I noticed trend following a 12 period EMA to 27 Period SMA cross seems to be fairly straightforward.
and watching the SMA EMA trend as above, on the predictive performance of your setups real time provides a great useful insight into how accurately it currently describes what is happening in the market, with an uptrend meaning the conditions/market type is right for those setups and a downtrend the reverse.
This seems to work especially well with general price trend trading. The pairs that trended strongly in the last 6 months had sustained periods of upward trending in the performance of the system (Switch on Scenarios) and the pairs with consistently more choppy price movement had sustained periods of downward trending in the performance of the system (Switch off or trade opposite scenarios).
Continuously reviewing the performance of the system seems to also work for trading price reversals in choppy markets and overall I believe gives a more accurate approach to identifying and appropriating a system for the market type.
I don’t know about you but in the past I have been really excited about getting 9 out of 10 trades correct using my setups one week only to subsequently achieve 1 out of 10 correct using the same setups the week after.
That tends to happen when people allow indicator “signals” to determine the opening of trades.
Observing/defining a “trend” for the purpose of identifying opportunities within it for taking price-action-determined trades, on the other hand, is a whole different matter altogether. There are, for example, people who will enter long trades as determined by their price action parameters [U]only[/U] when a 15-period SMA is above a 50-period SMA (or whatever) and both are rising and diverging - because that’s they how they choose to define an “uptrend” within their specific timeframe - and things like this can certainly be perfectly viable and sensible … if their backtested parameters prove that their methods have a better edge, when traded like that.
Sure that sounds fair. Many people trade with many different approaches, price action only trading derived from SMA period indicator readings are non the less indicator readings. The point is that the indicator readings or whatever method you use in any particular system however you define it will also be either suitable or not suitable for the reality of what is happening in the market and it is not counter logical to a System with ‘edge’ concept (the first principle underpinnings of that edge are currently non existent or superseded by another factor).
No one system can be universally applied to all market types. And the point is to identify the uptick in the effectiveness of your approach at any given time. Empirically is your approach appropriate for the market conditions or not.
If i take a simple indicator signal for a trending market, however I want to describe the setups for a go. if the market is characterized by a series of strong uptrends and downtrends in price action; my indicator will perform excellently (“a winning streak” an uptrend in the performance of the indicator - or in your current accuracy in spotting the right trades given your approach) which tells me that the market is in a phase a well defined trending on the price action.
This applies to anything (eg. reversals on a sideways ranging market) and I think tells you what is happening on the price action without having to understand it conceptually.