The proper way to trade an MA System

I'm not sure if i placed this in the right Forum but i would like to induce a discussion on trading MA systems.

It seems to me that many of us trades the ma cross.(Many thinks that MA is BS too, esp with the 'trading the naked trend' being the in thing lately).

It would have probably been smarter to trade the pull back that comes after the cross. Im not sure if anyone would agree but if i were to trade it in a purely technical sense, the trading the pullback would have been sensible choice, imo.

best regard
jest

I very much like your trading blog. Keep up the excellent work and Happy New Year my friend

Trading the pullback - the signal i really like is when the
low of a white c/stick touches a rising MA for a Buy signal,
or the High of a down c/stick touches a falling MA for a
Sell signal - BUT like all technical analysis it's not 100%
reliable.

HI Jest

I do trade the MA crosses , specially 60 ema crossing 200 ema on 5min time frame and 15min timeframes and the best trades are on a pull back to the 60 ema and then enter a trade, it gives better risk to reward ratio

my stop loss is always 15 pips below the 200 ema on a uptrend and above on a downtrend

imran

@WHTenn : Thanks! Just came back from a long holiday, feeling a bit rusty, but looking forward for a very interesting 2008. hehe.

@diminuendo, imransait : I think we're all thinking in tandem here when it comes to the subject of technical trading, for every breakout that happens its always wise to buy during the pullback.

But there are pullbacks which seems shallow and there are deep pullbacks, the trick is how do we deal with the shallow ones and how do we deal with the deep ones. I'll put forth my views in a later post, but before that, i'd love to read your views.

Thanks and regards

jest

jest

below is what i normally do with GU and GY. In a uptrend i notice that 50 and 200 ema act as support and vice versa in a downtrend.

if price closes below 200 ema in downtrend , i close my positions if open and look for the reverse crossover and vice versa in a uptrend

imran

try use 65 and 200 SMA instead, with an envelope (for euro I use +-0.01) on the 200 SMA. it looks good too. I've traded this system along side for months. It's even better on daily.

Jest, fellow LKY Islander......just saw your blog again so are you planning to launch your own managed a/c ?

@imransait : Thanks for your chart. I have attached mine. The arrow indicate where my possible entries will be. The cross is happened on 29 sep 07.

@cateful : Yes you can be right, i think MAs are just that. Once ur used to it any MA can be helpful.

@findcount : Erm bro, haha no lah. I do only for close relatives so far.

best regards
jest

Hello,
I was wondering if someone would backtest this for for I'm sorry, but I hope it's close enough for the thread topic.
I dont use metatrader and can only load 5000 bars of data, I'm thinking 5m Eur/usd or the other majors, not sure maybe even 1m
I know what many of you are all ready thinking what about sl tp, looking at my 5000 bars I don't believe I have enough data so I would say always in the market.
25 ema close and 100 ema close, 25 determines the direction, sorry if this has already been done.
Thanks,
Matt

Choose any MA. They are bound to support one price or another at some point of time.

What we have done in general is that we have used the MAs as a tool for a trade signal, which in my opinion carries some aspect of impairment in usage.

I'm not sure if thats the real purpose of MA when it was first created. The role of MA is to smooth out price movements so that it could give the trader a good sense of the trend.

MA(10) gives us an indication of the trend for the past 10days.
MA(20) gives us an indication of the trend for the past 20days.
When 10 crosses 20 you get a MACD rising above 0 signal, right? Does it indicate bullishness yes...infact it did 20 bars ago right? heh. So now we know the historical trend.

For the discretional trader, its important for us to develop a bias. And many has founnd it in ther own unique ways. Personally, i have found that the use of MAs as a very helpful tool to develop my 'sense' of the market.

Look again at the chart i posted in my previous post. A trader having a short bias has as many chance as i did to make a killing in the market too.

It does not mean that MAs have any dort of magic in it and that price 'responds' to its movements. NO. Use it correctly and the correct manner is using it to develop you bias on the market.

Like fti used to say. Bulls win, bears win, only pigs get slaughtered.

btw the chart above is a 4hr chart using sma 30 and 120.

regards
jest