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Chris---
Objective---to get a strong trending markets
Strategy---
Weekly--
Take the weekly 40 moving average(mv) and have it either going up or down.
If it is flat, assume previous trend until the price goes to other side and
pulls back and holds above or below the 40mv. This will avoid your
consolidation on the bottom and tops of the markets movement.
Daily---
Take the daily 40 mv and have it going in same direction as weekly with
price held above or below in the direction of the mv. When the daily 40 mv
average is contrary to the weekly you do not trade as this will take out
alot of the bull or bear flags and other consolidation areas of the market
that you see on the daily charts. The daily and weekly are good to use for
position trading.
Intraday---
Now I use 1/5 time frame of the daily, but hourly time frame of all markets
work also. This is used for swing trading. Or entry if your short on equity
or conservative on your entries trying to establish a long term position.
Entry----
There is many ways to go about this depending weather you are a position
trader or swing--let me try to put rules and then look at illustration, we
will use Dec Wheat 99 (if you do not have them you can go to
http://www.futuresource.com/ and look at theres for free with the
indicators)
1. Weekly has a direction determined by 40mv---in our illustration chart
(not included) WZ9 is down and price is below the mv so the trades will be
in that direction(short or sell).
2. Daily chart ---the mv must be in direction of weekly and price below it.
Illustation--if you look at that wheat chart, you will notice that the price
has been above the 40mv since last of July thru the middle of Sept. and the
mv average is going up and not down. Now the middle of Sept the price
breaks below, no entry because 40 mv on daily is still going up. Finally
when price pulls back on the 9/29/99 and above the 40 mv it does not need to
pull above 40 average tho(mv is pointing in direction of weekly). We now
have a setup for intermediate term position and enter with a close below the
40 mv if your looking at longer term position.
3. Intaday chart--- This is for swing traders, like myself, or for people
low on equity or have conservative entries trying to establish a longer term
position.
Entry--
You can enter in several different ways one is when stockastics pulls above
80 or below 20 on the hourly stockastics and crosses over you enter if you
are longer term trader you enter on close below 40 mv on daily. Another
method popularized by http://tradeworld2000.com/ is to take the first two
minutes of the market and one hour later in the market if the price is
above or below that trading range in the direction you are looking to go
enter. I am more of moving averages and so I take a method somewhat
described in http://www.mrci.com/lbr/index.htm "Street Smarts"--I use a 18
mv average and take the first five bars that touch or cross the 18 mv and
enter on the lowest or highest of them in the direction of the other two mv
agreeing. Therefore I entered at 274 1/2 on 9/30.
Exit----
First we find that in strong trending markets that the stockastics will
stay at extremes for sometimes before market turns. Illustration of wheat
intaday has been running between 35 and 10 on Stockastics while price keeps
falling. So Sockastics is worhtless for exit in my opinion. So I revert to
other methods. You can use predication methods like Fibo, or support and
resistance to get out of or you can use a moving average, or a combination
of the two. The first for target and the mv(hrly 40 is my favorite) as a
trailing stop in case you do not hit your target or the markets just act
random. I personally like the trailing stop and use RSI with target for
exit which is another subject in itself(I don't use normal interpretation of
RSI).
Now I think that describes it much better with some extra ideas. Also, to
your last question, I find that the weely and daily and hourly 40 mv
contains the market in the direction of the trend pretty much the same.
Except you have to remember, that weekly is real long term trend, that
daily is intermediate term trend so you would not exit as often as hourly
which is more swing trading, or short term trend.
This method determines strong trending markets. One other example that has
been also brought to our attention here. Soy Meal Dec example-----notice
that the weekly was down and has gone flat and price is above it that 40 mv
average @ the end of Sept. So we go to the daily now. The 40 mv has been
up but is flat so we go with previous trend which is up or long. I entered
on the 9/28 and exited and re-entered on the 10/6 using mv of the intraday
with the 5 bar rule, described above. Exited because target was hit looking
for re-entry again. If I was a longer term trader with this system I would
have enter just above the high of 9/30 and protect to the 40 mv with a
target in mine for exit(this is a 5 bar entry rule with 18mv on daily
chart).
This method determines strong trending markets, I trade strong trending
markets with this method and all other markets(I consider countertending)
are traded with another method, from "Street Smarts"
Hope this answers your questions and gives further or better insight. There
is some variations to this method to fit my style but if you want it from
the horses mouth go to http://tradeworld2000.com/ Nick VanNice. Have no
obligations to any sites mentioned other then there educating me and making
me a successful trader, which I'm indebted to.
charley
----- Original Message -----
From: Chris Jackson <chrisj@xxxxxxxxxx>
To: <charleydan1@xxxxxxxxxxxxx>
Sent: Sunday, October 10, 1999 7:06 PM
Subject: Question on use of 40mv
> A couple of questions on your post. See below
>
> ----- Original Message -----
> From: charleydan <charleydan1@xxxxxxxxxxxxx>
>
>
> >
> > I use 40 mv in all time frames all markets to determine trending
> markets.
> >
> > I first want a 40 mv in weekly to be flat to up or down to determine
> market
> > direction. Then I go to daily 40mv and want it to agree with the
> weekly.
> > Also, if the market has been going down and is just changing direction
> on
> > the weekly I want it to also go past the daily and then pull back
> before
> > entry of position. Then I go to a time frame 1/5 of daily in whatever
>
> > commodity or stock it is and swing trade it with entry with slow
> > stockastics, and exit upon pridicted swing as stockastics is 90% of
> the
> time
> > overextended.
>
> Could you clarify this comment ?
>
> >
> > If you look over charts you will see how the 40 mv contains the market
>
> over
> > and over again both in weekly, and more so in daily and the 1/5 chart.
>
> Are you saying the 40 mv contains both the daily and 1/5 charts more so
> than
> the weekly or that it is just more so with respect to daily ?
>
> Thanks,
>
> Chris
>
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