An idea about moving averages...

One way to explore the question is to create hypotheses and test them. Here are some hypotheses which you could test by writing spreadsheets or BASIC programs or Metastock modules, then pumping some historical data thru them:

H1: The day after the deltaMA rises, the underlying market price tends to also rise.

H2: 5, 10, 15, 20, 30, 50 days after the delta MA rises, the market price is higher. (accumulate statistics on this, is it higher >> 50% of the time (which your momma can get by flipping a coin))

H3: A strategy that buys when deltaMA rises and sells when deltaMA falls, makes profits greater than commissions+slippage
 
Quote from frostengine:

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

Lets say you take something 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 tomorrow 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...
==============
More than several ways to use that info wisely;
& as an elite trader told me more than several years ago,
get much more than that.

a]Probably least important, but worth ''keeping'';
apply both 5 & 10 SMA ..... to volume,
and price. Prefer charts which allow both [different colored]ma to price/vol ,
some don't.

z]Say you determine by records, that your average swing =10 days;
write that in your plan, have a written plan?????;
& note as a reminder ,positionS of both ma around 10 days.......

Good question;
we could run a ''mentor'' ad & charge $ for that:D
 
what you must not forget is, that the movement of a simple moving average is constituted out of new data coming in as much as of old data going out.

the fact that new data can only marginally change the output (=the ma) makes this output positively autocorrelated, thus non random, thus much more predictable.

consider a falling curve. and a simplie moving average starting in the middle of the fall. now consider tomorrows price. even if it is higher than yesterdays price, the sma will continue to fall as long as the incoming price is lower than the very first price which drops out. see my point?
 
Yes, it was addressed by "let it run."

To the original poster:

If you have already factored into your equation what will happen when you drop the previous days from the equations you are saying that you can predict whether the next day will be an up or down day, which would be very useful. I doubt that you are able to do this with the kind of accuracy you stated.

5 yr
 
Is it possible to create an equivolume moving average?

It should be interesting to see the volume on the AVG when two AVG are crossing....

I mean the volume on the last bar not the smooth volume due the length of the MA

Lorenzo
 
Quote from Ripley:[on predicting next day ma converge/diverge

It is impossible to predict that with a certainly of something >50%. IMPOSSIBLE.
More...
=============
Ripley;
believe it or not you are right and;
while stock prediction isn't possible in an exact-long term sense,
very high probability that trendlines or ma can help hit rate better than 50%.

And besides lots of money has been made with less than 50% hit rate, with proper[1-3% equity] size.

Another idea about moving averages, 5 ma can help;
but 50 period has helped me more,
much less slippage, much less commissions than 5, even though my favorite isn't a 50 ma however useful it is. Good area to experiment.
:cool:

Remember when DAL was on NYSE for years;
downtrend hardly EVER cleared top of certain moving averages.
 
This is similar to the topic but slightly different..... what if i said i can predict with aprox 55% accuracy whether the S&P will rise or fall tomrorow....

not much better than 50-50.. but enough to have an edge..... what methods would one go about using this information to profit off of it..... is 55% enough to make a statistical differnece?
 
Quote from frostengine:

This is similar to the topic but slightly different..... what if i said i can predict with aprox 55% accuracy whether the S&P will rise or fall tomrorow....

not much better than 50-50.. but enough to have an edge..... what methods would one go about using this information to profit off of it..... is 55% enough to make a statistical differnece?
More...

You can play an Opening Range Breakout in the direction you think it will break out to, and use a 1/2 R/R ratio, and you'll make money.

But, the better edges are those edges that you don't have to speculate on where the markets will go....but rather follow the market.
 
i might make a fool out of myself here, but the probs talked about are are near to irrelevant. it is easy to have a hit ratio of 85% ... sell options.

55% prediction value does not at all mean that you can make any money on it. at best it is an indication to dig deeper and find something exploitable, but that's about it.
 
You must log in or register to reply here.
Back
Top