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Walt Downs wrote:
> MR LYNN G wrote:
> >
> > Below are a few comments about moving averages by traders. My question to the
> > group is how do you reduce whipsaws when using MA's?
>
> Lynn,
>
> It depends on how you use the MA's. Many people use a dual or triple
> MA and trade cross-overs. While this may prove profitable in the long
> run, it often subjects the trader to massive drawdowns, while waiting
> to catch a large trend. This whip-saw effect is even more pronounced
> in the current markets, because volatility is greater, and American
> markets, with a few exceptions, have not trended well over the last
> four or five years.
>
> I trade MA's using a "Bounce" method.
>
> the systems are very simple:
>
> Look for the market price to cross over the MA you are using. (You
> only need one. I prefer an Exponential MA). Look for price to revert
> back to the MA and buy or sell the first bounce against the MA's
> resistence. This method can be used in all time frames, and filters
> such as ADX can be added to confirm trend state.
>
> L. Connors and LB Raschkes' book "Street Smarts" shows one such system.
> They call it "The Holy Grail" :) .
>
> In order to determine the length of the MA used, take a look at how
> long you usually like to be in the market, and times it by two. If
> you usually like to be in ten days, use a 20 MA etc.
>
> Exit strategies are also easily defined. If not stopped out, exit the
> position (MA / 2 ) days after entry. If you are using a 20 MA, exit
> after 10 days. Another method, is to use a smaller MA to exit.
> For example, if using a 20 MA, and you are long, then exit if price
> closes below a 5 day
> MA etc.
>
> Sometimes, the market won't come back to the MA, and you will miss out
> but in general this method will greatly reduce your drawdowns, while
> still affording a possibiity of catching the "JAWS" of the trading
> world. :)
>
> Walt Downs
> CIS Trading
> http://cistrader.com
Hi Walt:
Is it possible to show me a graphical representation of your mentioned methods?
Parameters:
1) Exponential Moving Average
2) ADX=9days
3) Exit/Trailing Stops (assuming 10-day trading time frame)
Thanks in Advance
Have a good one
Jeff Harteam
Hong Kong
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