Why do moving averages SUCK so much?

nattybumppo said:
What makes MA's suck?
1. Lots of lag.
2. Too popular--everyone is using them.
3. Trying to use them in isolation.
4. Trying to use them as short term signals. Since they have a lot of lag, they work more effectively for exploiting the bigger moves on longer time frames.
5. Using MA's with poor position sizing.
6. .......... Relying on too few signals or too many is likely to give you inferior results.

Keep in mind that your second strategy--buying below the MA and selling above it--fails in prolonged downtrends. In that case, you are cutting your wins short but letting your losses run! So you will have a lot of small wins occasionally wiped out by large losses unless you have other elements in your system to prevent this outcome.
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%%
Good points.
Actually that does not fail in a bear market\pro downtrend/it just takes longer to profit=big difference,.....................................................................................................
 
Overnight said:
Pfft, so on his chart, you have to wait months and months for a set-up
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...here ya go
nq 2021 0223 5m.png
 
From reading your comment, you are saying MA suck in longer term stock market movements since if for example you were to go long on a cross upward, you would do worse than a buy and hold strategy.

And, no one is going to disagree with this statement since yes, due to lag and other reasons including back testing, this simplistic strategy does not work especially since its the easiest to see on a chart for newbies.

However, that is not how PA traders in shorter time frames use MA. No we don't take them as signals to go long or short. What they are useful is determining trend or bias. If say stock prices are above the 200 day moving average then we are still in a bull market. So you might want to look for bullish trade setups that have an edge.

An edge is the actual setup that when both back tested and forward tested with real money has a profitable outcome above 55% of the time.

Once you find an edge, you then need to implement a system that includes risk vs reward for each trade, total loss you are willing to take for the day, and finally the ability to take your trade setups correctly on the far right side of the screen, and have the patience to wait for setups that you have back tested or use full automation if you are able.
 
I trade /NG (Natural Gas futures) exclusively and it religiously respects 50 and 200 EMA, especially on Daily chart.......
 

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heispark said:
I trade /NG (Natural Gas futures) exclusively and it religiously respects 50 and 200 EMA, especially on Daily chart.......
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To formulate a trading strategy based on that chart alone, I would have to immediately get into special cases of "trend above upper band", "trend below lower band" and "bounce between bands". And then when I had coded that, I am pretty sure it would fail horribly out of sample.

I guess you use it to guess where it may bounce intraday among other factors? "Religious respects" is giving it way too much credit though, even if the above isn't just a random fluke.
 
I just started using Amibroker to backtest and walkforward strategies. I had a strategy that, when optimized over 10 years, made $144,000. I then walked forward that same period with 6 month increments and it barely broke even.
 
Overnight said:
Pfft, so on his chart, you have to wait months and months for a set-up that MAY fail? Falling through the ice and drowning at the bottom. What a load of shit. How did it work out for him after 2009? How many more setups did he ever get on that DJIA?
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here ya go...
Paper F Trade 2021 0225 5m .png
 
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