I have a question about moving averages and oscillators

[triggertrader]

these indicators are used both for long term and short term trading.
in day trading i notice when using a stochastic or any other moving average i notice that the lines dip and rise above and below a negative positive line or when they crossover they tend to pull back and then do down again. then when the chart moves over to the next time frame they tend to "crack" and then solidify again.
my question is when do you act apon these indicators? when they make the formation you are looking for in a setup and then retract? when would you get in?
sometimes they look like a hair flying in the wind. there is no actual breakout.
if you look at past short term charts they are already formed out and look like great indicators.
i find them very hard to time.
any similar experiences and thoughts from traders would be appreciated.

 

[cashmoney69]

Yes, moving averages are not as simple as they're made out to

be. I've been using MA's in my trading now for a long long time

and still cant quite figure out when to trust a MA, and when to go

ahead and take the trade regardless if they crossed or not.

Remeber that ALL indicators/ oscillators follow price. No such

thing as a "leading" indicator. Best thing to do is go ahead and

take the trade anyway, because if you wait for a cross, then the

trend is either over, or mostly done for. Thats not always the

case if you look at my attachment. Where I drew the squares

was the perfect place to short aud/usd according to the MA's..

however I didn't take that trade..I took the one with the arrow

poiting to the lines...... There was no cross, but I still made a little

money just from reading price; however, had I made the trade

when the cross occured, I would have lost money.

 

[triggertrader]

Quote from cashmoney69:

Yes, moving averages are not as simple as they're made out to

be. I've been using MA's in my trading now for a long long time

and still cant quite figure out when to trust a MA, and when to go

ahead and take the trade regardless if they crossed or not.

Remeber that ALL indicators/ oscillators follow price. No such

thing as a "leading" indicator. Best thing to do is go ahead and

take the trade anyway, because if you wait for a cross, then the

trend is either over, or mostly done for. Thats not always the

case if you look at my attachment. Where I drew the squares

was the perfect place to short aud/usd according to the MA's..

however I didn't take that trade..I took the one with the arrow

poiting to the lines...... There was no cross, but I still made a little

money just from reading price; however, had I made the trade

when the cross occured, I would have lost money.

thank you for the chart and your personal experience.
i did notice before your entry there were 2 prior crossovers and the 2nd prior one would have lost money (if you went long)
my question is that is if you can remember this particular trade, when you were actually waiting for these moving average and price formations to develop did you find it difficult to identify the MA's in real time? i followed a 1 minute chart on the e-mini russel today live and notice even when you see a formation like a positive divergence when it moves to the next time frame the whole thing just broke apart and then didnt like a divergence anymore.
so how did these develop? did they develop in a wholesome formation without change after the next time frame or they broke apart?
my other question is what time frame was this chart? i notice i have even a harder time with the shorter term charts like 1 minute, because the MA's are even more erratic and change form.

 

[cashmoney69]

That was a 25min chart, and I also use a 1hr chart, but I dont

really take my trades off the 1hr, because my holding time

usually isnt that long, but mainly use it for support and

resistance, and also to see ma crossovers. A ma cross

on a 1hr will show up on a 25min about 3x faster, but a move on

a 1hr is more significant, than a 25min..so thats why I still keep

the 1hr up.

Not sure what you mean by "are the averages hard to follow",

because a 25min chart is as slow as Christmas, but for fx,

anything faster is too choppy for my taste.

 

[lindq]

Quote from triggertrader:

my question is when do you act apon these indicators?

You should not act on an indicator. You should act on price action. An indicator will simply get you in the ballpark and sometimes help to set up your entry or exit.

 

[riskfreetrading]

If your method is rooted in using indicators/technical stuff without having some special insight, the problem I think is not in acting on them, but in not systematically acting on them. Humans typically cannot do this. It might be better to use a robot. If you decide to do it yourself, I suggest that you do it always and without fail.

An example of insight is something that led me to discover it (or rediscover if others have discover it): Take a 25 and a 50 day moving average. Take a point where they cross. Count 25 days in the past from the point where they cross. The value of the 25 moving average at 25 bars past is equal to the value at which the 25 crosses the 50. Behind this observation, there is a truth and some useful insight. If you manage to disprove this PM me or let me know here.

Of course PM me if you like what you just read in the previous paragraph.

 

[bugsbunny]

Quote from riskfreetrading:

If your method is rooted in using indicators/technical stuff without having some special insight, the problem I think is not in acting on them, but in not systematically acting on them. Humans typically cannot do this. It might be better to use a robot. If you decide to do it yourself, I suggest that you do it always and without fail.

An example of insight is something that led me to discover it (or rediscover if others have discover it): Take a 25 and a 50 day moving average. Take a point where they cross. Count 25 days in the past from the point where they cross. The value of the 25 moving average at 25 bars past is equal to the value at which the 25 crosses the 50. Behind this observation, there is a truth and some useful insight. If you manage to disprove this PM me or let me know here.

Of course PM me if you like what you just read in the previous paragraph.

What lol u silly person u. are you saying that the value of 25MA is the same 25 days before it crosses a 50 MA !!!!!

 

[Jossan]

You can really improve ordinary moving averages by making them more intelligent.
The results are smoother curves and with less delay.

Moving Average Plugin:
Jurik's JMA

Trading Software with improved Moving Average:
Optimal Trader's OptAMA

Expect no miracles from intelligent moving averages, but they do improve indicators a bit.

/Jossan

 

[triggertrader]

Quote from cashmoney69:

Not sure what you mean by "are the averages hard to follow",

[/B]

i meant just what i said before.
they are hard to follow because i am using them for day trading with 1-5 minute charts, not 25 minute and hor time frames like you are using them for. so therefore they are swinging wildly.
if a convergence and crossover set up, the next 10 second they really arent set up.
the whole point is, price bars or candlesticks on a chart once formed in any time frame stick, becuase they are actual price. with MA's they don't. they keep swinging since they arent the actual price and are following price.
i think i'm coming to the conclusion that the answer to my question is you just have to paper trade them in real time. looking at a chart in the past will not help you test the accuracy of MA's

 

[Big AAPL]

You are correct in that observation. MA's on a smaller time fractal can be very misleading, because as you state, even though a candlestick has formed, the MA's direction has still yet to be determined. They do swing wildly on smaller time frame charts. As a trader who uses 1 to 5 minute charts for your entry/exit criteria, you should ditch the MA's on those charts and free up some real estate so you can get an uncluttered view of price action in that time frame. Then, you may want to use MA's (with your favorite settings) on a longer time frame so you can get a better idea of which side of the trend you are on.