Why exactly do EMA crossover systems not work? | Page 23 | 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?

  • #441
  • Jul 28, 2011 8:30pm Jul 28, 2011 8:30pm
Ok, I found one of the books that shows that a pure random entry point can still make money if we use the right exit and stop.

Needless to say, the idea that it is possible to make money even with random buy/sell signals was a true revelation for me. From that day on I started looking for better exit points rather than fine-tuning my entry points.

The book is called Trade Your Way to Financial Freedom by the famous Van K. Tharp. Not my favorite book by all means but it still contains a few nuggets. I will quote a few paragraphs:

"Tom Basso designed a simple, random-entry trading system. We determined the volatility of the market by a 10-day exponential moving average of the average true range. Our initial stop was three times that volatility reading.

Once entry occurred by a coin flip, the same three-times-volatility stop was trailed from the close. However, the stop could only move in our favor. Thus, the stop moved closer whenever the markets moved in our favor or whenever volatility shrank. We also used a 1% risk model for our position-sizing system. We ran it on 10 markets. And it was always, in each market, either long or short depending upon a coin flip. ...

It made money 100% of the time when a simple 1% risk money management system was added. ... The system had a (trade success) reliability of 38%, which is about average for a trend-following system." (end of quote)

This shows that although entry is important, it is probably the least most important component of a trading system.
  • #442
  • Jul 28, 2011 8:45pm Jul 28, 2011 8:45pm
Quoting Mr Breakout
Ok, I found one of the books that shows that a pure random entry point can still make money if we use the right exit and stop.

Needless to say, the idea that it is possible to make money even with random buy/sell signals was a true revelation for me. From that day on I started looking for better exit points rather than fine-tuning my entry points.

The book is called Trade Your Way to Financial Freedom by the famous Van K. Tharp. Not my favorite book by all means but it still contains a few nuggets. I will quote a few paragraphs:

"Tom...
that's misleading though. what was the sample size? i don't think that was ever mentioned in the book. i don't much care for such authors tbh. they are usually the onlookers of people who do in fact make money, but that's not to say they accurately relay the core of what makes money for the people they observe.
Congratulations ScalaFX for coming out of the closet!
  • #443
  • Jul 28, 2011 8:55pm Jul 28, 2011 8:55pm
Quoting Mr Breakout
random buy/sell signals.
//---
//---

hey mr b.... there was a russian once that offered to take any repetitive signal and make money.... or more to the point, not lose money....

it was his view, exits held the key..... entrys were second.......

//---
//---

you mentioned being able to exit within 19 pips of the top of almo's chart.... that would have been a dang good exit......

by coincidence, just about the time i went short.......

so, from the russians point of view, your exit out weighs my entry......h
Attached Image (click to enlarge)
Click to Enlarge Name: 19 pips.jpg Size: 149 KB
to trade and code, keep both simple... no call to impress....h
  • #444
  • Jul 28, 2011 9:09pm Jul 28, 2011 9:09pm
Quoting nubcake
what was the sample size?
I will give you more details tomorrow if you like Nubcake, right now I am testing a few promising trading ideas of my own.

Quoting nubcake
i don't think that was ever mentioned in the book. i don't much care for such authors tbh. they are usually the onlookers of people who do in fact make money, but that's not to say they accurately relay the core of what makes money for the people they observe.
Reading trading books is extremely important, they give the traders a solid foundation upon which to build profitable trading systems. When I started in this crazy business I knew nothing about trends, support and resistance, pivot point, moving average, Fibonacci, etc... so I had to read and learn slowly but surely. Some of these books are of course horrible, some are so-so, and some will indeed give you plenty of trading ideas to keep you busy for the next 50 years.

One thing is for sure though : No author is going to simply hand you a super profitable system if you only buy his $25 book. The rules of the best trading systems are always kept secret, nobody in his right mind is going to simply reveal his trading secrets so that you can compete against him.
  • #445
  • Jul 28, 2011 9:13pm Jul 28, 2011 9:13pm
Quoting Mr Breakout
I will give you more details tomorrow if you like Nubcake, right now I am testing a few promising trading ideas of my own.
never mind. i'm sure i have a copy somewhere and can look it up myself if i get curious enough. it's easy to massage data in a way that makes it seem like something it isn't, and that's what a lot of the books do.
Congratulations ScalaFX for coming out of the closet!
  • #446
  • Jul 28, 2011 9:27pm Jul 28, 2011 9:27pm
Quoting hayseed
//---
//---

hey mr b.... there was a russian once that offered to take any repetitive signal and make money.... or more to the point, not lose money....

it was his view, exits held the key..... entrys were second.......

//---
//---

you mentioned being able to exit within 19 pips of the top of almo's chart.... that would have been a dang good exit......

by coincidence, just about the time i went short.......

so, from the russians point of view,...
Thanks for your comments Hayseed. Or like you say in Russia, spasiba

I just want to add one more thing. Your (optimal) exit strategy will of course always depend on the time frame you are using. A trend "reversal" could happen on the 1h time frame but still continue on the daily bars, for example.
  • #447
  • Jul 29, 2011 3:35am Jul 29, 2011 3:35am
Quoting Mr Breakout
Ok, I found one of the books that shows that a pure random entry point can still make money if we use the right exit and stop.

Needless to say, the idea that it is possible to make money even with random buy/sell signals was a true revelation for me. From that day on I started looking for better exit points rather than fine-tuning my entry points.

The book is called Trade Your Way to Financial Freedom by the famous Van K. Tharp. Not my favorite book by all means but it still contains a few nuggets. I will quote a few paragraphs:

"Tom...

that was never at question, if your happy with a 50/50 totally random entry thats fine, a lot of newbie's would be better off with coin flip entrys as there entrys are so bad there 80%+ lose rate, so lose rate of 80% = screwed, win rate of 80% then your risk to reward hasn't got to be so high.

Both equally important.

Remember your merely quoting what the person who wrote the books thinks, doesn't make it any more valid than anyone else saying it.
Nothing to it, but to do it!!! Stick to the plan FOOL!!!!
  • #448
  • Jul 29, 2011 11:25am Jul 29, 2011 11:25am
oh man...this thread gonna be the most entertaining one, wish you guys will keep posting, so we'll never running out of adrenaline and laugh

btw, MA crossing system works for whom make it work, and doesn't works for whom didn't make it. To make it work, you have to make your self able to make it work. What makes it doesn't work is the user it self. There is no such an absoluteness for a trading system, what works for one doesn't guarantee for others, and vice versa.
  • #449
  • Jul 29, 2011 11:12pm Jul 29, 2011 11:12pm
Quoting in_drag88
oh man...this thread gonna be the most entertaining one, wish you guys will keep posting, so we'll never running out of adrenaline and laugh

btw, MA crossing system works for whom make it work, and doesn't works for whom didn't make it. To make it work, you have to make your self able to make it work. What makes it doesn't work is the user it self. There is no such an absoluteness for a trading system, what works for one doesn't guarantee for others, and vice versa.
There are 3 ways to use the moving average principle:

1: As a stand-alone system, example you buy/sell when the price is above/below its 19 and 39 moving average.

2: As an exit tool, example your long position is profitable but now you want to find a good exit point, so you decide to keep your position open as long as the price does not close below the 100 moving average, thus maximizing your profits.

3: As a filter. This is by far its best use. Example your system (other than a moving average system) issues a BUY signal, but you quickly look at the chart and see that the price is BELOW the 100 moving average so you do NOT take the trade.

Traders would be really amazed by the number of losing trades this simple rule/filter eliminates!
  • #450
  • Jul 30, 2011 5:26am Jul 30, 2011 5:26am
Quoting Mr Breakout
There are 3 ways to use the moving average principle:

1: As a stand-alone system, example you buy/sell when the price is above/below its 19 and 39 moving average.

2: As an exit tool, example your long position is profitable but now you want to find a good exit point, so you decide to keep your position open as long as the price does not close below the 100 moving average, thus maximizing your profits.

3: As a filter. This is by far its best use. Example your system (other than a moving average system) issues a BUY signal,...

Your getting there, keep it up!!

Thats pretty much how I trade using no.3 I have 2 MA bands, I only do longs above the slowest MA and vice versa, and trade pull backs to both MA with trend also. ( band is 20 - 30 pips ) filters out any inaccuracy nicely. 5 wins outta 7 this week

3. is also an example of a entry system, which improves your win rate, which you just by your own admission proved entrys are important.

More important / less important well that depends ofcourse on your particular method / personality.
Nothing to it, but to do it!!! Stick to the plan FOOL!!!!
  • #451
  • Aug 3, 2011 7:59pm Aug 3, 2011 7:59pm
Quoting jzw
So you are saying that you would have sat thru an earlier 100 pip reversal but somehow within 19 pips of the top you knew the move was over?
Again the answer is still yes. Let me give you an example. First look at my earlier post here : http://www.forexfactory.com/showthre...70#post4816370

Now here is an update on this trade, see the chart below. As you can see, we used a 100-hour simple moving average to exit this AUD/CAD trade with over 230 pip profits, at point D (hourly bar closed below the 100 moving average).

Now look at the reversal from A to B, that's a 120 pip "reversal". It is a bigger reversal than the one from point C to the 100 average, right? And yet we did not close your position at point B because according to this simple exit rule the time was not right.

Well my exit system works the same way, even though it has nothing to do with a moving average. (By the way, I would have exited this AUD/CAD trade exactly 51 pips from the top, but that's another story).
Attached Image (click to enlarge)
Click to Enlarge Name: xaudcad.png Size: 85 KB
  • #452
  • Aug 4, 2011 1:13pm Aug 4, 2011 1:13pm
Quoting Mr Breakout
Again the answer is still yes. Let me give you an example. First look at my earlier post here : http://www.forexfactory.com/showthre...70#post4816370

Now here is an update on this trade, see the chart below. As you can see, we used a 100-hour simple moving average to exit this AUD/CAD trade with over 230 pip profits, at point D (hourly bar closed below the 100 moving average).

Now look at the reversal from A to B, that's a 120 pip "reversal". It is a bigger reversal than the one from point C to the 100 average, right?...
Without telling the details of your secret exit system just tell yes or no if your exit point would have been at the same candle where mine was. As I have been developing a magical exit system too...
Attached Image (click to enlarge)
Click to Enlarge Name: audcad2.gif Size: 21 KB
  • #453
  • Aug 4, 2011 2:50pm Aug 4, 2011 2:50pm
Quoting tom2009
Without telling the details of your secret exit system just tell yes or no if your exit point would have been at the same candle where mine was. As I have been developing a magical exit system too...

He'd likely of drawn a trend line through the low's MAGIC, which means the dip before should of taken him out to but never mind.

Go Long when the trend is up, exit when the trend switches to down or goes flat 50/50 on the flat sometimes it continues.

Timing your entry to not hit your SL all the time and having enough upside is the tricky part.
Nothing to it, but to do it!!! Stick to the plan FOOL!!!!
  • #454
  • Aug 6, 2011 7:26am Aug 6, 2011 7:26am
Quoting aicccia
Is it because ema's inherently lag and this kills them in ranging markets?
Yes, because they lag and plain simple it is just a "smoothed" price and don't really have a prediction quality.

Then, if you add the: spread, slippage, commissions, negative swap and other trading costs, it will loose money over long term.
  • #455
  • Aug 6, 2011 11:46pm Aug 6, 2011 11:46pm
Quoting tom2009
Without telling the details of your secret exit system just tell yes or no if your exit point would have been at the same candle where mine was. As I have been developing a magical exit system too...
No that's not that candle. Really good exit point by the way
  • #456
  • Aug 6, 2011 11:47pm Aug 6, 2011 11:47pm
Quoting Sunliner
Yes, because they lag and plain simple it is just a "smoothed" price and don't really have a prediction quality.

Then, if you add the: spread, slippage, commissions, negative swap and other trading costs, it will loose money over long term.
No it won't.
  • #457
  • Aug 8, 2011 1:51pm Aug 8, 2011 1:51pm
Very simple: past performance does not guarantee future behavior
  • #458
  • Aug 24, 2011 3:52pm Aug 24, 2011 3:52pm
Quoting Mr Breakout
No that's not that candle. Really good exit point by the way
Thanks. I miss your posts in this thread by the way...
  • #459
  • Aug 24, 2011 7:30pm Aug 24, 2011 7:30pm
Quoting tom2009
Thanks. I miss your posts in this thread by the way...

Don't worry he'll be posting under another ID in the hope of setting himself up as a guru which people then give him money to trade for him. ( and it's gone )



Fools and there money and all!
Nothing to it, but to do it!!! Stick to the plan FOOL!!!!
  • #460
  • Jan 19, 2012 5:38pm Jan 19, 2012 5:38pm
The people on this thread who state the MA system is flawed and doesn't work I fail to understand what they are looking at as the charts confirm they DO work here is 3 entries on the euro/usd today on 5 min used with price action why do so many people object to this method like its evil and should not even be read an ounce.
Attached Image (click to enlarge)
Click to Enlarge Name: eurusd.gif Size: 33 KB
Find your Favourite Pattern
0 traders viewing now