Those that poopood on moving averages, thoughts on this?

[jinxu]

Why SHOULDN'T MA's work: they are derived from market data.
The question is how often do they fail?

Everything works if done consistently, but not always in meaningful ways.


View attachment 185388

To the untrained eye. Let me tell you a possible way to interpret this data using fundamental logic.

Spelling bees are an indirect correlation of the average IQ of the population.
It is assumed that the dumber the population get, the more likely they will put themselves into situation that get them kill from spider bites.
The dumber the population get, the more of them get kill as this is how evolution and natural selection works.

Therefore, the data correlates because it indirectly measure the IQ of the general population.

Hehe

 

[Fred Proffitt]

INMO the main problem with moving averages is that people use them as they would for the stock market. But the data produced from the fx market is different from the data produced by the stock market. So why should we expect two different data's to produce the same results? It's not logical!

I liken the two markets to comparing cars. All petrol cars are basically the same, they all work the same, but even a novice driver would never expect a Ford part to fit a BMW, yet traders expect all indicators to work on every financial market regardless.

When used correctly, differently, moving averages can be an exceptional tool to use in the fx market!

 

[tiddlywinks]

To the untrained eye. Let me tell you a possible way to interpret this data using fundamental logic.

Spelling bees are an indirect correlation of the average IQ of the population.
It is assumed that the dumber the population get, the more likely they will put themselves into situation that get them kill from spider bites.
The dumber the population get, the more of them get kill as this is how evolution and natural selection works.

Therefore, the data correlates because it indirectly measure the IQ of the general population.

Hehe

The Scripps Spelling Bee, among other USA eligibility requirements, involves children that are enrolled in school that have not passed the 8th grade on or before a specified date. An "indirect correlation to the average IQ of the population" is an invalid extrapolation even to the untrained eye. Furthermore, venomous spiders have a certain degree of geographic or environmental clustering. Commonplace personal activities, interests, or hobbies may place individuals in such locations. It could easily be argued that participating in activities such as camping, hiking, traveling, or even putting on your shoes enhances and/or expands knowledge and intelligence. So much for your theory.

ET members are in the upper percentile of financial-market participant profitability and intelligence because they have access to the internet and have a valid email address.

hehe.

 

[bone]

INMO the main problem with moving averages is that people use them as they would for the stock market. But the data produced from the fx market is different from the data produced by the stock market. So why should we expect two different data's to produce the same results? It's not logical!

I liken the two markets to comparing cars. All petrol cars are basically the same, they all work the same, but even a novice driver would never expect a Ford part to fit a BMW, yet traders expect all indicators to work on every financial market regardless.

When used correctly, differently, moving averages can be an exceptional tool to use in the fx market!

But a metric tool set including a 10mm socket will work on both a Ford and a BMW - I've owned both. Same with the Moving Average. It will work both on Fx and Equities... what needs to be modified and adjusted for different markets (vol and trading range) are the study settings and sampling parameters. Even more specifically - the rules set and confirmatory study(s) you use for one market probably won't work for another market. (again, vol and trading range dictate the necessary changes)

 

[Fred Proffitt]

Thank you, but you're just proving my point, as you wrote there needs to be an adjustment before the data from the fx market can be used to produce the same output as the data from the stock market.

Further sir, your inference that it is just volume and trading range that need to be adjusted is also wrong, the few strategies that have been developed for the Moving Averages on the stock market, which are mostly crossover types, definitely don't work on the fx market.

BTW, I never said that tools wouldn't work on both cars I said a PART made for a Ford would not work on a BMW. If they did why would anyone pay the extra money required for a BMW part?

Happy trading.

 

[Saltynuts]

If you read Colby's most recent remarks concerning his study of moving averages, he goes on to say that they basically don't work in today's markets the way they did when he originally published his findings. He blames HFT/Algo, etc. It's in the article you posted.

Used the correct way and with other means of verification/filtering, MA's have a useful purpose.

Remember: Price makes the average. The average does not make the price.

Wicked Data, many thanks!

 

[jinxu]

The Scripps Spelling Bee, among other USA eligibility requirements, involves children that are enrolled in school that have not passed the 8th grade on or before a specified date. An "indirect correlation to the average IQ of the population" is an invalid extrapolation even to the untrained eye. Furthermore, venomous spiders have a certain degree of geographic or environmental clustering. Commonplace personal activities, interests, or hobbies may place individuals in such locations. It could easily be argued that participating in activities such as camping, hiking, traveling, or even putting on your shoes enhances and/or expands knowledge and intelligence. So much for your theory.

ET members are in the upper percentile of financial-market participant profitability and intelligence because they have access to the internet and have a valid email address.

hehe.

Uh...I wasn't being serious. For one, I don't even know if the chart you put up was real or made up. And two, not enough data points. Three, I'm surprised you would reply to that and more so that you waste time trying to analyze it. Hehe.

 

[tomorton]

I don't fully understand the survey techniques and have never heard of a good portion of the systems listed.

MA cross-overs as entry signals are generally indicators that a price reversal has occurred. They are not very good at this task as they lag price action and are so frequently invalidated by more recent price action, so strict loss control is essential.

But this is an abuse of MA's anyway. They are trend indicators, not reversal indicators. Abusing a tool and getting a good result in a specific narrow set of circumstances is still an abuse of that tool and is a very poor example to follow. Likely to bounce back and hit you in the face.

 

[padutrader]

Wicked Data, many thanks!

yes
Price makes the average. The average does not make the price.

why should they not make sense....they are price because they are derived from price.

if you see the chart you will see that the short term average in orange [10 period] and yellow [20 period] are very steeply down whereas the longer term ones in brown dashed[200period] are still flat.
this means the move down is is short term one or a move in a larger trading range.
if you look left, as Al and many price action purists would advice you , you will see that it is in a range.
Use of ma do help confirm the actual technical situation, not surprisingly since both are related to the market price.
i came to the conclusion that i can fade the downmove. which i did [fade]

 

[padutrader]

the argument, that the crossover gives a late signal, is a complaint by traders, that the reward obtained in using this, is less.
But that is how it should be:you cannot have high probability and high reward.You have to accept less reward because you have confirmed trade. maybe go for 1:1 at most