming my favorite moderator! :p :cool:
 
Quote from frostengine:

I'm not asking whether or not macd is useful or not.... i'm asking whether or not being able to predict if the differnece will shrink or grow in the next day is useful..........
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It is impossible to predict that with a certaintly of something >50%. IMPOSSIBLE.
 
Ripley, i'd beg to differ... i'm CERTAIN I can predict it with a much greater than 50% accuracy... the question isnt WHETHER it can be predicted, tis whether or not that information is useful at all... as far as i can tell the knowledge of direction with the macd is not very important without specifics... thats why i'm trying to get some feedback to see if there are anyway to use that data...

Trust me, its deffinetly possible
 
You may want to take a look at some Donchian material; he wrote a few papers on MAs

Quote from frostengine:

I'm trying to figure out if its possible to develope a trading system around this....

Lets say you take somethign simple such as 5 day SMA and 10 day SMA......

And you have another piece of data called difference
difference=SMA10-SMA5....

So the difference between the two is your primary information... what if you can predict with a minimum of 85% accuracy whether tomrorw the difference between SMA10-SMA5 is going to grow larger or grow smaller....you cannot be certain by how much the difference will grow or shrink.. but you do know if its going to grow or shrink.....

Is there anyway to use this information to help your trading?

What sort of ways would you consider trading based on this information? if its even helpful AT ALL
More...
 
I think you are answering your own question- if you can predict whether the short v long term moving average is going to move in a certain direction then it isn't rocket science to put on a trade that follows the direction of this move. However, you have to think more logically.....

A concern, I suppose would be if the market opened in the direction that you were predicting the market will move i.e. your divergence has occurred without you having the chance to capitalise on it.

Mate, if you've got a system that you honestly believe gives you some kind of edge in terms of telling you whether you're going to move further away/closer to the lond term MA then great, but I dare say this edge is seriously crimped by:

a) where the market opens and

b) the fact that your rolling 5 day MA, for example, is obviously going to turn higher if 4 days ago there was a stinker of a day for whatever stock/index you are trading and it will drop off your average calculations tomorrow. You've not got yourself an indicator, in this case, as all you are doing is stating the fcuking obvious i.e. your rolling 5 day is going to turn up.

I hope this is in some way helpful because I really don't think you've found the holy grail. Also, I'd rather toss a coin than put my money on some poxy MA which tells you fcuk all other than a certain percentage of fcukwits will stupidly be saying "Oh look, we are near the 200 day moving average" and placing a dicey trade on it. It's a piss-weak indicator..... except to a certain extent on currencies.

Full credit to the moderator on this one though- you gave me a chuckle you sarcastic b*stard!
 
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