Quote from cashmoney69:
Trading is the direction of momentum is a high probability strategy that I've used now for many months now. Moving average crosses are also very useful. And btw, I hear nothing but bad things about IB...so what if they have low commissions?..thats the only thing they tout about on their commericals. Here are some things to read:
With all due respect, weren't you the one who threw in the towel a few weeks ago? The one who began his trading day by throwing his feet up on the couch and watching cnbc for your stock picks? And then goes out to buy a starbucks before the bell rang? This was your preparation for the trading day?
OK, enough of that.Moving average crosses are not a profitable method to trade, as they only work in trending markets. Being markets only trend around 20-30% of the time, with the rest of the time being in consolidation, trading any type of a cross indicator system will eat your lunch. Newbies typically begin with these type systems because they are so easy to implement and are visually appealing. Bottom line, they don't work if remaining profitable is your goal.
As for IB, I have had an account there for many years, but I am not a poster boy for their service. There is always room for improvement. Nonetheless, I have never had a single bad experience with them. I understand that everyones mileage will vary, but given the fact that they have tens of thousands of clients, many with multimillion dollar accounts, the few whiners are most likely the by-product of self inflicted behavior. Bottom line is, if you gave ten homeless people a brand new house to live in, two would no doubt bitch that it is too small.
Now, if you have a better solution for a low cost demo for new traders to get their footing, I am all ears.
st
Beginner Question
- Thread starter johnstac
- Start date
Much like you get your trade recommendations from the TV.
Enough said.
st
Thanks, I'm by no means an expert. I do know what a trend looks like and how to follow it, though. I'm surprised at how difficult this is for some people.
Unlike you, I dont even attempt to fade support... if I don't think it will hold, I will just leave it alone (I dont have the skill to fade consistently).
I do think that moving average crossovers can be played profitably but it involves a lot of sitting on your hands when market conditions arn't right. I think MA crossovers even work better long term, although I don't trade them as I prefer price for entries and MAs to just define the trend and give me a basis of r/w.
Also want to add to your point on indicators. A year ago I also relied on indicators because I somehow thought they would make my trading better. Well, of course I used default settings without regard to what the indicators really told other than textbook answers (which are usually wrong). I have dropped all indicators since then (minus the moving averages).
At one point I had moving averages, MACD, Stochs, and OBV on one chart and I would draw 1259812598 trend lines and make my bets accordingly only to find my bottomline didn't care for indicators that wern't properly suited to my definition of trend (in my time period)
I hope I haven't come across as a self-proclaimed "expert", as that was not my intention. I am in no way an expert on the markets, not even close.
As for moving averages, take a 3 minute ES chart and plot a 10 EMA and a 30 EMA. Ignore the MA's and draw your trend lines as you normally would. Mark where the MA's cross and where the trend lines are broken by price. Notice anything?
Now, plot higher highs, higher lows, lower highs, and lower lows. After a succession of higher highs or vice versa, note when you first get a change of trend, i.e., a HH, HL, HH, HL, LH, HL or equivalent. Notice the LH is the first indication of a change of trend, but then is followed by another HL. This is usually the first sign of entering chop, but the MA's will still cross leading you into a bad trade.
Price is the only thing that I have found that will consistently define trend, chop, and the range as it is happening. I get very few false signals using this method.
As soon as I see consolidation begin, I stand aside until the next swing either confirms it or not, and then trade the range rather than trend if it proves to be true. Once the range is broken, I then resume trading the trend, whichever direction that may be. It doesn't matter what the setting of the MA's are or the type, you simply cannot do that with MA's.
That said, you can take a 21 Hull MA on a 8 minute chart, and it will give fairly accurate entries, but if you wait for the Hull to change direction for the exit, you will get beat up. Using the tick for exits works well. If your charting allows, paint the rising HMA green or blue and a falling HMA red for quick visual of the turns.
Another easy method is to use a 9 and an 18 SMA. When they cross, enter at the first pull back to the 18 with a tight stop just below the tail of the pullback. Low risk trade, but again, it won't identify chop until you've been stopped out a few times. Another
variation of that setup is to use a 10 SMA with a 30WMA.
Once you see what price is doing in relation to the MA's, you can remove the MA's and trade without them. Just watch the swings and draw your lines. In time, you won't eve need to draw the lines to see the action. It's amazingly simple, but damn hard to master. Your brain is always wanting to screw with you!
Understand what the MA's are telling you, and you will learn to see the same thing in price alone with a higher degree of accuracy.
st
The stuff that Stealth is talking about is right on and it works. The best way to learn how it works is JUST WATCH PRICE. Turn off all indicators and just have a bare screen in front of you with price and volume on it. After a while of watching price you will start to develop opinions. Pretty soon you will start acting on those opinions. Read the chapter in Market Wizards about Tom Baldwin. His anwers to questions are short and concise but they pack a punch. Pit traders don't sit and look at indicators all day now do they?
Not at all. Not what I was implying. I just try to post that disclaimer near all of my posts in case anyone takes me too seriously or follows me too closely (not that my ego is big enough to actually think this will happen).
I don't trade futures but I think I know what you mean. Are you implying that when price breaks an obvious trend and goes into chop, an MA system will still keep you in (or possibly give a new signal to enter)? I agree it's not the best system, and that using price is more profitable... all I was implying is that it can be done in a strong market (which I think you agree with). Too many signals happen though the smaller the MAs that you use...
Guess it is what you mean
. I imagine reading the tape (volume in this case) helps you play horizontal ranges better. I have done some early buys before in strong markets at the bottom of the range with tight stops and hit a few homeruns, but trading the trend requires less discipline, less skill, and much less effort. (at least for me at my skill/confidence level)
Some interesting ideas... I don't use any of the moving averages you listed, but I see what you are explaining.
I used 10,20,50,100, and 200 SMAs. I only trade long when price is above the 20. The rest of the things I just use for screeners and for visuals. Not really necessary, but I like them there.
20,50 DMA crossovers are my favorite for shorting. Gives a good way to short once a stock has gone from trending to break down. But once again, MAs arn't necesary.
It's nice having some tools that you know other people are looking at though...
Quote from Stealth Trader:
Months??? It took me years to refine my current methods!
Keep in mind that reading price action is an art, not a science. This is why many discard it as being worthless. Thousands of hours of screen time will be required as well as printing out your charts each night and studying why you made the decisions you did during the day. Mark these charts with notes of what you now see and how it corresponds with a running journal of your trades, whether demo or live. You are training your brain to see the things that work and the things that don't, and then reducing the time it takes to recognize these setups forming from minutes to instantaneously. Truthfully, few people have the ambition and drive to see it through, and they begin seeking shortcuts. These are the people who typically claim how the MACD, RSI, CCI, etc. has "helped" their trading. It's referred to as denial. That's why I say to learn yourself before trying to learn to trade. You can BS yourself, you are not going to BS the markets.
st
Thank you again for your reply. Sorry, my question did not come out quite right. I figured it would take years to become good/great; I just meant how long until I should have an elementary ability understanding price action and the three beginning steps - which you basiclyanswered anyway, thank you.
I went to IB online to start the process of opening an account last night so that I can start demo trading and watching real-time data to begin to understand and learn price action.
I did not finish (but saved) the application as I had a few questions:
1. I understand that there is a $10 fee for not making at least $30 worth of trades, but what about the market data section that has subscription monthly prices. I am going to watch/demo the YM - do I have to pay an extra monthly fee for that?
2. Bundled or unbundled - I assume you can change that later, but what would be best trading only 1 YM contracts/day on average when I start.
3. Cash or Reg-T: I was thinking of taking a longer-term postion buying some apple stock whiling I am learning/demoing - does that matter?
4. Any other important details in the application process that I might miss that would be important?
Thank you again for entertaining my elementary questions, and replying so graciously.
I did not finish (but saved) the application as I had a few questions:
1. I understand that there is a $10 fee for not making at least $30 worth of trades, but what about the market data section that has subscription monthly prices. I am going to watch/demo the YM - do I have to pay an extra monthly fee for that?
2. Bundled or unbundled - I assume you can change that later, but what would be best trading only 1 YM contracts/day on average when I start.
3. Cash or Reg-T: I was thinking of taking a longer-term postion buying some apple stock whiling I am learning/demoing - does that matter?
4. Any other important details in the application process that I might miss that would be important?
Thank you again for entertaining my elementary questions, and replying so graciously.
And the other 8 would bitch about it being made out of cardboard and asbestos... Mmmm, pie throwing. Droooool... hahaha... great posts.
Oh, and AAPL is at a peak, imo. I like ILF. Here fishy, fishy, fishy...