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At 09:47 PM 1/14/99 -0800, you wrote:
>Neal wrote:
>> Displaced Moving Averages are a great trading tool, ask a trader
>> who uses them.
>
>Ok, I'm always interested in learning something new so I'm asking? What
>are they good for?
>
>--
> Dennis
>
Dennis,
I use them as a component of a trend indicator.
As an experiment, plot a 3-bar simple moving average
displaced FORWARD 3 bars. It is a good trend indicator
in a thrusting market. When price changes direction,
the 3X3 will often "cup" or "hug" the price action,
so a safer place to put a stop-loss would be on the
other side of the 3X3. Use a slower (eg. 25X5) moving
average for longer-term trends.
A non-displaced moving average has way more whipsaw,
so could not be as dependable. And using a slower
non-displaced moving average has the disadvantage
of entering and exiting the trend too late (although
it has less whipsaw). The displacement is a good compromise.
I saw someone else posted a message about using a
displaced moving average for a trailing stop. That's
not my application, but could have merit.
Displaced Moving averages, MACD and Stochastics are
what I use for trend indication. I love to fade the
Stochastic when the other two are in sync! This helps
me catch many novice and mechanical traders on the wrong side
of the market, making for a quick profit as they panic.
I was taught these techniques by Joe DiNapoli, he has a
web page which you will find linked on my own web page
below.
Best wishes,
-Neal.
-----------------
Neal on the 'net.
Trade well. Train hard.
http://www.halcyon.com/neal/
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