Thank you very much @robots4me for the encouragement
Trading Focal Points -- "A Leap Of Faith"...
- #302
- Mar 30, 2022 11:10pm Mar 30, 2022 11:10pm
- Joined Dec 2017 | Status: Trader | 4,378 Posts
Just as in real-life, everything comes with a trade-off. And that is true of Focal Points and Double Tops / Bottoms, as well. The trade-off has been mentioned many times before, but is worth reminding readers...
The SMA lines are backshifted by 1/2 their period. That means the most recent portion of the lines (denoted by small dots) are extrapolated / extended from where the real line ended. In other words, the dotted portion of the SMA lines is not based on price data. If the market hasn't changed within the most recent 16-32 bars then all is probably fine. But if the market has changed within the most recent 16-32 bars then the extended portion of an SMA line is NOT valid.
In the chart below I show an example where the market has changed, yet the SMA(32) is totally clueless. At this point I would consider the SMA(32) not only invalid, but possibly hazardous to your health...
The SMA lines are backshifted by 1/2 their period. That means the most recent portion of the lines (denoted by small dots) are extrapolated / extended from where the real line ended. In other words, the dotted portion of the SMA lines is not based on price data. If the market hasn't changed within the most recent 16-32 bars then all is probably fine. But if the market has changed within the most recent 16-32 bars then the extended portion of an SMA line is NOT valid.
In the chart below I show an example where the market has changed, yet the SMA(32) is totally clueless. At this point I would consider the SMA(32) not only invalid, but possibly hazardous to your health...
- #306
- Edited 5:29am Mar 31, 2022 4:50am | Edited 5:29am
- Joined Oct 2017 | Status: Trader | 12,472 Posts
- #307
- Mar 31, 2022 5:04am Mar 31, 2022 5:04am
- Joined Dec 2017 | Status: Trader | 4,378 Posts
{quote} A little "theory' to understand Centered Moving Averages location and their implications for your trading. {image}
- #308
- Mar 31, 2022 5:27am Mar 31, 2022 5:27am
- Joined Dec 2017 | Status: Trader | 4,378 Posts
Updated version of the R4M-DoubleTop indicator. This version includes SMA(128) and its extension.
So, now, we have it all...
(1) Detect simple Double Top / Bottom (16x32x64 crossing, followed by two 16x32 crossings)
(2) Entry (after close of bearish bar following second 16x32 crossing)
(3) guesstimated Target Price (extended SMA(128)
Simple strategy and easy on the eyes. And backed by theory...
So, now, we have it all...
(1) Detect simple Double Top / Bottom (16x32x64 crossing, followed by two 16x32 crossings)
(2) Entry (after close of bearish bar following second 16x32 crossing)
(3) guesstimated Target Price (extended SMA(128)
Simple strategy and easy on the eyes. And backed by theory...
- #309
- Edited 5:58am Mar 31, 2022 5:44am | Edited 5:58am
- Joined Oct 2017 | Status: Trader | 12,472 Posts
{quote} With your chart are you suggesting that the extended SMA(128) could be used to guesstimate a Target Price? If so, then we've got all the rules...
in this case yes. It is what I do R4M.
It is a cybernetic process . I guesstimate the Low AND the Crossing. Same reasoning : all potential Crossings are not equal..
Chart follows soon
- #310
- Mar 31, 2022 5:51am Mar 31, 2022 5:51am
- Joined Dec 2017 | Status: Trader | 4,378 Posts
{quote} in this case yes. It is what I do R4M. It is a cybernetic process . I guesstimate the Low AND the Crossing. Same reasoning : all potential Crossings are not equal.. Chart follows soon
You execute a cybernetic process, whereas I execute the rookie process. @parisboy -- slowly, slowly I hope to catch up to you one day. Do you think that's possible or am I just dreaming?
- #311
- Mar 31, 2022 5:55am Mar 31, 2022 5:55am
- Joined Dec 2017 | Status: Trader | 4,378 Posts
{quote} A little "theory' to understand Centered Moving Averages location and their implications for your trading. {image} {image} {image}
- #312
- Edited 6:31am Mar 31, 2022 6:07am | Edited 6:31am
- Joined Oct 2017 | Status: Trader | 12,472 Posts
A key point to understand how (Centered) Moving Averages work.
Empirical charts for empirical guys !
the bar removed from the count to calculate CMA 32 has a bigger value than the bar added .
Hence CMA 32 (blue) continues to go down.
Empirical charts for empirical guys !
the bar removed from the count to calculate CMA 32 has a bigger value than the bar added .
Hence CMA 32 (blue) continues to go down.
- #313
- Mar 31, 2022 6:11am Mar 31, 2022 6:11am
- Joined Oct 2017 | Status: Trader | 12,472 Posts
{quote} Excellent -- thank you. You execute a cybernetic process, whereas I execute the rookie process. @parisboy -- slowly, slowly I hope to catch up to you one day. Do you think that's possible or am I just dreaming?
I am sure you will one day soon become a strong supporter of the "theory".
Some are slower than others !
- #315
- Mar 31, 2022 6:19am Mar 31, 2022 6:19am
- Joined Aug 2012 | Status: Love for all; Hatred for none | 3,566 Posts
{quote} And that's because the backshifted CMA(32) doesn't yet see that new bar. BTW, @parisboy, you write (Centered) Moving Average (CMA). In MT4 the equivalent is "Simple" Moving Average (SMA). I should have mentioned this earlier because at first it confused me.
In this chart, Entry will be short position where arrow is marked and exit will be next circle?
I have another question that for bearish directions ; first circle must be above the second circle and vice versa for bullish directions?
Love for all; Hatred for none.
- #316
- Mar 31, 2022 6:39am Mar 31, 2022 6:39am
- Joined Dec 2017 | Status: Trader | 4,378 Posts
{quote} Thanks for updated indicator. I have one old school question for verification
As for the guesstimated Target Price (i.e. Exit) -- keep in mind we are all in the same boat. There isn't an "official" Exit point. However, maybe you use @Nih98's Sweet Spot indi as a clue. Or, as @parisboy just pointed out, maybe you use the extended portion of SMA(128).
This is discretionary -- it's not carved in stone what the correct thing is to do all the time. The indi is a tool that helps to visualize certain features -- i.e. to make it easier to draw your attention to certain patterns. At that point you apply discretion and your experience. I continue to gain confidence because I now see similar patterns repeat and they typically go the way I expected. Not always (because I'm a rookie, here) but this strategy definitely works. Plus, there is the added benefit knowing that it is backed by wave theory.
- #318
- Mar 31, 2022 8:11am Mar 31, 2022 8:11am
- Joined Oct 2017 | Status: Trader | 12,472 Posts
{quote} I would have traded differently -- I would have entered much earlier, shortly after the second 16x32 crossing is drawn. In fact, I think the optimal entry would have been at the close of the first bearish bar following that second 16x32 crossing. As for the guesstimated Target Price (i.e. Exit) -- keep in mind we are all in the same boat. There isn't an "official" Exit point. However, maybe you use @Nih98's Sweet Spot indi as a clue. Or, as @parisboy just pointed out, maybe you use the extended portion of SMA(128). This is discretionary...
- #319
- Mar 31, 2022 8:20am Mar 31, 2022 8:20am
- Joined Dec 2017 | Status: Trader | 4,378 Posts
I have a correction to make regarding a chart I had posted earlier. I had marked as a potential entry for a Double Top the close of the first bearish bar after the second 16x32 cross. In fact, there is no way you could enter that early. The reason is because of the backshifting. Since SMA(16) is backshifted 8 bars and SMA(32) is backshifted 16 bars then the earliest you could have entered a SELL trade was 16 bars after the second 16x32 cross. So, now I'm thinking that soon after you see the second 16x32 cross it will probably be obvious the price is in a down trend and that would be the time to enter the SELL.
- #320
- Edited 1:07pm Mar 31, 2022 8:27am | Edited 1:07pm
- Joined Oct 2017 | Status: Trader | 12,472 Posts
