A Moving Average Trading System

[pkgmtnl]

I have read at some website aboout the EMA system to trade in nifty.
it is

Draw line chart having EMA 70min & EMA 1030min,
also MACD(26,12,9)

Now the trading system
When EMA 70min cross & goes above EMA 1030min, then BUY.

When EMA 70min cross & goes below EMA 1030min, then SELL.

The MACD (26,12,9) will give the indication of trend

Try this, If any body cud give the Formula for these EMA and MACD for META STOCK, please publish here too.

 

[lazydaze]

The main problem with moving average systems is getting whipsawed during choppy trading range markets because of the lag in moving averages.

One way to avoid some of the whipsaws is to use price as the entry/exit signal, crossing some moving average reference point. Then if the market is choppy, you get stopped and reversed at the same price as you entered more or less.

You can adjust the frequency of trades by using a longer or shorter term moving average, but the longer term will involve more slippage - i.e. giving back more gains during a trend reversal. There are also gaps that occur that do not allow trading at your stop/reverse price, so there is slippage that way also.

However, the main goal is to capture trends, and this system does that well, making it difficult to miss a move. Overall the trend gains outweigh any slippage.

This method can be used as an always in the market system, where you are either long or short, depending on whether price is above or below your chosen moving average, or it can be gated with a longer term moving average, to only trade long in established uptrends and vice versa.

I have not traded this system with real money yet, but I wanted to get feedback and experience from others - have you traded a similar system? How did it turn out? What problems did you run into?

Thanks
Lazydaze

 

[dkd454]

This strategy may work fine but needs a lot of actual real life tests prior reaching any conclusion.

 

[linkon7]

I want to address a question commonly asked by investors and traders new to technical analysis and trading systems, "What is a good simple system to follow, to get in and out of markets?".

Most people are comfortable with the herd, market rumours, broker tips, etc. But by confirming your trading decision with the help of this trading system, you will be on the way to more profitable trading.

This simple and robust trading systems will not only identify trends, but will also provide you with entry and exit trading signals.

The Trading System

Remember the numbers 3 x 13 = 39

Simple daily moving averages of 3,13 and 39 can keep you in and out of markets fairly efficiently and profitably, (in any time frame actually). Here's how.

Some basic principles to understand are:

-The market moves in long (secular) trends.
-Intermediate trends can last for months to years.
-Short term trends can last for days to weeks.
-Trade intermediate trends in either direction.
-Trade short term trends only in the direction of the intermediate trend.

Proxies:

3 Day MA - a proxy for price
13 Day MA - a proxy for the short term trend (a moving trend line)
39 Day MA - a proxy for the intermediate trend (a moving trend line).

The Basics of MAs

MAs lag market reversals at tops and bottoms, the larger the MA the longer the lag period, the shorter the MA the shorter the lag but the more frequent the whipsaws. MAs work well when markets trend but get frequently whipsawed when they are in a range.

Therefore, trade trends with the MAs but do not trade ranges using MAs. Just stand aside and be patient until a new trend emerges.

The intermediate trend is in the direction of the 39 MA which acts like a moving trend line. If the 39 MA is pointing up then the intermediate trend is up, if down the trend is down. If the 39 MA is horizontal the market is in a range, from which a trend will, sooner or later, emerge.

Simple Trading Rules

1. When the 39 MA is moving up buy when the 3 MA crosses up over the 13 MA. and/or when the 3 MA crosses above the 39 MA.. When the 13 MA crosses above the 39 MA consider adding to your long position. Exit and stand aside when the 3 crosses back below the 13 MA..

2. When the 39 MA is moving down sell short when the 3 MA crosses below the 13 MA. and/or when the 3 MA crosses below the 39 MA.. When the 13 MA crosses below the 39 MA consider adding to your short position. Exit and stand aside when the 3 MA crosses back up over the 13 MA.

3. Only initiate trades in the opposite direction of the intermediate trend when the 3 MA crosses above or below the 39 MA, preferably after the 39 MA has already changed direction.

4. This 3:13 MA crossover will keep you trading in the trend with only a small lag and on the sidelines during corrections. The lag only becomes more substantial at reversals of the intermediate trend (a 3:39 crossover), a small price to pay at these uncertain times of trend transition.

You can set your technical analysis sofware to show bar charts with these 3X13x39 simple MAs. This trading system will help you select the best traders while avoiding the less profitable trades in choppy markets.

thanks a lot... i used to follow a similar system by using 10,30 and 50 EMA and i backtested your 3,13,39 out.... it seems work better. I use 5 min chart for taking positions in nifty. i always trade in the direction of 50 EMA and so far its working out pretty well on a nice trending day. if the 39 MA points down and the 3 and 13 cross up, i just ignore that cross and wait for the 3 ma to cross 13 again for taking further short positions. if the 3 MA crosses the 39, then i reverse my positions or simply get out.

i thank you once again for your effort to dicuss this method.

I use amibroker for my TA and i write my own afl. i am not a software person so it takes me a lot of time to code the desired system. I put in an indicator for warning me when both the rsi(5) and stochastics is oversold or overbought. and i use that for taking positions when the market is trading sideways and the MA system tends to give a lot of whipsaws.

i hope you take out some time and guide me on how to develop the system better. I am just 1 year old in this market and i hope you can help me speed up my learning curve.

thanks once again...


linkon7

 

[linkon7]

The main problem with moving average systems is getting whipsawed during choppy trading range markets because of the lag in moving averages.

One way to avoid some of the whipsaws is to use price as the entry/exit signal, crossing some moving average reference point. Then if the market is choppy, you get stopped and reversed at the same price as you entered more or less.

You can adjust the frequency of trades by using a longer or shorter term moving average, but the longer term will involve more slippage - i.e. giving back more gains during a trend reversal. There are also gaps that occur that do not allow trading at your stop/reverse price, so there is slippage that way also.

However, the main goal is to capture trends, and this system does that well, making it difficult to miss a move. Overall the trend gains outweigh any slippage.

This method can be used as an always in the market system, where you are either long or short, depending on whether price is above or below your chosen moving average, or it can be gated with a longer term moving average, to only trade long in established uptrends and vice versa.

I have not traded this system with real money yet, but I wanted to get feedback and experience from others - have you traded a similar system? How did it turn out? What problems did you run into?n




Thanks
Lazydaze

i trade this system and usually trade in the 50 ema direction. i ignore the 3 and 13 cross if the 39 ma is in the opposite direction and wit for the 3 ma to cross 13 again for taking futher position provided the 50 EMA is not flat.

another addon to this system would be the 13,39 macd. with a 5 ema as the signal line. that gives a good sense of the momentum and direction.

i am still in the process of learning this system so any further observations would be a big help.



linkon7

Learning is not essential....neither is survival.

 

[rajeeve6600]

i couldnt undersand anything from this..

 

[johnnypareek]

well,

3,13,39 is good one. but i canne across another set of nnoving averages for intraday. that is 10-20-50.

rennennber 10 n 20 are EMA n 50 is SMA. for better understanding plez refer attached pdf.

johnny

 

[Nava]

well,

3,13,39 is good one. but i canne across another set of nnoving averages for intraday. that is 10-20-50.

rennennber 10 n 20 are EMA n 50 is SMA. for better understanding plez refer attached pdf.

johnny

Hi, you have not attached pdf file..!

 

[johnnypareek]

hi,
here is dnload link.

http://www.4shared(dot)com/file/103106990/c252a271/5Min_Intraday_Strategy.html

replace (dot) with .

johnny

 

[Quakerman]

Is the moving average trading system intended solely for day trading or can it be
used for long term investing as well? Thoughts anyone?
Thank you
Quakerman