Do you believe moving average systems work? | Forex Factory

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Do you believe moving average systems work?

  • #1
  • First Post: Edited Jul 6, 2013 6:27am Jun 20, 2013 3:04pm | Edited Jul 6, 2013 6:27am
I do have my own view which I will discuss later however I would like to hear what others think about moving average systems , do you believe they have potential and why ?
The aim of this is a constructive talk that would hopefully help someone


Update 06/07/13

I really hope you guys focus on what we are learning here and contribute something useful . In order to avoid any further conflict , please stick to these rules

1- We don't need to know how much money/pips you are making unless you are specifically discussing the details of your system
2- I have no tolerance at all to insults and use of inappropriate language

3- This is not your trading journal , so please refrain from posting every trade you make
4- Share a useful method relating to MA's
5- Suggest something to improve our strategy
6- Be friendly

My promise to you : we will learn something useful on this thread

If you don't like the above, I would be sorry to ask you to leave but its your decision
Thank you for stopping by
  • #2
  • Jun 20, 2013 4:42pm Jun 20, 2013 4:42pm
Its rather hard to have constructive talk then u start it with "do u believe",ppl believe in gods, aliens.. ) then it comes to moving averages u can test and see yourself they do "work", what to make out of that work is up to person
  • #3
  • Edited 7:14pm Jun 20, 2013 6:31pm | Edited 7:14pm
Quoting uberteh
Its rather hard to have constructive talk then u start it with "do u believe",ppl believe in gods, aliens.. ) then it comes to moving averages u can test and see yourself they do "work", what to make out of that work is up to person
you see people trying different moving averages with different strategies but you rarely see one that survives a choppy market, what makes you think they work?
  • #4
  • Jun 20, 2013 6:42pm Jun 20, 2013 6:42pm
Quoting shahroor
I do have my own view which I will discuss later however I would like to hear what others think about moving average systems , do you believe they have potential and why ? The aim of this is a constructive talk that would hopefully help someone
It depends how you use the MA in your system. do you use the cross of MA as your entry and exit? Do you use them to determine trend? Do you use them to wave a magic wand a around?

Seriously though, I think MA have a place where a trader may use them to decide on a bias or trend if you would. Say if price is above both 100 and 200 MA, then my bias would be to look for long trades. If price is below 100 and 200 MA, then my bias would be to look for short trade setups. Price action will determine your entry and position trigger and possibly your exit, and MA "direction" would determine your bias.
  • #5
  • Jun 20, 2013 6:46pm Jun 20, 2013 6:46pm
Quoting PurePrice
{quote} It depends how you use the MA in your system. do you use the cross of MA as your entry and exit? Do you use them to determine trend? Do you use them to wave a magic wand a around? Seriously though, I think MA have a place where a trader may use them to decide on a bias or trend if you would. Say if price is above both 100 and 200 MA, then my bias would be to look for long trades. If price is below 100 and 200 MA, then my bias would be to look for short trade setups. Price action will determine your entry and position trigger and possibly...
I agree, direction is a very good point but do you think we could use them as the only tool to trigger our trade and be profitable ?
  • #6
  • Jun 20, 2013 6:48pm Jun 20, 2013 6:48pm
Quoting shahroor
{quote} I agree, direction is a very good point but do you think we could use them as the only tool to trigger our trade and be profitable ?
I don't think so because you will get slaughtered in a ranging market
  • #7
  • Jun 20, 2013 6:51pm Jun 20, 2013 6:51pm
Quoting PurePrice
{quote} I don't think so because you will get slaughtered in a ranging market
I know a lot of people try to overcome this problem by tweaking their moving averages ie using 10 instead of 20 or whatever and end up curve fitting which leads to system failure in forward testing ,but do you think there is other way to utilise a moving average strategy?
  • #8
  • Jun 20, 2013 6:56pm Jun 20, 2013 6:56pm
Quoting shahroor
{quote} I know a lot of people try to overcome this problem by tweaking their moving averages ie using 10 instead of 20 or whatever and end up curve fitting which leads to system failure in forward testing ,but do you think there is other way to utilise a moving average strategy?
I am not sure if there is a way or not, but I won't use them alone as a trigger. especially knowing they lag price considerably. The best way to trade is to use price action. Indicators (most of which are lagging) may help in giving direction as guideline, but PA is king. The only possibly "leading" indicator is divergence, but that is not guarantee that the divergence will play out in your favor either, and the divergence may continue for 100s of pips before the trade goes in your direction.
  • #9
  • Jun 20, 2013 6:57pm Jun 20, 2013 6:57pm
The good thing about moving averages as pureprice kindly mentioned is direction which is an essential part of any strategy therefore moving average is a good base for any trading system however there are problems such as
1- delayed entries which we could live with
2- delayed exit which could wipe all our profits by the time the MA gives exit signal
3- choppy makrets

can any one list any other problems you encountered
  • #10
  • Jun 20, 2013 7:12pm Jun 20, 2013 7:12pm
if you look at the EU chart for example with an MA plotted on it you can see massive trends that lasted months and yrs , this makes us think we could easily ride the trend using simple MA strategy and make 1000+pips, in practical terms it wont happen because of all the problems listed above .

However there must be a way to deal with these problems , I think what we need to do is change the way we tackle these problems , not to replace one MA with another, and not to add other indicators which leads to more variables and ultimately more problems
  • #11
  • Jun 20, 2013 7:18pm Jun 20, 2013 7:18pm
A lot of people talk about price action and refer to MA as indicator but if you think about it , an MA is a true reflection of price action although it is delayed it might actually work better than watching live price action because it means less noise which is better in many ways
  • #12
  • Jun 20, 2013 7:44pm Jun 20, 2013 7:44pm
now lets look at this chart with 50 SMA, we dont really know what currency and what date and we're going to make a decision based on what we see only
you have four options here
1- Wait for a retracement and then go long
2- Jumb on now and go long
3- Go short
4- look for a better opportunity

please share your views there is no right or wrong
Attached Image
  • #13
  • Jun 20, 2013 8:38pm Jun 20, 2013 8:38pm
I saw no difference we use or do not use indicator
with naked eye we can see clearly
prices move up or move down
of course after the fact,,both are same
Attached Images
if there is something you should keep secret,simply just save it,, so, just
  • #14
  • Jun 20, 2013 8:40pm Jun 20, 2013 8:40pm
Yes, moving averages do have a place in trading. Being one of the simplest indicators they have so many uses! Not to mention most other indicators/oscillators are MA based. It's very hard to skip them completely.
"To hold, you must first open your hand. Let go." - Lao Tzu
  • #15
  • Jun 20, 2013 9:07pm Jun 20, 2013 9:07pm
I'd prefer to use them as a guide (ranging or trending) You can't deny tha 50, 100, 200 MA etc provide s/r
  • #16
  • Jun 20, 2013 9:15pm Jun 20, 2013 9:15pm
interesting views thanks guys but what would you do with the chart I posted above , would be interesting to know
  • #17
  • Jun 20, 2013 9:21pm Jun 20, 2013 9:21pm
You see the 1hr close above 25EMA suggests to me the next stop is the 50EMA then 75EMA... Above 100EMA for me would show a possible trend change... (in theory).
Attached Image (click to enlarge)
Click to Enlarge Name: Screenshot1.png Size: 80 KB
  • #18
  • Jun 20, 2013 9:29pm Jun 20, 2013 9:29pm
For this chart (if i had to choose) i'd say wait for a retrace and go long near the MA.
If i could use bollinger bands i'd wait for a close outside and then back inside the bands to enter short... in the assumption price will return to its average over that period.
Attached Image
  • #19
  • Jun 20, 2013 9:37pm Jun 20, 2013 9:37pm
Quoting RBlackburn
For this chart (if i had to choose) i'd say wait for a retrace and go long near the MA. If i could use bollinger bands i'd wait for a close outside and then back inside the bands to enter short... in the assumption price will return to its average over that period. {image}
appreciate your view, Bollinger bands is an interesting addition
any other views?
  • #20
  • Jun 20, 2013 10:59pm Jun 20, 2013 10:59pm
Quoting shahroor
now lets look at this chart with 50 SMA, we dont really know what currency and what date and we're going to make a decision based on what we see only you have four options here 1- Wait for a retracement and then go long 2- Jumb on now and go long 3- Go short 4- look for a better opportunity please share your views there is no right or wrong {image}
1- Wait for a retracement and then go long

2- Jumb on now and go long

3- Go short

4- look for a better opportunity


believe me
1--4 = its all have the same opportunity to win and to lose,,depending on how to manage each individual (on the way )
if there is something you should keep secret,simply just save it,, so, just
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