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Group:
I was wondering if someone can address this controversy? I read where
William Brower wrote an article circa August, '98 on the subject of DMA's.
In the article, he goes through an example which improves returns sig-
nificantly, and then states "This result is typical. As counter-intuitive
as
it seems, displaced moving average systems usually outperform the standard
moving average system."
Earl Adamy, a name most of you will recognize as a respected computer
expert and trader, posted the following to the RT forum: "I did detailed
back-
testing of DiNapoli's displaced MA's using daily S&P cash data from
1970-1997
using MA's from 3 to 25 in increments of 2 and displacements from 1-7 in
increments of 2. I could find no displaced MA which provided consistently
profitable entry and exit on both long and short side or on either side
indiv-
idually. Like about every fixed frequency indicator I've ever tested, they
did
well in trending markets and got whipsaawed badly in trading markets."
I was exploring this idea initially from the book "Martin Pring on Market
Momentum", page 115 which states: "This concept of leading moving averages
ws promoted by Gartley in the 1930's........He believed that the best
combination of
moving average and lead came from a 25-day simple moving average advanced
by
3 days. He came to this conclusion from research covering the stock market
from
the late 1920's to the early 1930's--a period that covered major bull,
bear, and tran-
sitional markets."
Another individual whose advice I respect has stated that he is not a fan
of DMA's
and has 'proved' it for himself with a similiar exercise using SC's
optimization
report. He states that the DMA's are a carry-over of the past when
calculation
capability was limited.
I don't understand how Brower can come to an opposite conclusion on DMA's
and would appreciate any expert commentary which can explain this dilema.
Thank you.
Charles
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