Anyone use moving average indicators?

[expiated]

Have you automated this? With some of my techniques I could build an entire automated system around this idea.

No, it’s not automated. To be honest, the image I posted was pulled from a brand new system I haven’t even tested yet, and the way the system employs the moving averages I cited is not exactly as described in my previous entry other than what I wrote about identifying reversals.

Here is the complete system…

It’s designed to assist me in making winning trades a lot more frequently than I was doing when entering positions based on when price had gone “too far,” yet without diminishing my winning percentage. I won’t bore you with the details of how it’s supposed to work, but in theory, it looks relatively “foolproof” to me.

By the end of this week’s first day of trading, I should know if it lives up to my expectations when put into actual practice.

 

[expiated]

Sorry to sound so negative, but what's quoted above is basically nonsense.

You can CALL it nonsense if you like, but that won’t stop me from using it profitably…



Go ahead and construct your wonderful SOUNDING arguments. I’m more interested in what happens when ideas are actually put into practice.

 

[expiated]

the moving average midline is itself also moving (and that's the key concept completely ignored by the statement above), while the price is moving

This would be true if I were blindly “trading by the numbers,” but that would be foolish. There are ways to confirm when price is actually reversing direction and not merely being met by a falling or rising moving average. You’re making assumptions when you naysay a system based on its ignoring concepts when you are actually referring to other (straw man?) systems (i.e., the principle of mean reversion, which you conveniently cite, but might be a strategy that is only superficially similar to my own).

 

[expiated]

I'm afraid that one simply isn't true. It's just "wrong".

“That’s just wrong” is a TERRIBLE argument. Simply making such a statement does not make it so. People say the sky is blue, but that’s just wrong! Oh, really? Where is your proof, because all I have to do is point my camera heavenward and take a snapshot to prove that it IS blue.

You can SAY it’s wrong all you want, but if I make money everyday using my handful of key moving averages (see post #71) perhaps you will forgive me for entertaining the possibility that maybe YOU are then one who is wrong after all.

 

[Xela]

Where is your proof

I didn't offer "proof", nor is it realistically possible to do that in a forum. (It can be done, to some extent, by textbooks, and I'll mention a couple of examples of them below.)

Instead, in an attempt to be helpful, I offered a brief explanation of the fallacy on which the "reasoning" of what you quoted actually rests (that's in the third, fourth and fifth paragraphs of my post above).

More productively, it would actually help you greatly to read one or two well-established, orthodox, recognised, accredited trading books, such as Tushar S. Chande's Beyond Technical Analysis or even Van Tharp's first book. At some future point, Paul Ciana's New Frontiers in Technical Analysis might also interest and help you.

I'm sorry that it wasn't possible to illustrate the misguided logic behind what you quoted without coming across as "negative posting". Not possible for me, anyway.

I've done the little I can (both above, and earlier, in one of your own threads) to encourage you toward a more productive and beneficial direction, but I sense (as indeed several other members have also!) that any and all offers/suggestions, however delicately worded, apparently tend to be perceived as "hostile" and "critical", and I'm afraid that puts it well beyond my own skill-set to try to assist further.

With absolutely no disrespect intended at all, just like many other members who have (briefly) conversed with you here, I can't help feeling that a re-appraisal of some of your basic beliefs about "how indicators work" would be a lot more beneficial to you than what you're struggling to do at the moment.

That's just my own opinion, and naturally enough you're free to disagree with it, but please don't take it as any kind of personal criticism, not least because so many of us, at one time or another in the past, have more or less "been where you are now" and struggled our way through it. (Actually, to be honest, it isn't "just" my opinion: it's very clear that others who have posted briefly in your two threads feel the same way and some have even mentioned it to me, but they've now abandoned their attempts to help you - as I'm afraid I clearly now must, also). Again, apologies if the reality I tried briefly to explain is distressing.

I offer you the observation, again with absolutely no disrespect implied, that willingness to learn something, and to change one's underlying orientation and belief-set really does tend, in the long run, to differentiate between the very large number of aspiring traders who are "where you are now" and the very small proportion of them who achieve their goal of long-term, steadily profitable trading. In other words, it's not about "Being Right". It's just about equipping oneself to trade safely and profitably over the long-term.

I wish you well and am sorry - after repeated attempts - not to have been helpful.

 

[tomorton]

It depends on the markets. Not as trivial to apply as they look. I have seen code for trading commodities with moving averages about 10K lines long. Lazy implementation like golden/death cross is usually not as profitable or unprofitable compared to more advanced implementations using variable moving average periods. A must read good article about the changes in the markets with respect to moving averages.

Thanks for this link. I've read a lot of well argued articles and papers about trading by people who are far better educated than I am. They usually "prove" something can't be done: trend-following and using MA cross-overs are frequent targets but that might only be because they are popular, not because they're inherently weak.

MA cross-over systems are regularly found to be unprofitable when the MA cross-over is used to justify both immediate entry and immediate exit. MA cross-overs are a valuable entry set-up indicator - but they're not a signal, and there is accordingly no logic in staying in an incorrectly opened position merely because the reverse MA cross-over has not printed. So usually these MA cross-over-critical papers suggest that getting on the wrong train is a mistake but also that you have to stay on board until it returns all the way to the station where you stupidly jumped on.

Anti-trend-following papers usually set this strategy up against buy-and-hold. Buy-and-hold is the most stupid non-strategy ever invented because almost nobody practices it within its own rules - you buy dividend-paying shares and they are never sold, not even when you die.

On top of that, any long-only strategy might fail against buy-and-hold, or it might win - but who cares? Where is the sense in restricting your trading to long-only?

 

[yiehom]

Where is the sense in restricting your trading to long-only?

You can buy and go live your life, and even die leaving the share still up, unlike waking up at night to check if you havn't been gapped over in your short.

 

[Cheesy]

I'm afraid that one simply isn't true. It's just "wrong".




That one rests on a lack of understanding of - or allowance for - the mean reversion fallacy: briefly, the principle of "mean reversion", as many traders (perhaps unwisely) call it, lets them down on the positive-expectancy front because their logic fails to recognise that the mean itself is a moving one.

In other words, the price can be at the bottom of a channel (e.g. lower line of Keltner, or lower Bollinger band, or just "below a moving average to which it will revert": the principle is exactly the same in each case), and then "revert"/"rise" to its "normal level" ("mean-reversion principle") but actually drop further in the process, because the moving average midline is itself also moving (and that's the key concept completely ignored by the statement above), while the price is moving.

So, yes, eventually the price must revert to the midline ... and that's what many people (in practice typically and especially undercapitalised, overleveraged, relatively inexperienced spot forex traders) find attractive about it: superficially, it "looks predictive". Unfortunately, the point they're typically missing is that that reality doesn't actually predicate which way the price will have moved, overall, by the time it's actually done so!

That one's (unsurprisingly) mistaken because the first of its two premises is false, and second just ignores the "mean reversion fallacy".

Sorry to sound so negative, but what's quoted above is basically nonsense.

What you are saying is True Xela, but its out of context of the proper market behavior. What you described is experienced within the context of a "Break" of resistance or support out of a range bound market.

The "Fade" is designed to be used within the context of a range bound trading market generally in a "Range" of support and resistance, so I will keep fading a range until it breaks a level and starts moving to another price range, which in that case mean reversion has "failed" me and I lose money on that trade.

I think its important to note that If you used Mean reversion as your only system to trade, you would have to know when to apply this technique so that it fits the market context, or else what Xela is describing would happen all day long. So when you say it does not work, in what market context are you speaking? I think you and Expiate were both correct, and you were talking about the same thing just in two different market contexts.

 

[tomorton]

You can buy and go live your life, and even die leaving the share still up, unlike waking up at night to check if you havn't been gapped over in your short.

You can go broke buying and getting gapped overnight too. I don't think many people were shorting US stocks in 1929.

Financial "experts" say that shorting is more dangerous than buying because an instrument like a share can rise to an infinitely high price, but it cannot fall any lower than zero. But that's only true mathematically, in real life it makes no difference. If you put all your money in a share and it goes to zero, you're broke: if you short the same share and it doubles, you're also broke. You can't be more broke than broke.

 

[expiated]

Again, apologies if the reality I tried briefly to explain is distressing.

I rather see myself in a position somewhat similar to that of Nicolaus Corpernicus and your well-established, orthodox, recognized, accredited trading books as akin to the Catholic Church.

I do not find your suggestions to be hostile, but rather, as an attempt to convince me to abandon a successful approach to trading foreign currency pairs that has been validated to my satisfaction by two-and-a-half years of experiential evidence...and to instead embrace “the reality” of the beliefs of an establishment that has provided me with no evidence that their notions are able to attain better results (an 80% to 100% daily success rate on a consistent and ongoing basis).

This does not mean I take your disagreement as some kind of personal criticism. It simply means that I too have my own opinions.

If unable to develop winning systems, I would greatly appreciate your “attempts to help” me. But since you are trying to convince me that such systems cannot work when I already know they can, you are correct in concluding that we will never see eye-to-eye in this regard.

Being right and being able to trade safely and profitably over the long-term are not mutually exclusive. History is full of examples in which one community’s “misguided logic” turned out to be a single freethinker’s initial steps into a whole new realm that opened up doors of possibility “the establishment” couldn’t even begin to imagine.

I could come back here in three months and show you documentation of my having taken a small sum and accelerated its growth exponentially to an almost incredible amount, and I suspect you would still implore me to study the works of Chande, Tharp and Ciana.

I am attempting to take my trading to a whole new level, and I believe I will. But if not, I will simply go back to my old system of making a handful of trades per day with a nearly 100% success rate—Chande, Tharp and Ciana notwithstanding.

I have no doubt that no offense was intended, so no offense was taken.