Why exactly do EMA crossover systems not work? | Page 13 | Forex Factory

Options

Go to
Permalinks
Print Thread

Similar Threads

Help. EMA Crossover with different EMA cross for exit 0 replies

EMA crossover (ema 14 & 34) 4 replies

Please help code an EMA Crossover 12ema x 24 ema cross 1 reply

Systems, Systems and Systems... 1 reply

EMA Crossover Systems 1 reply

Attachments: Why exactly do EMA crossover systems not work?
Exit Attachments

Why exactly do EMA crossover systems not work?

  • #241
  • Jul 24, 2011 7:38pm Jul 24, 2011 7:38pm
Quoting Mr Breakout
Actually it is the exact opposite. There is no way on earth that a losing system is going to make money "if you give it enough friggin years and the right ruleset".

It is like saying that with enough time each casino player is going to bankrupt the casino. Sure you can make money in a short period of time, but as time goes by the Law of large numbers takes over and if your trading system has no statistical edge to begin with you will ALWAYS end up in the poor house, even if you are Bill Gates, you can bet the farm on that.
oh ffs.

does "having the right ruleset and enough time" that creates a losing situation = what i was saying? no!

does 5 heads in a row mean i have an edge with a coin toss? does 600 heads in 1000 coin tosses mean i have an edge?

prices wander around enough that it's possible to devise a range of curve-fitted bullshit rules to trade by. period.

does a blackjack player who tends to win between 5 and 8 pm have an edge by trading between 5 and 8 pm? do they have an edge if they seem to win more when they wear red underwear? do they have an edge by only trading when they hear the neighbour sing in the morning if historical research shows a tendency to win on these days?

random pattern match != edge.
Congratulations ScalaFX for coming out of the closet!
  • #242
  • Jul 24, 2011 8:12pm Jul 24, 2011 8:12pm
Quoting nubcake

prices wander around enough that it's possible to devise a range of curve-fitted bullshit rules to trade by. period.
Absolutely not.

Yes it is possible to curve fit a system for the year 1985 or 1994 or 2010 and for a specific instrument, like gold or the DAX or the EUR/CAD, but again it is IMPOSSIBLE to curve-fit 16 and a half years of data on 21 different instruments using only a simple moving average rule and a very basic money management.

Here is an example.

Sell when the RSI is above 70 and buy when the RSI is below 30.

Well go ahead and backtest this "system" with the historical data of thousands of stocks, the currencies and all the futures contracts and you will quickly discover that you always end up losing money no matter how hard you try to "curve-fit" this system.

This system does not work in the long run because it has virtually no trading edge to begin with, except for a few extremely choppy markets.

Nubcake, if you still don't understand what a statistical trading edge is then you have absolutely no business trading, period.


Quoting nubcake
do they have an edge if they seem to win more when they wear red underwear?
Don't worry about this blackjack player, he will soon realize, after wearing his red hat 1,000 times, that there is no positive or negative mathematical correlation between his luck and the color of his hat, his shoes or his underwear.
  • #243
  • Jul 24, 2011 8:21pm Jul 24, 2011 8:21pm
talking with you is like talking with turveyd. pointless.

if you want to curve-fit my words and ignore key points then good for you. it fits well with the whole curve-fit theme that you are so confident about.

blah blah let me pick random shit and prove how it doesn't work, therefore, nubcakes point about how some random shit is curve-fitted to appear to work is therefore proven false by my irrelevant and poor example.
Congratulations ScalaFX for coming out of the closet!
  • #244
  • Jul 24, 2011 8:56pm Jul 24, 2011 8:56pm
Quoting Custos
I would recommend the opposite. Stay with the backtesting, it is an unbiased way of finding what works and what doesn't.
Always a pleasure to read your straight-to-the-point posts, Custos.

Yes backtesting is one of the keys to success in the trading arena, without it the trader has no way of knowing the predictive power of his system, if any, or the maximum and average drawdown he will have to deal with.

A lot of traders would surprised to see the number of "sound" trading ideas that simply do not work once you test them with 10 or 15 years of historical data.
  • #245
  • Jul 24, 2011 9:09pm Jul 24, 2011 9:09pm
Again, I would like to inquire of my backtesting FF friends and ask why are the statistics so bad for Forex traders if backtesting is so easy? Tradestation has been around for years.....correct? It is supereasy to plug in a few backtesting rules.....they are EVERYWHERE. I am just asking out of curiousity. In effect, almost any MA crossover can give positive backtest results based on nothing more than a regression to the mean. Anyway, what say my backtest buddies?
  • #246
  • Jul 24, 2011 9:29pm Jul 24, 2011 9:29pm
Quoting Troikaone1
Again, I would like to inquire of my backtesting FF friends and ask why are the statistics so bad for Forex traders if backtesting is so easy?
Most traders lose precisely because they do NOT use a proven system at all, they just trade almost randomly and like to quickly grab a few pips while letting their losses run wild.

More importantly, even if you show them a decent trading system, they will always find a way to screw things up and change or eliminate the trading rules as soon as they encounter a severe drawdown, just when the system is about to recover from its losses.

Quoting Troikaone1
In effect, almost any MA crossover can give positive backtest results based on nothing more than a regression to the mean. Anyway, what say my backtest buddies?
Moving average cross over systems are not looking for a regression to the mean. On the contrary, they want to exploit a deviation from the mean, which is precisely and simply the definition of a trend.
  • #247
  • Edited 9:48pm Jul 24, 2011 9:37pm | Edited 9:48pm
I don't think there is a single backtested system in FF that works. If there is one, I'm sure a lot of newbies would like to try it! Maybe there is one, but I haven't heard much about it. With so many talented traders that visit this site surely there is one single backtested system that is the talk of the FX trading world. Where is it? A backtested system presupposes that a person who has never heard of FX can simply take every signal that the system generates and start making money from day one w/o any effort or intense study.....right? That aint gonna happen. It is this same fallacy that drives misguided traders to the huge "trading system"/"black box" market. It is a bit naive to think a neophyte can do that. But if you take a "backtested" system on its merits a neophyte should be able to outtrade the most seasoned trader based on nothing more than a backtested system (assuming the neophyte is following all trading rules to the tee).

So you are telling me that a 13 year old, with reasonable intelligence, can trade FX using a backtested system and can outtrade FX traders who have been at this for decades? WHAT???????? ARE YOU SERIOUS????????
  • #248
  • Jul 24, 2011 10:00pm Jul 24, 2011 10:00pm
i love MA, they really works, specially if the markets are in trending. but they are not good if the market are ranging (well MA can also tell you if the market is in ranging or trending too). I always use this indicator solely, this is very powerful, simple and easy to use indicator. I use multiple EMA, SMMA, LMA, SMA from 1 - 200, main points for me are 50, 100 & 200. thats why i have 3 different color in my chart meaning the price is on that level with MA, moving average also conforms with the lines. let say a price hit but 200 ema, check your fib. and surely it probbably your major resistance and support. multiple MA also tell how strong the trend is. and more importantly where it will go in the future (i repeat again this is effective if the market is in trending mode). I love MA, i hope i'd use this very simple strategy from before. I have lose and win. those lost of mine, i cant blame the MA, its my money management problem.... actually this is the most problem i have, if i can overcome this.. then MA is a very good tool for me
Attached Image (click to enlarge)
Click to Enlarge Name: eurusd.gif Size: 74 KB
There is Time for Bull, and Time for Bear. and so be the Wolf.
  • #249
  • Jul 24, 2011 10:07pm Jul 24, 2011 10:07pm
Quoting Mr Breakout
Rules :
Buy on the open when the 13-day moving average of closes crosses from below the 39-day moving average and yesterday's close is greater than the close of 40 days back. Do the reverse for short trade.
.
hey mr b..... the russians say a trading system should fit in a matchbox..... yours described above does.....

it took a couple minutes to write the ea and a couple more to backtest on every pair.....

the 13 and 39 are clear enough, similar to the awesome indicator...... however, if you don't mind, what was the basis of the value (40) for days back...... is that something more related to futures contracts.......

thanks......h
to trade and code, keep both simple... no call to impress....h
  • #250
  • Jul 24, 2011 10:09pm Jul 24, 2011 10:09pm
Here is a profitable backtested forex system, it is called the Keltner Channel breakout system and can be found on the March 2011 issue of the (freely available) Currency Trader Magazine.

The strategy was tested on daily price data from June 6, 2000 to Jan. 1, 2011 (10.5 years) in the following seven currency pairs:
USD/CAD GBP/USD NZD/USD EUR/USD AUD/USD USD/JPY USD/CHF
The same parameter values are used for all currency pairs in the test.

The system generated a 30.49% yearly average profit (at the portfolio level) and 46.06% maximum drawdown.

The Keltner Channel settings are:
1. Central indicator line: 250-day SMA of the price.
2. ATR length: 10 days. (ATR = Average True Range)
3. ATR multiple: 2.5.

The strategy trade rules are:
1. Go long if yesterday’s close is above the upper Keltner Channel band and price is above the 175-day SMA.

2. Go short if yesterday’s close is below the lower Keltner Channel band and price is below the 175-day SMA.

3. Exit long if yesterday’s close is below the 175-day SMA.

4. Cover short if yesterday’s close is above the 175-day SMA.

5. Place a stop-loss order two times the 14-day ATR below the entry price
(for long trades) or above the entry price (for short trades).

Trade size is determined by the following equation:
Trade size = (0.01*account balance in $US)/(contract size*14-ATR)
  • #251
  • Jul 24, 2011 10:43pm Jul 24, 2011 10:43pm
Quoting hayseed
hey mr b..... the russians say a trading system should fit in a matchbox..... yours described above does.....

it took a couple minutes to write the ea and a couple more to backtest on every pair.....

the 13 and 39 are clear enough, similar to the awesome indicator...... however, if you don't mind, what was the basis of the value (40) for days back...... is that something more related to futures contracts.......

thanks......h
Hi Hayseed,

To eliminate a lot of false breakouts, the simple moving average cross over system described above wants the price to be not only above the 13 and 39 MA (for long trades), but also above the price recorded two months ago (40 trading days), and the opposite for short trades. 40 is the value that seems to be working most of the time and has no magical meaning, but of course feel free to experiment with other values.
  • #252
  • Jul 24, 2011 10:44pm Jul 24, 2011 10:44pm
Quoting Troikaone1

So you are telling me that a 13 year old, with reasonable intelligence, can trade FX using a backtested system and can outtrade FX traders who have been at this for decades? WHAT???????? ARE YOU SERIOUS????????
Yes.
  • #253
  • Jul 24, 2011 10:48pm Jul 24, 2011 10:48pm
Quoting Mr Breakout
Yes.
b/s.
AVT INVENIAM VIAM AVT FACIAM
  • #254
  • Jul 24, 2011 10:49pm Jul 24, 2011 10:49pm
Quoting Mr Breakout
40 is the value that seems to be working most of the time and has no magical meaning, but of course feel free to experiment with other values.
*cough* curve-fit *cough*
Congratulations ScalaFX for coming out of the closet!
  • #255
  • Jul 24, 2011 10:49pm Jul 24, 2011 10:49pm
Quoting the redlion
b/s.
rofl. finally something i can agree with you on big red!
Congratulations ScalaFX for coming out of the closet!
  • #256
  • Jul 24, 2011 11:07pm Jul 24, 2011 11:07pm
Quoting the redlion
b/s.
Redlion must surely be so busy dealing with his margin calls that the cannot even type a single word and express his ideas in a coherent and articulate manner.
  • #257
  • Jul 24, 2011 11:36pm Jul 24, 2011 11:36pm
Quoting nubcake
*cough* curve-fit *cough*
If we follow Nubcake's "logic" then ANY profitable backtested trading system is by definition curve-fitted, since we must necessarily give some value to each of its parameters.

And since it is a curve-fitted system it is also and necessarily a losing system, get it?
  • #258
  • Jul 24, 2011 11:49pm Jul 24, 2011 11:49pm
Quoting Mr Breakout
If we follow Nubcake's "logic" then ANY profitable backtested trading system is by definition curve-fitted, since we must necessarily give some value to each of its parameters.
yep.

when stuff is just randomly mashed together with random values that all SEEM to point towards making a dollar, then it's a curve-fit. what else COULD IT BE!?

if, on the other hand, someone said "here is a system you can backtest... do this this and this etc" where all of the rules and parameters and so on actually had a REASON for being chosen then that would be of interest and something bloody revolutionary and beyond the norm of the forex idiocy.

as it stands it is all just random shit mashed together that someone somewhere stumbled onto which happens to seemingly work for no reason other than that they HAPPEN to!

it's all just an indian doing a rain-dance. he dances, it rains, therefore it rains because he dances and will always continue to do so. voodoo crap with no basis in reality. it happens to rain sometimes when he dances... so should he base a business around this model and seemingly positive rain expectancy? oh, i forgot to add... his previous experience tells him that standing on one leg adds to his expectancy, so there's always that added reassurance to go on as well *phew*.

would you go into a rain-making business with such retarded concepts backing the method? that's what people in this joint do day in and day out. curve-fit. oh, of course there is always the sure-fire answer of "because the 'big boys' use this MA and that fib bounce" etc. as soon as someone uses the term "big boys" to put reason to something happening i know i'm reading the words of a complete and utter retard!
Congratulations ScalaFX for coming out of the closet!
  • #259
  • Jul 25, 2011 12:10am Jul 25, 2011 12:10am
You know why people don't like you Nubcake?

....because the truth hurts!

"...BECAUSE THEY CAN'T HANDLE THE TRUTH !!! "

  • #260
  • Jul 25, 2011 12:17am Jul 25, 2011 12:17am
Quoting CrucialPoint
You know why people don't like you Nubcake?

....because the truth hurts!

"...BECAUSE THEY CAN'T HANDLE THE TRUTH !!! "

people don't like me? lol, no way!

i should probably conform then... or something. now i just need to find a way to give myself brain damage and i'll be set.
Congratulations ScalaFX for coming out of the closet!
1 trader viewing now