Experiments in Technical Analysis

[Ropewalker]

Re: Experiments in Technical Analysis - Trading the MACD

Hi Friends

Thanks Rajeev and Ananth. I sure hope this will be useful and other too will share their experience with MACD for everybody to learn.

Ananth, Wishing you and all members of the forum a happy Shankaranti and Pongal

Let us continue with our discussion on MACD.......

One of the most important signals based on the MACD is DIVERGENCE. We will postpone discussion on this till little later.

Now Let us take a deeper look at the MACD charts and try to learn a little more about the additional signals that we get and how to trade them.
So far we were talking about Bullish crossover after a downtrend. In this case the Bullish crossover occurred below the zero line. However the Bullish crossover can occur above the zero line. Such crossover occurs when the stock dips temporarily before proceeding with the up trend. Such crossovers above the zero line produce some excellent trades.

Bearish crossovers occurring above the zero line generally acts as warning signals as it indicates waning of the positive momentum. Bearish crossover below the zero line indicates strong bearishness.

For the making the discussion more interesting we will first make a system with the following criteria.

BUY when there is a Bullish MA crossover.
SELL when there is a Bearish MA crossover.

Additionally the zero line bullish crossovers will be marked with an encircled number 1 with an arrow pointing upwards in order to indicate that the momentum has indeed reversed.

Bullish crossovers above the zero line will be marked an encircled number 2 and arrow pointing upwards indicating good trade opportunities.

Similarly bearish MA crossover above the zero line will marked 3 and bearish crossover of the zero line will be marked 4.

A chart and an Indicator with these signals enclosed

Next we will see if we can find more signals

regards

Karthik

Hi Karthic,

Nice job, but thing is that in trending market MACD crossovers are fine but in trading days they give u whipsaws and tend to pile up huge brokerages without real profit with multiple entry exit. How can this be taken care of?

Thanks & regards
Ropewalker

 

[karthikmarar]

Hi Ropewalker

True, MACD crossover signals are good in a trending market and prone to whipsaws in a ranging market. However here an attempt has been made to reduce the whipsaws by combining the MACD with ADX. Look at what I have defined as power buys, power dips and power hooks in the subsequent sections of the MACD discussion. This does help to reduce the whipsaws to a very great extent. Ofcourse it is impossible to eliminate whipsaws completely. The power signals also have the inhert draw backs of late entries. However it is always better to have late entries and good trades rather than trying to get early entries and not so sure trades.

warm regards

karthik

 

[Ropewalker]

Hi Karthik,

Ok, your MACD is slightly different. Would you mind to share how you combine it with ADX? I admit its impossible to design a system without whipsaws but we need to try and try for perfection. I have been testing an indicator named RMI that is better than RSI though built on the same observations. This way we need to try for the best.
regards
ropewalker

 

[karthikmarar]

Hi Ropewalker

Combining with ADX... It is already there in the discussion on MACD. If you are familiar with Amibroker afl then you can study the same. Also I had explained in my writeup which i had also uploaded on 4shared.com.

RMI... is the same ehler's stuff ??

regards

Karthik

 

[Ropewalker]

Hi,

RMI is Roger Altman's stuff. I may have missed out the post on that post of combining with ADX. I am also not familiar with Amibroker afl. I use Metastock.
Can yo get me the links on that post and if possible can you throw some light on this from Metastock angle.

Thanks
Ropewalker

 

[karthikmarar]

Hi Ropewalker

I had posted a link for a pfd version of the the MACD discussions. In case you had missed it, here is it again

http://www.4shared.com/dir/1136409/6d28c7e6/sharing.html

regards

Karthik

 

[Ropewalker]

Dear traders you can make money in intraday

Don't buy or sell anything with in 30 minutes of opening bell & closing bell

avoide CNBC TV chennel recommadation & Tips

after 30 minute look 10 Most active Securities should have good volume Becouse volume is acsilator of car, so go ahead on volume

your first buy should be in small quantity Dont average on downside always average on upmove side with tralling Stlop Loss use povit point for good stop loss....

Buy stock always from week hand and sold to strong hands.

Dont buy or sell with emotionally and overtrade

In Intraday loss should not more then 2 % of your capital

In Intraday profit should more then 5 % of your capital

if your trade 10 times in a day and 7 times you failed 3 times you gain that mean you are not losser So always be happy with your trades

Happy trading

Bye

Hi Infy,

After going through your day-trading made easy, I find that it is better to sit idle and watch. That way you do not lose money and hence you are on profit .

I feel all these years I have been wasting money, time, energy researching on the market dynamics after going through your capsule course.
Thanks
Ropewalker

 

[karthikmarar]

Hi Ropewalker

The RMI is a variation of the RSI. Ok, something on RSI for you and other RSI fans.

One of the problems with the RSI is the disconcerting wriggle because of the short-term variations in the closes or in simple terms its jagged often failing to provide a proper picture. It would be much better if we have a smoothed version of the RSI. Of course we can use standard EMA or SMA to smooth the RSI. Obviously the smoothing produces lags, which is not desirable. The Ehlers smoothed RSI produces a much smoother RSI without sacrificing much on the lag. The SRSI is much smoother compared to the Wilder’s RSI. I will not go into the mathematics, as it is a little complicated. For the mathematically inclined… it uses a 4th order FIR filter.

I am enclosing a chart showing both the RSI and SRSI.

Anybody interested in the afl?

Regards

Karthik

 

[Ropewalker]

Hi Karthik,

You have been really working hard for this forum. We all do research and test and try different indicators, systems but very seldom do we take the pain of putting it in so details on the site. You inspire me.

Thanks and regards
Ropewalker

 

[ashutosh.krsrivastava]

Hi Ropewalker

The RMI is a variation of the RSI. Ok, something on RSI for you and other RSI fans.
..................
I am enclosing a chart showing both the RSI and SRSI.

Anybody interested in the afl?

Regards

Karthik

Ya karthik,

pls post the afl....

regards
ashutosh