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Ian,
The displaced moving average is used for trend determination,
in DiNapoli techniques, not as an entry/exit signal.
In addition it is used in determining some patterns which
**predict** a change in trend before price turns (now that's a nifty trick).
Fibonacci is used for determination of entry/exit points.
One benefit of a displaced moving average is that it reduces
whipsaw. And it does this without introducing too much lag.
You can reduce whipsaw by slowing the moving average instead of
displacing it (using a longer moving average), but that has the
effect of lag. Lag causes you to enter a trend later, and to exit a
trend later (very costly for a trader). Try it on a chart...
See the attached chart. The area in the circle proves that whipsaw
is not eliminated, merely reduced. After that period, you will see
that the displaced moving average (blue dotted line) accurately
determines trend while incurring less whipsaw than the undisplaced
moving average (black solid line).
The undisplaced moving average here is a 3-period simple, the displaced
one is the same, just displaced 3 periods to the right. I see Lionel
already responded telling you how to displace a moving average.
If you want to do it within a formula, you would use something like:
ref(mov(C,3,S),3)
Trend is up when price closes above the moving average, else trend
is down.
-Neal.
At 06:54 PM 8/17/99 EST, Ian Burgoyne wrote:
>Neal,
>This is off the topic of Fib trading but to do with displaced moving
>averages which I recall you are a supporter of.
>Would you mind explaining how you use the displaced moving averages ?
>Whether you simply use the horizontal shift with the canned moving averages
>in Metastock or do you write your own code and create an indicator? How many
>days displacement do you find effective?
>
>Regards,
>Ian Burgoyne
>Melbourne
>
>
>>From: Neal Hughes <neal@xxxxxxxxxxxxx>
>>Reply-To: metastock@xxxxxxxxxxxxx
>>To: metastock@xxxxxxxxxxxxx
>>Subject: Fibonacci trading
>>Date: Tue, 10 Aug 1999 22:46:05 -0700
>>
>>
>>
>>Here is a good example of a trade using Fibonacci techniques.
>>Brilliant entry, exit and stop-loss techniques, couldn't hope
>>for anything more precise.
>>
>>If list members a have questions, post them here, I'll try to
>>help. It's a struggle, because I broke my right hand recently,
>>so I'm doing this with my left one..
>>
>>For details, see:
>>http://savagetrader.com/news/sectorwatch/index.html
>>
>>Best wishes,
>>-Neal.
-----------------
Neal on the 'net.
Trade well. Train hard.
http://www.halcyon.com/neal/
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