Cross systems trash? help me!

Hi,
I have a question to propose to everyone that is based on the infamous cross signal. I notice that a lot of people when posting their systems use crosses that happened in the past to show an entry point. I also noticed that the cross happens because the candle after the cross.

So the entry point is at the cross in the history, but wasn't a cross until the candle after. So everyone if taking that signal would be at least 1 candle late which could screw up at least 20% of the back testing and make what looks to be a good cross system, a terrible one.

Also, when forward testing, if a cross appears, and the signal is taken just to find out that the candle after the cross actually removes the presence of the cross all together!

I hope i made that clear to understand.

I have concluded that cross systems are garbage! Price is the ultimate indicator in my book.

I also wanted to state that i have been demo trading for a year and a half off and on and have never been consistently profitable for more than a month and a half.

I would like comments and criticisms. And maybe if someone could show me an indicator that doesn't change its mind weather there was a cross or not the day after i take the damn trade!

Take it easy everyone and happy trading!

There is a crowd out there that reduces everything to "price". That is simple. Though there needs to be more reasoning to trade than just "price is the key", or "price is the only indicator that doesn't lag" and all the rest that is stated. Right? I, after reading all this "price" stuff, have concluded that a lot of people just say price this, price that to feel more presitigious. Also, this "price" community is so large ... people don't even know what someone is actually talking about when they say they use price. The fact is, a lot of people, specifically those in J16 Price Action Thread, are not trading "price", they are trading patterns and historical probabilities. Not that this is wrong or misconceived, these traders are as a whole probably the most profitable traders on the forum. If you were trading "price", wouldn't you just be trading numbers? It is trading "Price Action" because of the "Action" = patterns and shapes ... not 1.3400 EUR/USD.

When someone states that they are "trading the price" or something spiffy like that, they are simply trading what they, and likely others, are noticing to be a double bottom pattern on a daily chart. Or something of similar nature. Some people will draw a simple line and they will trade a 1,2,3 price pattern. It is still a pattern though. They are trading "patterns". This is what annoys me sometimes. It has become so popular to be naked and trade just the price, though it is in reality just simple patterns? Correct?

I guess my plea is this, when someone says that they trade "the price", explain a little more. Do you trade patterns based off of price movements of the trading subject? This occurs whether one is watching EUR/USD or XOM. Or are you trading some hyper-natural way when you see price moving at a certain speed or something? If price is moving at a rate of .12% change per minute you trade it? See? It is confusing. Both could be "trading the price as the main indicator". :

MA Cross Systems, if used on the cross every single time, will certainly not be profitable in the long run. However, one can use these lines to display a blueprint of what occured in the past to help anticipate the present and future. MAs do lag, because of this fact one must use them in a logical way. I am not an MA Cross System sympathizer, however, I do personally benefit from using MAs and MA crosses. If I didn't use MAs as my training wheels I would be sitting around trying to catch daggers all day on "resistance" or "support" levels. MAs can become explicit reminders that something has yet to establish itself as an upward or downward move. This is different than using them explicitly to trade an upward or downward move.

Lastly, I do agree with you Forex Prospect. MA Cross Systems if used as an actual mechanical system are "trash". I have yet to see one that doesn't filter to exhaustion or use multiple time frames etc. The reason for this struggle is because ... it just isn't that simple.

Thank you, you too.

I can think of two reasons why “price action” based entry techniques are more likely to be productive than those based on technical indicators, like MA crossovers.

The first is based on the idea that the aim of entry is to somehow get us into a trend, both as early and as reliably (the relationship between which is frequently a compromise), as possible. Patterns like “pin bars” and “outside bars” require only the close of one bar (the current one) to complete, while several more closing prices may be required before a crossover occurs (the longer the periods of the MAs, the greater the “lag”). So, in the context of any one given timeframe, “price action” will almost always give and earlier signal. But is it any more reliable?

That brings us to my second point: the probability of a phenomenon being reliable, or effective. If enough influential traders believe in, and act upon a phenomenon, the weight of their action will cause their “prophecy” to occur. When price moves toward an area of heavy support or resistance, almost everybody is waiting expectantly for a convincing breakout, and if it occurs, the queue of pending orders is frequently such that a resulting breakout triggers explosive movement. Hence I would describe that as a “high probability” phenomenon.

MA crossovers are about trend-riding. Dopey’s excellent Demark quote (“divergence is a symptom, not a cause”: http://www.forexfactory.com/showthread.php?p=1432488) applies even more obviously to crossovers. The change in trend eventually causes the MAs to cross; and if the resulting trend lasts long enough for costs to be overcome, and for our exit method to capture profit, then a winning trade results, otherwise not. The implicit assumption is that this will occur more often than not. If a crossover system works profitably, then I suspect that has more to do with the fact that prices "trend" (a "robust" concept) rather than the way in which the MAs are calibrated (optimized). For optimization to enhance profitability, prices must follow something approaching their past cyclical "rhythms", more often than not, in the future.

The bottom line is that we must enter on a price bar, and almost any indicator can be calibrated to give entry on an earlier or later bar. So I would suggest that (1) any one indicator is not necessarily better than another, and (2) loading up a chart with additional indicators doesn't necessarily provide "confirmation", because all of these indicators are ultimately being calculated from the same OHLC(V) values. I provide chart examples of all this here: http://www.forexfactory.com/showthre...226#post172226

In terms of reliability according to the “self-fulfilling prophecy” (resulting from universality of use), MAs (and, in fact, all technical indicators) present two difficulties, when compared to other techniques. The first is that their calibration is arbitrary, i.e. some people might use Rob Booker’s 5,13,62 EMA method, while others might use the Cornflower calibrations (8, 12, 24, 72), still others a 24/28 tunnel like Vegas, and so on. The second is that MAs change with timeframe, e.g. an EMA(25) on a 15 minute chart will plot completely differently than an EMA(25) on a 1 hour chart. So the probability of any one particular setting capturing universal sentiment is necessarily going to be lower than, firstly chart patterns (pin bars, inside bars etc – which don’t require calibration), and even lower still than horizontal lines like support, resistance, key Fibo retracements etc, which not only don’t require calibration, but are also timeframe-independent (e.g. support at 1.9965 is the same across every timeframe), and are therefore more likely to be considered by a greater number of traders. Additionally, concepts like S/R and Fibos are actually "leading" indicators in the sense that they point to future "decision points" resulting in a possible reversal, or an explosive breakout. It makes sense that confluence between S/R, trendlines and/or multiple Fibos (drawn between different highs and lows) would further improve the probability that a greater number of traders are anticipating a certain event.

Hence I would suggest that techniques based around the most widely accepted aspects of price behavior are the most “robust”, i.e. capable of operating profitably irrespective of timeframe, and the changing cyclical "rhythms" that occur within a given timeframe. I believe that’s one good reason why the James16 “price action” entry concepts have attracted such a wide following.

Anyway, Darkstar explains this much better than I do:

David