|
PureBytes Links
Trading Reference Links
|
The issue of lag brings alongwith it the issue of noise. To me they seem
to be inversely related. I have been using Double EMA ( i.e EMA of
EMA) of MP(). To compensate for lag I use short term durations in my MA
crossover system . This allows me to catch a fairly substantial portion
of all major moves in trending markets. The lag may not be addressed here
but yes noise certainly is filtered out and only effective signals are
recognised.
One technique that has been talked about here on the forum in the recent
past which while not addressing the issue of lag in MAs' but focusing on
catching turns pretty much near the point of occurence was Bressert's
Double Stochastic. Double EMAs' coupled along with Stochastic of
RSI and Double Stochastics provide reasonably profitable trades.
This system has worked quite effectively for me for quite some time now.
I would like to enter a caveat here, that this works only in trending
markets, the focus being on catching major portions of the trend.
So the question to my mind is do we live with a bit of lag as long as we
filter out noise or do we rule out lag and take the noise along with it.
While I know I am digressing from the basic issue of this particular
thread I would like to suggest an approach based on using signals arising
from a combination of these three tools or any other tools that each
individual is comfortable with, as I believe at the end of any discussion
we are looking for a means of making as many profit making trades as
possible and avoiding as many bad trades as is possible.
Rakesh Sahgal
At 10:37 AM 02/11/2001 +0000, you wrote:
Vitaly, All,
There is a lot that can be done with the ZeroLag indicators. Don't lock
yourself into using a simple EMA1:= Mov(P,Period,E); as your base
formula. The possibillities are endlesss. Exchanging the Close for a P is
a start. What would happen if you used MP() or Typical() instead of the
Close? Again, I can't begin to tell you the number of indicators that I
have seen evolve from this one formula.
J.
>From: "Vitaly Larichev"
>Reply-To: metastock@xxxxxxxxxxxxx
>To: "Metastock List"
>Subject: Re: Lag In Moving Avg
>Date: Sat, 10 Feb 2001 19:43:09 -0500
>
> > Bob Webb is exactly right, and said it very well. It's
> > not possible to remove the lag from a moving average.
>
>I concur with it. An improvement still available here is to
dynamically
>change the period in MA; MS syntax doesn't allow it :-( . For
instance,
>considering that the tops are accompanied by high volatility, one can
>make a formula for MA with the period inversely varying with the
>volatility, or ,say, ROC for that matter. In fact, the following
formula
>posted on the list is built on this idea, though implicitly:
>
>{From Metastock List of Wed, 03 May 2000 14:07:04 GMT From: "j
seed"
>; I changed Close to P}
>
>Period:= Input("What Period",1,250,10);
>EMA1:= Mov(P,Period,E);
>EMA2:= Mov(EMA1,Period,E);
>Difference:= EMA1 - EMA2;
>ZeroLagEMA:= EMA1 + Difference;
>ZeroLagEMA
>
>I like it, I use it. To smooth it out further, one may apply it twice
with
>smaller period for the second.
>
>But again, you cannot make the lag zero!
>
>All said, I was impressed by Jeff's trendline
>(http://www.digital-web.net/~haferman/plot.html).
Very good, indeed!
>
>Jeff, can you expand a bit what's it - "non-linear
trendline"? If it doesn't
>sound too nosy, of course :-) .
>
>Cheers, Vitaly
>
>
>
>
>
>
>----- Original Message -----
>From: "Jeff Haferman"
>To:
>Sent: Saturday February 10 2001 4:52 PM
>Subject: Re: Lag In Moving Avg
>
>
> >
> > Bob Webb is exactly right, and said it very well. It's
> > not possible to remove the lag from a moving average.
> >
> > It is possible to draw a non-linear trendline through
> > a time series, and this will give you an idea of
> > the current trend. Such a trendline doesn't appear
> > to the eye to have the lag associated with an MA.
> >
> > For example, try my "plot" page at
> >
http://www.digital-web.net/~haferman/plot.html
> >
> > Enter any U.S. equity symbol, wait about 10 seconds,
> > and you'll get a plot back with a best-fit non-linear
> > trendline.
> >
> > Jeff
> >
> >
> > Bob Webb wrote:
> > >
> > >Jim,
> > >
> > >I think I know what you mean by the question, but when you think about
>it,
> > >it is not possible. A "moving average of X periods" is, by its very
> > >definition, an average of X number of previous prices (O,H,L,C) or some
> > >other value (e.g., see the use of m.a. in the MACD). If price (e.g.,
>Close)
> > >is reversing from being in an upward trend to moving lower, then it will
> > >take a certain number of Closes, before the moving average of X periods
> > >will begin to also reverse direction. Thus, a moving average is, by very
> > >definition, a lagging indicator.
> > >
> > >There are, however, two ways (and perhaps more) to decrease (but not
> > >remove) the lag in a moving average:
> > >
> > >(1) make the "X" in a "moving average of X periods" a smaller number.
>Thus
> > >it will take a fewer number of lower Close values to turn the moving
> > >average around.
> > >
> > >(2) give greater weight to the most recent X values and lesser weight to
> > >the older X values. This is accomplished by using a weighted or
>exponential
> > >moving average.
> > >
> > >The danger, however with using either of these above methods (or a
> > >combination of both), is that you will have a greater number of whipsaws.
> > >
> > >In conclusion: a moving average is, by definition, a lagging indicator.
> > >There are other indicators that are anticipatory, but not the m.a.
> > >
> > >Hope this helps.
> > >
> > >Bob.
> > >
> >
>
>
>
>
>
>
Get your FREE download of MSN Explorer at http://explorer.msn.com
|