How to avoid whipsaw
- Thread starter ozzie123
- Start date
I'm keeping it on my work computer and currently I'm away from it so I think I'll just post an online chart. Here it is (ACI):
http://www.stockcharts.com/c-sc/sc?s=ACI&p=D&b=5&g=0&i=t78461860805&r=5093
(you have to copy-paste it I think)
I bought it right after the 5-20 MA golden cross and CCI produces buy signal. MACD is just going above its zero line and stoc is going up. I entered the trade on October 16th.
Now it's October 19th and the candlestick doesn't look to good and I think is ready for a plunge.
Here's another one:
http://www.stockcharts.com/c-sc/sc?s=WAG&p=D&b=5&g=0&i=t78461860805&r=5093
(you have to copy-paste it)
I bought the stock on October 16th, there's already an imminent golden cross between 5 and 20d MA (hasn't happened yet but looking at the chart at that time, the probability is good). MACD is on negative area and is heading up, so does CCI and stochastic.
Now it's 19th of october and the bull is loosing its power.
All help is very much appreciated
http://www.stockcharts.com/c-sc/sc?s=ACI&p=D&b=5&g=0&i=t78461860805&r=5093
(you have to copy-paste it I think)
I bought it right after the 5-20 MA golden cross and CCI produces buy signal. MACD is just going above its zero line and stoc is going up. I entered the trade on October 16th.
Now it's October 19th and the candlestick doesn't look to good and I think is ready for a plunge.
Here's another one:
http://www.stockcharts.com/c-sc/sc?s=WAG&p=D&b=5&g=0&i=t78461860805&r=5093
(you have to copy-paste it)
I bought the stock on October 16th, there's already an imminent golden cross between 5 and 20d MA (hasn't happened yet but looking at the chart at that time, the probability is good). MACD is on negative area and is heading up, so does CCI and stochastic.
Now it's 19th of october and the bull is loosing its power.
All help is very much appreciated
ozzie,
A few suggestions, if I might.
1. Have you ever backtested these strategies? I think you will find they are at best random.
2. MACD, Stochastics, CCI, really any momentum indicator or oscillator, are all measuring basically the same thing. Using more than one of them will just add confusion.
3. The most powerful signal in technical analysis is the divergence. Learn to use it if you are going to use these indicators. Simple cross over methods will whipsaw you to death. (I have poted many times here on how to use divergences, just use the search function.)
4. I am not a big fan of MA crossover systems for stocks, but they will work on trending issues. Your approach to using htem is all wrong however. A 5-20 MA crossover, or any MA crossover approach for that matter, is a long term method. The fact that the stock "looks weak" three days later means nothing. You need to cme up with an exit signal to take you out of the trade. The whole idea of trend following, whichis what this apporach is, is to sit tight and let the stock tell you what it is doing.
5. You need to understand that any trend following system is a home run type strategy. Typically you will have only about 30% winning trades at best, but hopefully some of those will b ehuge winners that pay for all the losers.
6. As for your trades, ACI was in a long downtrend. It produced a divergence on the double bottom and you might have justified a short term buy there. Waiting for the mA cross put you right up to retracement resistance from the previous downtrend. All the people who bought higher and held through the sell off telling themselves they would sell when "it got back to even" are beginning to bail out now, so a strong up move is unlikely.
7. WAG was also in a steady downtrend. I can't see any technical reason to buy now or anytime in the near future.
8. If you want to buy on MA crosses, you might want to look into Linda Raschke's "holy Grail" method, which requires a strong uptrend, ie ADX>30, and a pullback to below the 9 day MA and a recross to the upside. It's a lot easier for a stock that has pulled back from an uptrend to go higher than one that has been in a long selloff.
A few suggestions, if I might.
1. Have you ever backtested these strategies? I think you will find they are at best random.
2. MACD, Stochastics, CCI, really any momentum indicator or oscillator, are all measuring basically the same thing. Using more than one of them will just add confusion.
3. The most powerful signal in technical analysis is the divergence. Learn to use it if you are going to use these indicators. Simple cross over methods will whipsaw you to death. (I have poted many times here on how to use divergences, just use the search function.)
4. I am not a big fan of MA crossover systems for stocks, but they will work on trending issues. Your approach to using htem is all wrong however. A 5-20 MA crossover, or any MA crossover approach for that matter, is a long term method. The fact that the stock "looks weak" three days later means nothing. You need to cme up with an exit signal to take you out of the trade. The whole idea of trend following, whichis what this apporach is, is to sit tight and let the stock tell you what it is doing.
5. You need to understand that any trend following system is a home run type strategy. Typically you will have only about 30% winning trades at best, but hopefully some of those will b ehuge winners that pay for all the losers.
6. As for your trades, ACI was in a long downtrend. It produced a divergence on the double bottom and you might have justified a short term buy there. Waiting for the mA cross put you right up to retracement resistance from the previous downtrend. All the people who bought higher and held through the sell off telling themselves they would sell when "it got back to even" are beginning to bail out now, so a strong up move is unlikely.
7. WAG was also in a steady downtrend. I can't see any technical reason to buy now or anytime in the near future.
8. If you want to buy on MA crosses, you might want to look into Linda Raschke's "holy Grail" method, which requires a strong uptrend, ie ADX>30, and a pullback to below the 9 day MA and a recross to the upside. It's a lot easier for a stock that has pulled back from an uptrend to go higher than one that has been in a long selloff.
Quote from ozzie123:
Care to share what system are you talking about here? I know that those indicators are for beginners (hey, I am beginners on technical trading). I'm trying to dig deeper on price channels, MA envelopes, and pivots in the mean time
well I can't share systems but I can point you in general direction.
that AAAinthebeltway guy on page 4 or something gives you good advice when it comes to divergences of these classic indicators
however I doubt he himself is using just that, you need to take a stock chart, and consider some really whacko ideas, (I am not joking)
to look for edge, relax, make sure you have couple years in your life and start combining indicators and changing their
parameters as you play with chart of some stock
I'll give you big hint, (and probably hate myself later cause no one ever helped me)
combine support and resistance studies of long term short term and intraday BINGO :eek:
okay enough said, I am gonna go download some porn, haven't looked at shemails lately
hey shut up, you all do it