the point I was trying to make, kind of long winded, was that if
you back test pretty much any two moving averages as a system i.e.
go long when the faster MA crosses above the slow MA and reverse
short when the fast MA crosses below the short MA, unless you curve
fit them to a given time frame, they will always produce less than
50% winning trades. Thus logic dictates that yes when MA's
cross one another more often than not it's a whipsaw and price will
simply resume back in the direction it was already headed.
For example if I test a 13 EMA crossing over a 34 EMA, over
one time frame I get only a 33% winning strategy, this means that
odds favor you to actually assume the trend will continue in the
same direction in most cases when the two MA's cross.
Best to use much more powerful but simple technical analysis
techniques such as patterns, trendlines, symmetry moves, even some
rudimentary wave count but only if it's very obvious, and for
moving averages they have their place, however best to use them for
noting bullish and bearish configuration and price distance from
price and each other etc
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Here's a couple posts I
Question for Matt, Steve or other technically oriented folks: In ...
Posted by matt on 23rd of Dec 2015 at 10:43 pm
Here's a couple posts I made years ago where I go into this in much more detail
http://breakpointtrades.com/blog/post/222952/#222959
Thanks for the link.
Posted by frtaylor on 23rd of Dec 2015 at 10:54 pm
Thanks for the link.
the point I was trying
Posted by matt on 24th of Dec 2015 at 12:05 pm
the point I was trying to make, kind of long winded, was that if you back test pretty much any two moving averages as a system i.e. go long when the faster MA crosses above the slow MA and reverse short when the fast MA crosses below the short MA, unless you curve fit them to a given time frame, they will always produce less than 50% winning trades. Thus logic dictates that yes when MA's cross one another more often than not it's a whipsaw and price will simply resume back in the direction it was already headed. For example if I test a 13 EMA crossing over a 34 EMA, over one time frame I get only a 33% winning strategy, this means that odds favor you to actually assume the trend will continue in the same direction in most cases when the two MA's cross.
Best to use much more powerful but simple technical analysis techniques such as patterns, trendlines, symmetry moves, even some rudimentary wave count but only if it's very obvious, and for moving averages they have their place, however best to use them for noting bullish and bearish configuration and price distance from price and each other etc