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Very Simple Moving Average

  • #1
  • First Post: Apr 2, 2007 11:37am Apr 2, 2007 11:37am
Hi,

Have you ever looked at a chart and seen how the price will go through a moving average and the next thing you know you could have captured 30 pips 65 pips 100 pips.

For an example if you look at the GBP/JPY on a daily chart with a 60 ema on it, you can see how the price constantly moves through that 60 ema.

This is my idea, more than likely not new, but oh well.:

When the price moves past the 60 ema you buy/sell. Thats it

The problem is it could move past the 60 ema at 2.00am in the night and you will miss it because you where dreaming of that perfect trade.

So we need this system to be purely mechanical so that you set it and wait for the results.

Can any one help in making a very simple EA that will buy/sell when price moves past the 60 ema.. Set a stop loss if it goes against us. Maybe add the option of using a trailing stop. and also a take profit.

No I have not back tested this or forward tested this but just looking at the charts tells me that it is powerful enough to make a lot of pips.

ALL comments welcomed.
It's All About Attitude ...
  • #2
  • Apr 2, 2007 12:12pm Apr 2, 2007 12:12pm
Bill,

Hate to break it, but an automated version of this system seems to do very poorly.

I tried several different things...first, I tried buying at the close once a bar crossed the EMA...no dice...I got a 20% when all in on the market.

Then I tried buying at the EMA price, and it fared worse. Often times, the price bounced off the EMA, and more often than not, the price oscillates tightly around the EMA before finally going through.

I would be very careful with this system as my back-testing for 10 years of data (and multiple combinations including 3 months, 1 year, 2 years, 5 years and 10 years) all yielded less than spectacular results. The ONLY profitable combination was a 10 year test, but once you add in a spread of anything more than 2 pips, the system turns negative.

This system probably has to be more discretionary which means that an automated system using only the rules you posted is not sufficient for a profitable system in my opinion.

Quoting billser
Hi,

Have you ever looked at a chart and seen how the price will go through a moving average and the next thing you know you could have captured 30 pips 65 pips 100 pips.

For an example if you look at the GBP/JPY on a daily chart with a 60 ema on it, you can see how the price constantly moves through that 60 ema.

This is my idea, more than likely not new, but oh well.:

When the price moves past the 60 ema you buy/sell. Thats it

The problem is it could move past the 60 ema at 2.00am in the night and you will miss it because you where dreaming of that perfect trade.

So we need this system to be purely mechanical so that you set it and wait for the results.

Can any one help in making a very simple EA that will buy/sell when price moves past the 60 ema.. Set a stop loss if it goes against us. Maybe add the option of using a trailing stop. and also a take profit.

No I have not back tested this or forward tested this but just looking at the charts tells me that it is powerful enough to make a lot of pips.

ALL comments welcomed.
  • #3
  • Apr 3, 2007 6:05pm Apr 3, 2007 6:05pm
Attached File(s)
File Type: pdf 5_13_62.pdf   395 KB | 1,955 downloads

62 may work better
  • #4
  • Apr 3, 2007 7:11pm Apr 3, 2007 7:11pm
I am experimenting with the 55 EMA as part of a couple of strategies (including the 5/13/55). When price closes above/below the EMA 55, price tends to continue if the 45 RSI closes above/below the 50 line (same direction). Also the slope of the 13 EMA will come into agreement with the slope of the 55 EMA. This will take place around the 13/55 cross, but will sometimes happen sooner. Also good to look at next higher time frame (look at Day if trading 4H). I trade higher time frames, I assume it works on the lower time frames as well.
  • #5
  • Apr 3, 2007 7:18pm Apr 3, 2007 7:18pm
The key to successful MAs cross system is the exit strategy. If you set your TP to 15 pips (on 15m chart), I think you will succeed.
  • #6
  • Apr 4, 2007 7:25pm Apr 4, 2007 7:25pm
Quoting chazbo 3071
I am experimenting with the 55 EMA as part of a couple of strategies (including the 5/13/55). When price closes above/below the EMA 55, price tends to continue if the 45 RSI closes above/below the 50 line (same direction). Also the slope of the 13 EMA will come into agreement with the slope of the 55 EMA. This will take place around the 13/55 cross, but will sometimes happen sooner. Also good to look at next higher time frame (look at Day if trading 4H). I trade higher time frames, I assume it works on the lower time frames as well.

Do you have the RSI set at 45.......when I set the RSI to 45 it's almost a straight line.

Thanks for the input
It's All About Attitude ...
  • #7
  • Apr 4, 2007 9:51pm Apr 4, 2007 9:51pm
Quoting billser
Hi,

Have you ever looked at a chart and seen how the price will go through a moving average and the next thing you know you could have captured 30 pips 65 pips 100 pips.

For an example if you look at the GBP/JPY on a daily chart with a 60 ema on it, you can see how the price constantly moves through that 60 ema.

This is my idea, more than likely not new, but oh well.:

When the price moves past the 60 ema you buy/sell. Thats it

The problem is it could move past the 60 ema at 2.00am in the night and you will miss it because you where dreaming of that perfect trade.

So we need this system to be purely mechanical so that you set it and wait for the results.

Can any one help in making a very simple EA that will buy/sell when price moves past the 60 ema.. Set a stop loss if it goes against us. Maybe add the option of using a trailing stop. and also a take profit.

No I have not back tested this or forward tested this but just looking at the charts tells me that it is powerful enough to make a lot of pips.

ALL comments welcomed.
This just goes to show that looks can in fact be deceiving. It is easy to step back, look at it and think how great it is! But run through several dozen examples (it's so easy to do by hand, that there is really no excuse for not getting your hands dirty), noting the exact price you would get (without hindsight) and factor in all those pesky whipsaws and the actual price that you could get when applying a consistent set of rules to the data, and suddenly you realize why a simple automated system based off a MA isn't going to get you there. It looks like it should, it ought to but it doesn't. Just another learning block in the educational cycle. MAs are great for averaging data points, and for smoothing them. They do well in visually representing "trend" once it is underway, but are poor at best as turning point signals for entry / exit. So my advice is to use them as trend indicators, and use something else to time entries and exits rather than trying to fit a square peg in a round hole.
  • #8
  • Apr 5, 2007 5:50pm Apr 5, 2007 5:50pm
Quoting billser
Do you have the RSI set at 45.......when I set the RSI to 45 it's almost a straight line.

Thanks for the input
Yes, I use 45 RSI. To make RSI easier to read, you can uncheck the fixed minimum/maximum boxes and set level at 50. I find it to be excellent confirmation for the continuation of a move through 55 EMA. I also use 50 CCI passing through the 0 line for double confirmation although you sometimes will enter a bar later.
  • #9
  • Edited Apr 6, 2007 12:04am Apr 5, 2007 11:41pm | Edited Apr 6, 2007 12:04am
Quoting FXEZ
This just goes to show that looks can in fact be deceiving. It is easy to step back, look at it and think how great it is! But run through several dozen examples (it's so easy to do by hand, that there is really no excuse for not getting your hands dirty), noting the exact price you would get (without hindsight) and factor in all those pesky whipsaws and the actual price that you could get when applying a consistent set of rules to the data, and suddenly you realize why a simple automated system based off a MA isn't going to get you there. It looks like it should, it ought to but it doesn't. Just another learning block in the educational cycle. MAs are great for averaging data points, and for smoothing them. They do well in visually representing "trend" once it is underway, but are poor at best as turning point signals for entry / exit. So my advice is to use them as trend indicators, and use something else to time entries and exits rather than trying to fit a square peg in a round hole.
I find my self feeling a little embarrassed about starting this thread thinking that my original posting was a great idea and would make a heap of pips.

There has been some very good posts that has made me think very hard about what I put in writting before I actually test a system to see if it is valid or not.

Thank you.

I wish it was as simple as price moves above a moving average and bam ..... I'm a millionaire.

ITS NOT......But what is worth a million is the support that this forum gives to a hopeful trader.

Thanks for posting everyone....I'm learning a lot from everyone....Please keep it coming
It's All About Attitude ...
  • #10
  • Apr 6, 2007 10:18pm Apr 6, 2007 10:18pm
Excuse me, the key to success with any indicator is by using it in a different and creative way which makes sense of course...For example, for ages, traders use moving averages to generate signals when the price crosses the moving average to the upside or to the downside...Well this strategy works in trending markets perfectly & fails in sideways modes. So profits made during trends are lost during sideways periods.

If you let me, I can tell you some variations to use the simple moving averages crosses, but this doesn't mean that I am recommending any of them to you, I am just giving some ideas off my head regarding this issue.

Idea 1:

This idea basically is to get the signals when the slope of the moving average increases above a certain value. Let me explain this clearly...Let's say that the following series of data are the values of the moving average you are using: 28, 26, 30, 32, 35, 29, 25, 35, 50....

Since the distance in time between every value presented is 1 time period based on the time frame used, the slope is measured by subtracting 2 values & dividing by the number of periods between those 2 values...For example, the slope between the last 2 values is (50-35)/1 = 15.

The slope between the last 3 values is (50-25)/2 = 25/2 = 12.5.

Now, this can have so many variations, let's say that if the slope of the MA used is equal to or above 10, we shall go long & when it is below 10, we shall sell...

Let's start the series from the beginning...28, 26, 30, 32, 35, 29, 25, 35, 50

(26-28)/1 = -2 (Nothing)
30-26 = 4
32-30 = 2
35-32 = 3
29-35 = -6
25-29 = -4
35-25 = 10 (This is a buy signal)
50-35 = 15 (This can be taken as a buy signal confirmation)

Please note that if you plot this series with time and think of it as a moving average for some prices, you will notice that this moving average is rising at the end & for sure prices have already crossed the moving average to the upside...

This actually made you after the cross over, we don't know how late, but with more probability that a trend is being established.

Now the great thing you will find in such a way is that when a moving average slopes up or down sharply, most probably prices are establishing a trend. The probability of a moving average sloping up above a certain value in a sideways period is minimal. If you are using a normal price cross over system, you will get whipsawed many times in sideways modes, by applying that slope thing, you will probably save yourself from the trap & instead of taking 10 losing trades inside a sideways period, you will probably take only 3 false signals and you still will catch all the trends a little bit late.


Idea 2:

The second idea aims also to reduce the losses from sideways periods. This idea includes some money management & risk control ideas, here it is:

It is a well known concept that trends tend to continue in the same direction until something definite happen to change their direction, so an uptrend is assumed to continue unless something happens to change this uptrend to either a sideways or a downtrend.

Now, the problem lies in the sideways trending period. How can this be fixed? Simple. Once you get a false signal from your moving average cross over system, you know you are probably going into a sideways period (because moving average cross over systems produce most of their false signals in sideways periods). So, what do you do when your system gives you a false signal & you are taking a loss, you will cut your position size into half when you take the next trade. Now the probability is increasing that prices are entering a sideways period, you get another false signal & you take another loss, but on a smaller position size this time. You again wait for the next signal & you again cut your position size into half.

Now, if you keep going this way, you will end up reducing your position size dramatically so you will actually catch the real trend, either up or down with the minimal position size & this is not smart.

What comes next is smart enough to fool the market. One of the concepts of the Dow theory is that a trend at its' beginning have the highest probability to keep going its' way and as it keeps going, the probability of continuation gets smaller & smaller & the reversal probability increases.

Think of it as if the trend is a normal human being. A human being when born, what are the probabilities that he/she will reach 40? The probabilities are very high. Now, when this human being reaches 30, what are the probabilities that he/she will reach 40? Of course the probability now is very low, since as we grow older, we are actually moving towards death. The same concept goes with trends, as the trend grows older, it means that the trend is about to die.

How this concept can help us in our idea. We were cutting our position size into half every false signal. Let's say that the average life of a sideways trend on a daily chart is 3-6 months (Sometimes more, sometimes less). And let's say that the average number of false signals in the average sideways period is 8 signals. What shall we actually do is the following, on signal 1 we will be trading with our normal full position size and it turns out to be a false signal. We take signal 2 with 0.5P (Half the position size). We take signal 3 with 0.25P (Reduced into half once again). We take signal 4 with 0.125P (Reduced into half once again).

Now we reduced our position size 3 times after 3 false signals. Now, we won't reduce our position size anymore, we will keep taking the signals with the same position size used which is 0.125P for another signal, which is the 5th.

After that, we shall increase our position size once again back up. Why? Because the sideways trend is getting older now & the probability of its' death is increasing. So on the 6th signal, we get our position size back towards 0.25P. On the 7th signal we go back to 0.5P & on the 8th signal we get back to 1P & finally, the sideways trend dies & either an uptrend or a downtrend is in motion & we are positioned in the market with the correct position size.

This idea helps to reduce the losses during the sideways periods while keeping profits the same.


PLEASE, don't take those as trading systems, they are not. These are just ideas off my head on how to use existing indicators creatively. None of the above mentioned ideas are complete trading systems which you can actually rely upon to trade your real money, a complete trading system can't be formulated in a single post.


Thanks,

Nader
  • #11
  • Apr 7, 2007 10:54am Apr 7, 2007 10:54am
Seperation

what about the 34 MA?

lets just say we go long when price goes thru the 34.
Ah but what about the whips, we cant cut them all out but we can get rid of a few whips.
Lets add a 55 and a 89 ma
Now lets go long when price goes up thru the 34 and the 34 is above the 55 and the 55 is above the 89. basicly any TF.
Go short when price goes down thru the 34 and the 34 is below the 55 and the 55 is below the 89.
the 55 or the 89 can be used as a stop, or if you prefer a set number of pips.

if all the MAs are tight and close together and moving sideways then you have two choices back away and wait for them to give you a set up like above. Or draw a support line uncer current price lows and a risistance line above recent price highs, and take a break which ever dierection it goes.

I appogize for this not being filled with confusing indicators and will work on a very difficult and hard to follow system later, maybe I could sell a difficult one and not have to trade for a living.

I like your idea of trading as price goes thru a MA.
  • #12
  • Apr 7, 2007 10:57am Apr 7, 2007 10:57am
Quoting narafa

Idea 1:

This idea basically is to get the signals when the slope of the moving average increases above a certain value. Let me explain this clearly...Let's say that the following series of data are the values of the moving average you are using: 28, 26, 30, 32, 35, 29, 25, 35, 50....

Since the distance in time between every value presented is 1 time period based on the time frame used, the slope is measured by subtracting 2 values & dividing by the number of periods between those 2 values...For example, the slope between the last 2 values is (50-35)/1 = 15.

The slope between the last 3 values is (50-25)/2 = 25/2 = 12.5.

Now, this can have so many variations, let's say that if the slope of the MA used is equal to or above 10, we shall go long & when it is below 10, we shall sell...

Let's start the series from the beginning...28, 26, 30, 32, 35, 29, 25, 35, 50

(26-28)/1 = -2 (Nothing)
30-26 = 4
32-30 = 2
35-32 = 3
29-35 = -6
25-29 = -4
35-25 = 10 (This is a buy signal)
50-35 = 15 (This can be taken as a buy signal confirmation)

Please note that if you plot this series with time and think of it as a moving average for some prices, you will notice that this moving average is rising at the end & for sure prices have already crossed the moving average to the upside...

This actually made you after the cross over, we don't know how late, but with more probability that a trend is being established.

Now the great thing you will find in such a way is that when a moving average slopes up or down sharply, most probably prices are establishing a trend. The probability of a moving average sloping up above a certain value in a sideways period is minimal. If you are using a normal price cross over system, you will get whipsawed many times in sideways modes, by applying that slope thing, you will probably save yourself from the trap & instead of taking 10 losing trades inside a sideways period, you will probably take only 3 false signals and you still will catch all the trends a little bit late.


Thanks,

Nader
Thanks for the post Nader

very interesting yet very confusing.....I'm not sure what the values are that you are talking about ...28, 26, 30, 32, 35, 29, 25, 35, 50.... are these ma's?

Could you explain more or even better post a chart to demonstrate what you mean please.

Again thanks for mosting

Billser
It's All About Attitude ...
  • #13
  • Apr 8, 2007 10:06am Apr 8, 2007 10:06am
Quoting billser
Thanks for the post Nader

very interesting yet very confusing.....I'm not sure what the values are that you are talking about ...28, 26, 30, 32, 35, 29, 25, 35, 50.... are these ma's?

Could you explain more or even better post a chart to demonstrate what you mean please.

Again thanks for mosting

Billser
The values are hypothetical values off my head and they are supposed to represent a moving average values with time...

Posting a chart will help for Idea 1, however it won't do any good for Idea 2...

Attached is an example chart for Yahoo to clear the Idea 1, hope it is clear enough...


Thanks,

Nader
Attached Image
  • #14
  • Apr 8, 2007 10:09am Apr 8, 2007 10:09am
Any thoughts on this set up.

The 6 ema close and the 5 ema open comes from an article that twoblink posted over a year ago in his open/close thread:

http://www.forexfactory.com/showpost...8&postcount=22 (click on the first link)

I don't believe this would work on the shorter time frames because of whiplash and the price action would not move as far up or down as it does on the longer time frames when a cross happens

I started looking at this last week and will start trading it this week.

My thoughts are to place a trade when the 6 & 5 cross (1/2 position) Then place the other 1/2 when the cci and rsi cross the white dotted line.

Stop Loss: not sure how because depending on what pair you trade it might hit you in the ass before the trade goes the way it is supposed to go.

Again I'm not professing to have found anything new...just trying to find something that works for my style of trading and hopefully yours too.

Let me know what your thoughts are.

Happy Pippin'

Billser
Attached Image
It's All About Attitude ...
  • #15
  • Apr 8, 2007 10:18am Apr 8, 2007 10:18am
Quoting droesparky
Seperation

what about the 34 MA?

lets just say we go long when price goes thru the 34.
Ah but what about the whips, we cant cut them all out but we can get rid of a few whips.
Lets add a 55 and a 89 ma
Now lets go long when price goes up thru the 34 and the 34 is above the 55 and the 55 is above the 89. basicly any TF.
Go short when price goes down thru the 34 and the 34 is below the 55 and the 55 is below the 89.
the 55 or the 89 can be used as a stop, or if you prefer a set number of pips.

if all the MAs are tight and close together and moving sideways then you have two choices back away and wait for them to give you a set up like above. Or draw a support line uncer current price lows and a risistance line above recent price highs, and take a break which ever dierection it goes.

I appogize for this not being filled with confusing indicators and will work on a very difficult and hard to follow system later, maybe I could sell a difficult one and not have to trade for a living.

I like your idea of trading as price goes thru a MA.
Thanks for Keeping It Stupid Simple .....
It's All About Attitude ...
  • #16
  • Apr 8, 2007 10:58am Apr 8, 2007 10:58am
Why don't you try using a longer MA, say 100. Use ATR as a filter, meaning you only enter long when price goes above the MA by the ATR. When you enter a position, open it with multiple lots, and then take profits by closing one lot at each multiple of 2*ATR leaving the last lot open until price comes back to the MA.
  • #17
  • Apr 8, 2007 11:15am Apr 8, 2007 11:15am
I'll help you refine your use of RSI 45 and CCI 50. I didn't mention this in my previous post because I thought you wanted a real simple system using only one EMA.

You use the 34 EMA in addition to the 55 EMA as previous post suggested. If price crosses the EMA 34 first, the 50 CCI crossover is what you want to focus on. If price crosses the 55 EMA first, the 45 RSI crossover is more important.

Your idea of adding to your position at the EMA 55 cross is good. However, if your 5,6 EMA crossover is close to 34,55 EMAs, I would wait until until you have the appropriate RSI/CCI cross before taking trade. Price will often bounce off 55 EMA as a support/resistance.
  • #18
  • Apr 8, 2007 12:02pm Apr 8, 2007 12:02pm
hello,

don't use a simple moving average crossover system; they only work in strong trends and they do really poorly in ranging markets. Please be sure not to trade this on a live account. I encourage you to try it on a demo account though.
  • #19
  • Apr 8, 2007 12:18pm Apr 8, 2007 12:18pm
Quoting SisterCurare
Why don't you try using a longer MA, say 100. Use ATR as a filter, meaning you only enter long when price goes above the MA by the ATR. When you enter a position, open it with multiple lots, and then take profits by closing one lot at each multiple of 2*ATR leaving the last lot open until price comes back to the MA.
I should probably make it clear, I did not mean use the 100 MA in addition to another MA as a signal for a cross. When the 100 MA crosses price on a daily chart then you place orders to buy or sell at a price that is equal to the MA plus or minus the ATR at that instant.
  • #20
  • Apr 8, 2007 4:27pm Apr 8, 2007 4:27pm
Quoting tradeigel
hello,

don't use a simple moving average crossover system; they only work in strong trends and they do really poorly in ranging markets. Please be sure not to trade this on a live account. I encourage you to try it on a demo account though.
Thanks for your concern Tradeigel,

Each trade is the responsibility of each trader and I for one will look out for support resistance levels, levels ending in 00, news when it comes out, higher and lower time frames to see when is the best times to get in or out and what is the over all trend direction doing.

Billser
It's All About Attitude ...
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