Why trade at the cross? Wait for the confirmation | Forex Factory

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Why trade at the cross? Wait for the confirmation

  • #1
  • First Post: Apr 11, 2008 11:01am Apr 11, 2008 11:01am
A simple thought just ran through my head. Why do people trading MA cross systems trade at the cross? To me I would think trading at the cross would be the absolute worst time to trade. That moment represents an indecisiveness, and possible shift in direction.

It doesn't make sense to me that the only time to trade is at the cross too. What about all the pips in the middle? Those are the pips we want. I would propose the best way to play MA's would be to enter a trade only after a cross has been made something like 5-10 bars back and the change in MA positions has still held.

The difficulty would be in determining the exit since we can not accurately predict the end of the run simply on MA. I would think tying in MACD calculations to it might help a little.

Again, this was just a simple thought that ran through my head while sitting here at work. Has anyone traded an MA system that was based on this idea of waiting for the cross to hold for several bars? Did the success rate change at all?

TIA. Matt
  • #2
  • Apr 11, 2008 11:09am Apr 11, 2008 11:09am
Another thought ran through my head. Perhaps the cross should simply act as a qualifier to begin another type of trading system. Perhaps after the cross occurs then we set up a breakout model for price to trigger. That way we set ourselves up to either catch the new trend, or stay our of a possible whipsaw and continue on the previous trend that holds.

Excuse me for not doing any searches since I am at work and have less than a minute to post my thoughts. Are there any other threads about systems that use other systems to initiate another system?
  • #3
  • Apr 11, 2008 11:11am Apr 11, 2008 11:11am
Quote
you must remember you are trading the weak against the weak here, probably the worst pair to be trading right now, there are many others that will give you much better signals and clearer signals than this one IMHO

This is Tmac talking about the GBP/USD

Hope you got the meaning behind trading the cross: Always find the pair by strong currency vs weak currency, and find good entries, u'll have nice odds.

take current situation for example, E/G, G/CHF are good pairs, imho
  • #4
  • Apr 11, 2008 12:47pm Apr 11, 2008 12:47pm
I think you might want to reread what I posted. I wasn't referring to currency crosses. I was referring to MA crosses.
  • #5
  • Apr 11, 2008 1:31pm Apr 11, 2008 1:31pm
oh, sorry man.

I don't trade MA cross system, I use MA as a sort of R/S

Hope other professionals answer ur questions
  • #6
  • Apr 11, 2008 1:46pm Apr 11, 2008 1:46pm
Evening Matt

Interesting subject and one that probably affects most traders who use any type of signal generated entry and/or exit.

However I would find it difficult to do as you suggest. If your system/method involves MA crosses and the crossover is the signal then it should be used albeit with some discretion. The cross in itself should be telling you of a change in direction and if that's what you're set up to trade then not trading the signal defeats the object of the strategy.

That is not to say that you go blindly on every cross of course, there will be occasions when it would be prudent to hold fire, possible due to impending news, approaching strong S & R, TL's etc or that price just immediately reverses against the signal. But to wait for more bars for confirmation would in my experience be too costly and at what stage can you be sure that you have 'confirmation'. One of the things I used to do if I wasn't happy with the setup would be to go to a higher TF but I stopped doing it because it was just delaying the entry in most cases and costing me pips.

Whatever way the cross is being used if it has been properly tested and proved to be reliable then I believe using the signal with good MM would be more advantageous than waiting for confirmation. For me the losing trades avoided would not compensate for the missed pips during the 'confirmation' bars.

Look forward to further comment on the subject you raise, tis' a thorny issue for many.

rgds, strada.

Quoting permanentjaun
A simple thought just ran through my head. Why do people trading MA cross systems trade at the cross? To me I would think trading at the cross would be the absolute worst time to trade. That moment represents an indecisiveness, and possible shift in direction.

It doesn't make sense to me that the only time to trade is at the cross too. What about all the pips in the middle? Those are the pips we want. I would propose the best way to play MA's would be to enter a trade only after a cross has been made something like 5-10 bars back and the change in MA positions has still held.

The difficulty would be in determining the exit since we can not accurately predict the end of the run simply on MA. I would think tying in MACD calculations to it might help a little.

Again, this was just a simple thought that ran through my head while sitting here at work. Has anyone traded an MA system that was based on this idea of waiting for the cross to hold for several bars? Did the success rate change at all?

TIA. Matt
  • #7
  • Apr 11, 2008 5:44pm Apr 11, 2008 5:44pm
ma crosses systems are pretty much a joke-- the 200 ema can be used a little.. -----9/30 , 10/40, 8/80, 164, 5/34, 6/10/16, 5/8/21 .. They all will leave you with a thinner wallet.
Just my opinion.
  • #8
  • Apr 11, 2008 8:07pm Apr 11, 2008 8:07pm
It's easier to just wait for the price bar itself to cross a moving average. Try the 200 or the 365.
  • #9
  • Apr 11, 2008 11:32pm Apr 11, 2008 11:32pm
Quoting strada
Evening Matt

Interesting subject and one that probably affects most traders who use any type of signal generated entry and/or exit.

However I would find it difficult to do as you suggest. If your system/method involves MA crosses and the crossover is the signal then it should be used albeit with some discretion. The cross in itself should be telling you of a change in direction and if that's what you're set up to trade then not trading the signal defeats the object of the strategy.

That is not to say that you go blindly on every cross of course, there will be occasions when it would be prudent to hold fire, possible due to impending news, approaching strong S & R, TL's etc or that price just immediately reverses against the signal. But to wait for more bars for confirmation would in my experience be too costly and at what stage can you be sure that you have 'confirmation'. One of the things I used to do if I wasn't happy with the setup would be to go to a higher TF but I stopped doing it because it was just delaying the entry in most cases and costing me pips.

Whatever way the cross is being used if it has been properly tested and proved to be reliable then I believe using the signal with good MM would be more advantageous than waiting for confirmation. For me the losing trades avoided would not compensate for the missed pips during the 'confirmation' bars.

Look forward to further comment on the subject you raise, tis' a thorny issue for many.

rgds, strada.
I probably should have not mentioned it as MA crosses. Really, the idea can be applied to almost any indicator or system that includes crosses. For example, you could play a breakout system but only trade the breakout when it closes past the breakout range and not just trades through it. Or if you're playing an RSI you would wait for it to close several bars over 50. MACD would wait for several bars the close above 0.

I get the feeling this type of mentality is being applied by many traders already. My thought is that we're looking for a type of momentum in our trades. If the indicators signals are true, then the trade should still be there after several bars have close already. How many bars do your trades generally take and how many bars does a movement you receive a signal on continue? If your trade takes 3-5 bars, and the movement generally lasts 10-15 bars, I see no harm in waiting 3-5 bars to confirm the signal and prevent a bounce off the cross, breakout point, or whatever.
  • #10
  • Apr 12, 2008 3:19am Apr 12, 2008 3:19am
Quoting permanentjaun
That moment represents an indecisiveness, and possible shift in direction.
Yes.
Quoting permanentjaun
It doesn't make sense to me that the only time to trade is at the cross too. What about all the pips in the middle? Those are the pips we want. I would propose the best way to play MA's would be to enter a trade only after a cross has been made something like 5-10 bars back and the change in MA positions has still held.
Depends. How big are the ma's, with a large ema/sma pair for example it might be true but for a small pair (like 15 for example) taking the 1-3 bars that open below ema and sma behind at positive angle already - is a much better idea because in 5-10 bars the move will already be over ussualy.

I assume you're trying an EA based on this by your second thread ?
Well in that case I'm not sure how well MACD will help but as further confirmation maybe it's worth it. Anyway, try momentum - at the same period number as your ma, aim only for low numbers (0.0002 range) for further confirmation it should work well.

Good Luck
On the path to Enrichment.
  • #11
  • Apr 12, 2008 3:41am Apr 12, 2008 3:41am
Surely it depends on the speed of the MAs. If you use 1/2 on a M1 timeframe, you're right. Use something like 100/200 on a D1 timeframe and the change in direction is probably already over.
The market reveals who we really are...
  • #12
  • Apr 12, 2008 9:41am Apr 12, 2008 9:41am
Quoting 4XWeezal
ma crosses systems are pretty much a joke-- the 200 ema can be used a little.. -----9/30 , 10/40, 8/80, 164, 5/34, 6/10/16, 5/8/21 .. They all will leave you with a thinner wallet.
Just my opinion.
I am sure many traders will agree with your statement which no doubt has much truth it it for many people who have failed in trading using MA crosses. I can only speak for myself and can assure you that I have been using the same MA crosses for well over a year now and the number of losing days I've had can be counted on one hand, needless to say I have not had a losing week or month. My income from trading now is steady week in week out and out of boredom I have been looking at some other methods but soon realise they offer no advantage. This perhaps adds further proof to the premise that as we are all different we all adopt and use trading tools differently; one man's meat is another's poison you could say.

Quote
Originally Posted by permanentjaun
I get the feeling this type of mentality is being applied by many traders already. My thought is that we're looking for a type of momentum in our trades. If the indicators signals are true, then the trade should still be there after several bars have close already. How many bars do your trades generally take and how many bars does a movement you receive a signal on continue? If your trade takes 3-5 bars, and the movement generally lasts 10-15 bars, I see no harm in waiting 3-5 bars to confirm the signal and prevent a bounce off the cross, breakout point, or whatever.

Hi Matt, Re momentum, often this can be strongest close to the start of any move so why risk missing what could be the most profitable part of the move? And even if the momentum does build more gradually if the trade has been entered early then (assuming multiple lots are being traded) initial profits can be banked early, SL's set at BE or better and let the move pan out in the knowledge that it is working in your favour. At whatever stage the trade is entered whether on the initial signal or several 'confirmation' bars afterwards no trader can be sure the trade is definitely going to be profitable, it will never be that easy. I think the whole aspect of 'confirmation' may have more to do with the individual's psychology and attitude to risk. That to a large extent brings it down to the individual's belief in their system/method/strategy and their confidence to trade it.

You asked about the number of bars my trades take. It varies enormously, after taking TP 1 & 2 my trades will run until I have good cause to exit. On the other hand sometimes I get stopped out on the very first bar and no doubt this is where you will tell me that I should have waited a few bars for confirmation! Does this make us both right? Let's hope so.

rgds strada.
  • #13
  • Apr 12, 2008 11:32am Apr 12, 2008 11:32am
Quoting strada
You asked about the number of bars my trades take. It varies enormously, after taking TP 1 & 2 my trades will run until I have good cause to exit.
Hi Strada,

As someone testing a system using ma's myself I'm interested in knowing a bit more how you TP. I've watched all those nice big moves that sometimes follow but then I realized that catching them may not be worth it because they are few and you never know when to tp or how to trail stop well.
So I figured I'll just set the r:r to 1:1 enitialy and then decrease the sl spread wide behind the sma (I'm using an sma/ema pair). Of course I have a whole bunch of entry rules to improve my chances and using momentum (for entry) and a large sma/ema pair (for being aware of consolidation areas in tp range) as additional indicators. Probably I'll continue getting a better than even success rate as I test more and the r:r is better than 1 on average so it's good I believe, but I'd be happy to hear of possibilities to improve the tp part.
For example reading you post I'm thinking really why not close say 3/4 of the trade and trail the remaining quarter. Then again on m1 I don't have much time to enter more complex orders so it's also a factor to some extent. Would welcome your insights from your experience.

Thanks
On the path to Enrichment.
  • #14
  • Apr 12, 2008 11:52am Apr 12, 2008 11:52am
[quote=permanentjaun;1947813]Another thought ran through my head. Perhaps the cross should simply act as a qualifier to begin another type of trading system. Perhaps ....
  • #15
  • Apr 12, 2008 5:06pm Apr 12, 2008 5:06pm
Hey Strada.. are you still trading the Bago?

What time frame, if so?

I've had a similar experience.

Take care my friend.

Marco
"I know how hard it is for you to put food on your family." George W. Bush
  • #16
  • Apr 12, 2008 5:55pm Apr 12, 2008 5:55pm
This is the system I use on a 15 minute time frame with metatrader, does not produce a lot of signals, but I have been using it with success for a couple of years now.
Attached File(s)
File Type: tpl maintrend15m.tpl   6 KB | 521 downloads
  • #17
  • Apr 13, 2008 11:53am Apr 13, 2008 11:53am
Hi Marco, good to hear from you and trust you're well and prosperous.

Yes I'm still trading bago and depending on time available have used different TF's. Last few weeks have been using 1m and it's surprisingly good, low SL's but had to up the pain barrier limits but happy with it and most days I get more time away from the screens. How about you?? If you want to discuss drop me a PM, maybe not fair to be off subject on here.

Quoting MarcoW
Hey Strada.. are you still trading the Bago?

What time frame, if so?

I've had a similar experience.

Take care my friend.

Marco
Quote
from Jurrasic
As someone testing a system using ma's myself I'm interested in knowing a bit more how you TP. I've watched all those nice big moves that sometimes follow but then I realized that catching them may not be worth it because they are few and you never know when to tp or how to trail stop well.
So I figured I'll just set the r:r to 1:1 enitialy and then decrease the sl spread wide behind the sma (I'm using an sma/ema pair). Of course I have a whole bunch of entry rules to improve my chances and using momentum (for entry) and a large sma/ema pair (for being aware of consolidation areas in tp range) as additional indicators. Probably I'll continue getting a better than even success rate as I test more and the r:r is better than 1 on average so it's good I believe, but I'd be happy to hear of possibilities to improve the tp part.
For example reading you post I'm thinking really why not close say 3/4 of the trade and trail the remaining quarter. Then again on m1 I don't have much time to enter more complex orders so it's also a factor to some extent. Would welcome your insights from your experience.
HI Jurrasic, close 3/4 and let 1/4 run. Yes why not, the important thing is that you're comfortable with it. I like to use 3 lots/parts and depending on TF and SL use specific targets for TP1 then 2 and I'll let 3 run until either I get a new signal or there's news or EOD etc.

rgds strada
  • #18
  • May 18, 2015 4:18pm May 18, 2015 4:18pm
coudnt agree more.always wait for the market to tell you its direction.
  • #19
  • Last Post: May 18, 2015 11:59pm May 18, 2015 11:59pm
MAs lag, period. Dont get sucked into the land of indicators!!!

Get an Ea to set you straight, (hint hint they dont work) your only chance at success in trading from a probability stand point is price action in some form or another learn it
Learn, a forex trader must, unlearn and relearn he will.
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