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Why exactly do EMA crossover systems not work?

  • #481
  • Jan 21, 2012 1:04pm Jan 21, 2012 1:04pm
man,thats martingale!!!! Though im amazed by the very little drawdown.
Drawdowns of upto 50% are perfectly normal for trend trading,but how many folks can live through that.

also that graph is too good, id be really worried
wo-yoy! wo-yoy! wo-yoy! wo-yoi! wo-yoy-yoy-yoy!
  • #482
  • Jan 21, 2012 1:57pm Jan 21, 2012 1:57pm
Quoting thelws
as a long time student of MA and studied MA under a master who has been using it for 30+ years...

All I will say is that MA are only good for 1 thing. They tell you the trend. In fact it is probably the most reliable indicator to tell you of the trend. Simple and elegant. If your MA is crossing over to bull side, your bias is long. If your MA crosses to the bear side, your bias is short.

That is all the MA cross is good for.
I completely agree with what you said. my mentors also showed me that MA's should not be the sole reason of getting into or out of a trade. They use to say an MA is more like a condiment to your meal. You dont drink soy sauce out of the bottle without a suffering bad result. Instead you put it with other things to enhance the taste. A condiment is meant to be in moderation and is tailored to each person.

If you cant tell the trend with an MA on the charts you shouldn't trade it, if above wait for a buy signal, if under MA then wait for a sell signal. I personally use a particular type of MA ( not ema) and use it constantly on Multi-TF's. Its probably the best filter I have ever used, ( when used appropriately ). And it works great for scalping ( short term or longer term)
  • #483
  • Jan 21, 2012 2:47pm Jan 21, 2012 2:47pm
What would you say a good set of MA are to use for an intraday system? I use the 21, 30, 50, 100/200 Simple

Does it matter what combination you use? day or swing trader?
Find your Favourite Pattern
  • #484
  • Edited 8:28pm Jan 21, 2012 8:08pm | Edited 8:28pm
Quoting Custos
that statement is so wrong. But believe what you want.
and why is that statement wrong? i cant see my faults please help and enlighten me
  • #485
  • Edited 8:29pm Jan 21, 2012 8:18pm | Edited 8:29pm
Quoting pemully
man,thats martingale!!!! Though im amazed by the very little drawdown.
Drawdowns of upto 50% are perfectly normal for trend trading,but how many folks can live through that.

also that graph is too good, id be really worried
you are right, its a heavy extended version of martingale, which has no more to do with the original martingale, i use
- atr for steps between orders
- doubled pipsteps between the orders
- hedge position

thy secret why the dd is so low, i use shifted bars, most of the false entries are eliminated

1st pic show a high risk version with 1 bar shift
2nd pic show a medium risk version with 2 bars shift
3rd pic would be a low risk version with 3 bars shift (not uploaded)
  • #486
  • Jan 22, 2012 4:45am Jan 22, 2012 4:45am
Quoting ixbone
and why is that statement wrong? i cant see my faults please help and enlighten me
Money management cannot create positive expectancy. Positive expectancy is created by exploiting a market inefficiency.

Money management however can increase the positive expectancy of a system. But the prerequisite is that the system ALREADY has a positive expectancy without advanced money management rules.
  • #487
  • Jan 22, 2012 5:23am Jan 22, 2012 5:23am
Quoting Custos
Money management cannot create positive expectancy. Positive expectancy is created by exploiting a market inefficiency.

Money management however can increase the positive expectancy of a system. But the prerequisite is that the system ALREADY has a positive expectancy without advanced money management rules.
ok, i know what you mean. thanks

personal, money management is for me a combination of:
- risk control (do not overtrade, be always in shape with your current&available balance)
- order control (time when you trade)
- position size control (depending on the available, current free balance)
because all points resulting in increased or decreased balance (money)
the target of money management is to catch steady and save profits without putting your balance in high danger szenarios - because each "system" starts with a coin flip

but maybe i'm totally wrong
  • #488
  • Jan 22, 2012 5:50am Jan 22, 2012 5:50am
Quoting ixbone
ok, i know what you mean. thanks

personal, money management is for me a combination of:
- risk control (do not overtrade, be always in shape with your current&available balance)
- order control (time when you trade)
- position size control (depending on the available, current free balance)
because all points resulting in increased or decreased balance (money)
the target of money management is to catch steady and save profits without putting your balance in high danger szenarios - because each "system" starts with a coin flip

but...
good post. I agree with all your points, except the last one. In that case you are thinking too one-dimensional.
Positive expectancy is a function of the win/loss ratio AND the risk-reward ratio. There are good systems that have a worse win/loss ratio than a simple coin flip, but the risk-reward on the winning trades is so high, that it is profitable over the long-term.
And this goes also into the other direction. There are systems with a higher win-loss ratio than a coin flip, but normally have a lower risk-reward. Now again here we have to look if the combination of both ratios give us profits in the long-term. So, saying that each system starts with a coin flip is not right.
  • #489
  • Jan 22, 2012 6:22am Jan 22, 2012 6:22am
Quoting Custos
good post. I agree with all your points, except the last one. In that case you are thinking too one-dimensional.
Positive expectancy is a function of the win/loss ratio AND the risk-reward ratio. There are good systems that have a worse win/loss ratio than a simple coin flip, but the risk-reward on the winning trades is so high, that it is profitable over the long-term.
And this goes also into the other direction. There are systems with a higher win-loss ratio than a coin flip, but normally have a lower risk-reward. Now again here we have to look...
pardon, i'm a graduate communications engineer (IQ before EQ)
with a coin flip i mean, there is a good entry (system) currently, but when a new tick arrives (regardless if up or down), the good entry is now in the past - but you are right in medium and long term trading, because the new arrived tick is less significant - so my statement about coin flip was in/to general. (my fault) there a so many variables left, this would open a new general trading discussion about, styles, systems, time frames and so on.

Back to starting question, yes ma's work in combination with some filters, perfect money management (described earlier) and a well balanced account to survive high floats (drawdowns)

Thank you for your considerations!
  • #490
  • Apr 4, 2012 6:04am Apr 4, 2012 6:04am
i have read the thread one thing seems to missing is no body mentioned how far the stop should go can somebody please explain thanks in advance
  • #491
  • Apr 5, 2012 7:51am Apr 5, 2012 7:51am
Exactly why forums get bad reviews. The system does work and extremely well. I trade it for a living with no problems. Not one indicator.

Select your time frame, pair(s), money management, broker, trading platform, trade the London Market from 4 am till 12 noon est. Take no longs below the slow ema, no shorts above slow ema. Do not trade when fast ema is trading very contrary to slow ema even if it's in the same zone. Somewhat is acceptable. Stop trading when slow ema is flat to avoid congestion. Entry when price crosses closed fast ema. Exit when price crosses fast ema again. This avoids missing big runs. If a gain of 20-40 pips starts to stall take half profits and let balance run out to the fast ema. 6pip stop loss EU. 7GU. Assuming you're not paying more than 1.2 for EU and 1.9 for GU.

It is a tiresome system but one that will enrich one no doubt. Even though the ema lines are lagging the law of probabilities will win the day.
  • #492
  • Apr 5, 2012 12:07pm Apr 5, 2012 12:07pm
Quoting dforant1
Exactly why forums get bad reviews. The system does work and extremely well. I trade it for a living with no problems. Not one indicator.

Select your time frame, pair(s), money management, broker, trading platform, trade the London Market from 4 am till 12 noon est. Take no longs below the slow ema, no shorts above slow ema. Do not trade when fast ema is trading very contrary to slow ema even if it's in the same zone. Somewhat is acceptable. Stop trading when slow ema is flat to avoid congestion. Entry when price crosses closed fast ema. Exit...
Thats not a cross though, your using the MA's as S/R and for direction rather than just MA1 crosses MA2.

I do much the same, bigger SL's, 5M setup your right on the time zone to play it, then again if you want for the US Session.
Nothing to it, but to do it!!! Stick to the plan FOOL!!!!
  • #493
  • Apr 5, 2012 6:01pm Apr 5, 2012 6:01pm
Quoting Turveyd
Thats not a cross though, your using the MA's as S/R and for direction rather than just MA1 crosses MA2.

I do much the same, bigger SL's, 5M setup your right on the time zone to play it, then again if you want for the US Session.
My bad. I start to trade a trend when my fast ema crosses closed past my slow ema as long as the slow ema isn't flat. I use several methods for exits. Sell half and let it run, let it run as long as the fast ema isn't crossed again, get out with 20-40 pips and look for pullbacks to the fast ema line. The manner of the price fall or rise determines my exit strategy.

There are some down days. Usually down 10-20 pips. That's why I trade all the hours 5 days a week and bank the excess over my needs. Mondays and Fridays are a little slower but still fruitful.
  • #494
  • Apr 5, 2012 7:12pm Apr 5, 2012 7:12pm
Quoting dforant1
My bad. I start to trade a trend when my fast ema crosses closed past my slow ema as long as the slow ema isn't flat. I use several methods for exits. Sell half and let it run, let it run as long as the fast ema isn't crossed again, get out with 20-40 pips and look for pullbacks to the fast ema line. The manner of the price fall or rise determines my exit strategy.

There are some down days. Usually down 10-20 pips. That's why I trade all the hours 5 days a week and bank the excess over my needs. Mondays and Fridays are a little slower but still...
What TF and MA settings do you use ??

My previous it was so good cheat after 6months stopped working recently, how long have you been using your method ?? it's all I can see working recently under the current fast trend conditions.

Answer in my journal if you want!!

Thanks
Nothing to it, but to do it!!! Stick to the plan FOOL!!!!
  • #495
  • Apr 6, 2012 12:27pm Apr 6, 2012 12:27pm
Quoting mpsangha
i have read the thread one thing seems to missing is no body mentioned how far the stop should go can somebody please explain thanks in advance
Don't longer periods need bigger stops, shorter periods smaller stops? Some like the previous high/low of the candle for a stop. Some the last top/bottom for the stop. I trade a lower period and like a 6pip sl for EU and 7 for GU including spread. Once I'm +6 to +7 pips my sl is moved to even. Sure a few trades may be lost due to tight control but $$ preservation is key. There are plenty of trades in a week. Don't get into weak trades like with flat slow ema's. Don't take a long price cross over fast ema if it's moving toward slow ema. and vice versa. There are plenty of trades. Some that don't qualify as a good trade may come back with a pullback to the fast ema line and be well worth it.

In fact if you want to avoid most sl don't take the 1st trade at all. Wait for a line pullback. Happens after most good crossovers. Then a 2nd and 3rd pullback trade. That's how I started these crossover ema trades initially.

If slow ema is flat AVOID it. If that is attempted in 1H trading one could lose many good trades that a lower period offers.
  • #496
  • Apr 6, 2012 12:38pm Apr 6, 2012 12:38pm
Quoting Turveyd
What TF and MA settings do you use ??

My previous it was so good cheat after 6months stopped working recently, how long have you been using your method ?? it's all I can see working recently under the current fast trend conditions.

Answer in my journal if you want!!

Thanks
It should be easy to find an ema line combo that works well. Lower time frames seem to work better than higher ones. There is much written on this trading method on the net. A 5/8 is too fast for my liking. 5/15 10/30 is more my style, room to breathe.
  • #497
  • Apr 6, 2012 1:14pm Apr 6, 2012 1:14pm
Quoting Pipanator
well regardless of backtesting I can see it works in some way along with price action which is good. Also, a large portion of amatuers use it so it increases the probabilty of our trades working out using this than not using it.
Amateurs..........I call em Pro's if there using some trading savy. My only gripe is getting up 3:30 est to start my trading till 12 noon est. Would one call 60% to +100% profit amateurish using a fast and slow ema? Good grief how can some be so blind?
  • #498
  • Apr 6, 2012 1:16pm Apr 6, 2012 1:16pm
Quoting Rikers
I did a backtest with all posible ma cross combinations and non of them were profitable in the long run, additional discretionary logic is needed to filter the wrong trades or analyze the entry/exit point.
There is something obviously wrong with the backtest method or the entrance of info.
  • #499
  • Apr 6, 2012 5:12pm Apr 6, 2012 5:12pm
Quoting dforant1
It should be easy to find an ema line combo that works well. Lower time frames seem to work better than higher ones. There is much written on this trading method on the net. A 5/8 is too fast for my liking. 5/15 10/30 is more my style, room to breathe.

I used to trade similar, but with a 2.5+ pip spread from my broker instantly handicapped, haven't got the time for M1, M15 suited me better but market is to fast so down to M5, but I see M1 being back on the table after I mess with my charts some more
Nothing to it, but to do it!!! Stick to the plan FOOL!!!!
  • #500
  • Apr 6, 2012 5:36pm Apr 6, 2012 5:36pm
http://www.forexfactory.com/showthre...50#post5549950


Most is all math some can dissagree no problem would take the challenge
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