M.A. crossovers

Quote from Murray Ruggiero:

problem is a dual moving average system has problems due to phase relationships with the market. If you use a 1/2 cycle moving average minus a full cycle will be 180% out of phase with the market. Buying every top and selling every bottom. The triple MA does not have this phase problem so that why it works better.
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That's simply not true. If you use MA1 = 1/2 cycle moving average, MA2 = full cycle moving average, MA3 = 1.5 cycle moving average, you will be 180 degrees out of phase with the market. Buying every top and selling every bottom.

A spreadsheet is attached. Price is cyclic with period = 30 bars. The Triple MA system is used, with MA1 = 15 days, MA2 = 30 days, MA3 = 45 days. Notice how it buys every top and sells every bottom.
 

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See the point is that moving average crossovers work because they are trend following systems, when the market is in trend mode this phase issue is not a problem. If you look at 3D plot of the parameter space for a triple MA you will see it is much better. The triple MA, requires both the medium term moving average to be above the long term and the short term above the medium. This means that it is more likely the market is in trend mode. If the market is in trend mode then , the cycle issues do not matter, because this phase problem relates only to trend mode.
 
Quote from Murray Ruggiero:

this phase problem relates only to trend mode.
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This is untrue; the phase problem is absent from trend mode! I imagine it is just a typing mistake.
 
Quote from MGJ:

This is untrue; the phase problem is absent from trend mode! I imagine it is just a typing mistake.
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Cycle issues assume you are in cycle mode. If you are in trend mode then you can't use same assumptions. Otherwise if I am totally wrong, you could just use the dominate cycle and buy every bottom and sell every top.

The fact that you can only make these cycle assumptions when you are in cycle mode is not only something I said , John Ehlers has also discussed these issues in many articles and books.
 
horribilicus makes a good point. It's very rare that a crossover is a good trade-able signal, as the longer the MA, you'll be late on entry...too short, and its probablt just a wipsaw. And don't think about trading off MA's in a trendless market, you're just asking for it.

I use MA's mainly to help me see if a trend is going to continue or end based on the crosses, but the actual signal came many candles before. Just my experience in the jungle of indicators.

As you can tell from this chart, If you bought each time the MA's crossed, you would have bought the top.

cm
 

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Murray, please can we know the name of the person/trader who is using the crossover as mentioned by you.

If it is not possible to disclose the name, it is not a problem, as we can understand it.

Thanks for the same.
 
Quote from Gyles:

Murray, please can we know the name of the person/trader who is using the crossover as mentioned by you.

If it is not possible to disclose the name, it is not a problem, as we can understand it.

Thanks for the same.
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Yes, I interviewed him in my book Traders Secret. His name was John Fritz. He traded a quadruple moving average system using walk forward analysis. He was featured in Future Magazine new trader section right before we interviewed him.

Here is a link to Traders Secrets in our store

http://www.tradersstudio.com/Produc...cmd/CatalogItemDetails/psmid/657/Default.aspx
 
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