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Is this too simple ?

  • #1
  • First Post: Dec 1, 2009 7:32am Dec 1, 2009 7:32am
I've being looking at eur/usd on 1hr time scale,this gives me a chart from nov15th until today.
I've applied a simple line chart,not candles and have put a m/a of 10 on it.
This would have returned roughly 900 pips ,going long and then short on the cross overs, over this time period.
I'm new to Forex ,and i'm thinking it probably isn't nearly that simple,i'm thinking that this set up probably suites the way eur/usd has being moving in that time period.
Can anyone more experianced shed some light please.

Regards Alb
  • #2
  • Dec 1, 2009 7:45am Dec 1, 2009 7:45am
When do you want to enter the trade? On the close of that H1 time period or as soon as it crosses your MA?

In the first case you will loose many pips especially when price spikes above your MA and you have to buy at a high price.
In the second case you would loose your ass because the Line Chart constantly touches and crosses the 10MA this means you have to wait for the H1 Period to close otherwise your line could be above the MA but after you entered the trade it could close below your MA.

Just switch between CandleChart and LineChart and you will see where there problem is.
  • #3
  • Dec 1, 2009 7:59am Dec 1, 2009 7:59am
Quoting arrowloopboy
I've being looking at eur/usd on 1hr time scale,this gives me a chart from nov15th until today.
I've applied a simple line chart,not candles and have put a m/a of 10 on it.
This would have returned roughly 900 pips ,going long and then short on the cross overs, over this time period.
I'm new to Forex ,and i'm thinking it probably isn't nearly that simple,i'm thinking that this set up probably suites the way eur/usd has being moving in that time period.
Can anyone more experianced shed some light please.

Regards Alb
The line you are seeing is a 1MA Median. It is the average of the high and the low. When the candle is done it looks easy. However, in live trading you dont know if price is going up or down soooooooo when price opens across the line but price continues to go up and recrosses the line as the high gets higher your median average goes up. So what you see when the candle is done is it stayed above the line but in reality when the candle opened it crossed the line giving you a false signal. If you entered the trade it was a loser but the next candle you see it didnot not. In other words that line moves as price moves. If you wait until the candle closes the previous post clearly pointed out the problem of doing that. If you try to enter when it crosses, price could reverse and then the line uncrosses thus the false signal. Dont worry we all fall for that one when we get started. If you try to solve the problem by increasing the MA then it takes longer for price to cross the line and then you get in too late. That is the main problem of crossing MAs and basically all indicators. All indicators, are based on MA and then some kind of math formula. Then you take the results of the math formula and you picture it as bars, line, charts, etc. But they all have the same built in problem. They dont know what price will do next the next 30 seconds and cant tell you that. They can only tell you what price has been doing and you hope it keeps doing what is has been in the past. Sometimes you win, sometimes you lose. Good luck.
  • #4
  • Dec 1, 2009 8:52am Dec 1, 2009 8:52am
Thanks men,i see exactly what ye mean ,but would it work with s/ls above and below the main s/r lines
  • #5
  • Dec 1, 2009 9:05am Dec 1, 2009 9:05am
Quoting arrowloopboy
Thanks men,i see exactly what ye mean ,but would it work with s/ls above and below the main s/r lines
I highly value S/R lines, If you want to see how I mix them together you can get ideas from my Nanningbob 4H trading system:

http://www.forexfactory.com/showthread.php?t=169309

I think you can take some of my ideas and add them to yours and come up with something.
  • #6
  • Dec 1, 2009 9:09am Dec 1, 2009 9:09am
Quoting nanningbob
I highly value S/R lines, If you want to see how I mix them together you can get ideas from my Nanningbob 4H trading system:

http://www.forexfactory.com/showthread.php?t=169309

I think you can take some of my ideas and add them to yours and come up with something.

Thanks Bob,i'll take a look
  • #7
  • Dec 1, 2009 11:25am Dec 1, 2009 11:25am
Well, what about using the MA as reversal signals. The MA setting is tight in that it would follow the market movement. So when the MA turns downward, couldn't you use that as in indicator to open a trade to sell. Vise versa for buy signals.

I would think that if you do infact use this system with a single MA, a Simple MA would not cut it as it lags a few candles back but if you use a Weighted MA or Triangular MA would cut down on the fakeouts and give you pure pricing reversal signals.

What do you guys think?
Attached Image (click to enlarge)
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  • #8
  • Dec 2, 2009 11:30am Dec 2, 2009 11:30am
I use a very similar "system", although on 4hr and daily charts... larger MA value too. No, it isn't too simple, you just may find that you have to adjust the figures while maintaining the overall concept. Most people ultimately discover that indicators, if they serve any use at all, are just as a means of better seeing the market's motions. It is like wearing glasses. Sure, you can see otherwise (most could), but you have to strain a little bit to do so. Leave the MA on there, don't do backtesting any longer (instead focus on TPs, SLs, times you would want to get out and sit on the sidelines etc), trade really small... see what happens over the next year.

Also, realize this... you wont make millions over night. You have plenty of time though to use trading to make that little bit more to put you over the top.

Quoting Jhig

What do you guys think?
Ehh, I think you mentioned the ultimate pitfall... too tight. I have traded for near two years now with a single MA and I wouldn't lower its value beneath 100. With appropriate use of a SL, such as at the bottom of the candle that initially goes through the line, you can get away from a lot of swing in the market. The main element of this type of trading is that you do have to time your profit exits... exits make you the money and you will not find an easy way to get out with max profits. I never get max profits, or even close to be honest.
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  • #9
  • Dec 2, 2009 8:15pm Dec 2, 2009 8:15pm
Quoting Jhig
Well, what about using the MA as reversal signals. The MA setting is tight in that it would follow the market movement. So when the MA turns downward, couldn't you use that as in indicator to open a trade to sell. Vise versa for buy signals.

I would think that if you do infact use this system with a single MA, a Simple MA would not cut it as it lags a few candles back but if you use a Weighted MA or Triangular MA would cut down on the fakeouts and give you pure pricing reversal signals.

What do you guys think?
Again you are seeing the final results or the after picture. Where you put the buy signal you will notice price crossed and uncrossed several times in the previous 4 or 5 hours. In other words you would have probably stopped out several times before hitting the new trend. 2nd once you enter the trade you dont know price is going to go up a lot or a little. It could just as easily retraced and continued on the downtrend. When you are live you dont know what will happen next. You will also notice during these trends price crossed above the MA line several times and these would have been false signals. You are also not looking at a ranging market. MA would give all sorts of false signals, here is a pic with arrows to show the problems you face.
Attached Image (click to enlarge)
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  • #10
  • Dec 6, 2009 10:09am Dec 6, 2009 10:09am
MAs are the only thing which has earned me pips. I dont wait for MAs crossover, i see when MAs start to change the direction and then take a trade.

If you wait for MAs crossover, you loose pips and sometimes after MAs crossover, MAs again start to change direction.

I have seen if you have a target of 20 pips, MAs work. There is no way to know how much price will rise or fall though in most cases it is more then 20 pips.

So, once MAs start to change direction on 1 H chart, then entering for 20 pips TP has given me some pips.
  • #11
  • Last Post: Dec 6, 2009 10:30am Dec 6, 2009 10:30am
Quoting arrowloopboy
.
This would have returned roughly 900 pips ,going long and then short on the cross overs, over this time period.
Yeah, right it's all looking good from right to left. Watch in the real time

and see how many fake crosses there would be before it finally crosses.

If that was so easy as you said, we could just place 24 EMA on chart and

buy above and sell below, everyone should be millionaires by now..

) Nobody can even identify Trend, well, everybody can, after the fact,

looking at the charts 12 hours later, sure it's easy..
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