MA’s are essential trend indicators. They are not reversal indicators or entry signals using MA cross-overs.
I don’t get what you said sir
They might not be for you @Tommor, but many others have been successfully using them for entries for years…
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Indicators are useful, but don’t rely on only technical tools; you have to learn chart analysis as well as the fundamental.
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I would only argue with your word “many”. I think it would be more accurate to say that “not many” people have been using MA’s successfully for years as reversal indicators or cross-over entry signals.
The fact is, its true to say that the Matterhorn CAN be climbed, but its also true that NOT many people have climbed it.
What I mean is that the reason all indicators, including MA’s are said to be unreliable, is that traders use them for the wrong purposes.
Most traders will tell you that MA’s are lagging indicators, and that by the time they have indicated a reversal has taken place, much of the potential profit from trading the reversal has already disappeared. But they shouldn’t be using MA’s to indicate entry on a reversal in the first place, that would be an abuse of the indicator, so its not fair to criticise the indicator, when its the trader who’s at fault.
MA cross-overs are especially poor entry signals if you use the converse cross-over as an exit signal. That way, you would be late getting in and late getting out. Twice as bad.
SMA and Bollinger band are reliable indicators, but i always use MA, RSI and Stochastic Oscillator.
I have seen according to my trading experience , technical indicator works just for very short time , but fundamental indicator works for all time if you can acquire it in a proper way.
[quote=“tommor, post:7, topic:150468”]
The fact is, its true to say that the Matterhorn CAN be climbed, but its also true that NOT many people have climbed it.[/quote]
In fact, in my opinion, @Tommor, you have got this totally the wrong way round. It is not the “Matterhorn” trends that cause the problem with MA crossovers as entries, it is those little ones that turn out to be just little bumps that fizzle out that cause the problems. It is an often stated issue with MA methods that the main difficulty is how to filter out the short fake outs, not how to stay in the longer moves. The whipsaw is precisely what kills these types of methods.
Here is the recent smallish “matterhorn” with the EU, it wasn’t difficult to make money on this one, and the so-called “late entry” myth was never an issue here:
on the other hand this period would have brought little joy trying to ride these little humps:
Actually, this is another illusion that is prompted and repeated by especially Newbies that pick up on such expressions and repeat them and thereby make them truisms. Yes, MA’s are lagging, but that is their purpose! That is the positive value in them and why they are useful. The issue of whether too much of a new trend start has gone before an entry crossover appears depends entirely on the periods of the MAs used, the time frame and, of course, ultimately, how long the trend actually continues for.
But I fully agree with the problem of using MA crossovers for exits or reversals. I would not recommend that at all, except maybe as a last resort signal that one should have already exited! And I think the reason is often clear. To continue with the “Matterhorn” analogy, if there occurs a good reason to start climbing up it, then it might still take a long time before the message spreads and people start to gradually join in and before the movement starts to take on any overall recognised significance as a big climb. This is also true at the start of a sustained trend. People gradually notice it and join in, it is not an instant event as people go from no position to opening a position (usually).
But if we then look at the other extreme, when everyone is “on board” and standing on the peak of our “Matterhorn”, it can be a different scenario altogether. If someone suddenly announces that “there’s a strorm coming” then chances are everyone starts to get down off the mountain at the same time, and fast. Thus the steepness of the exiting part of the curve can be substantially greater than during the accumulating stage.
Therein lies (one of) the inherent problems in those MA crossover systems which include exits as well as entries - the mathematical structure of the MAs demands that the price movement should be like a smooth sine wave type with similar gradients both on the way up and on the way down, but that rarely happens. It has surely been proved beyond any doubt that mechanical MA crossover systems for entry and exit do not work long term - expressly because there are not enough “Matterhorns” between the hillocks.
I would fully agree with this about trying to trade reversals this way. In fact, we have seen recently a number of new traders trying an MA crossover method where they have actually used it to predict a reversal happening in the midst of a clear and present long term trend. It didn’t work, they got burned on the fast and furious return to the original trend, and then dismissed the method as a failure!
I do not consider late entry to be an issue at all unless there is no follow-through - but that is the same whatever method one uses as a trend trader. Entries based on fundamental analysis may well be capable of predicting a move that is not yet underway, but any kind of TA is based on the price data as we have it right now - i.e. current compared with historic. That applies whether you talk about MAs or trendlines or S/R or whatever. Exiting trades, though, is another matter and I would fully agree that MAs are an inefficient late way of exiting, pretty much in the same way as trailing stops.
In fact, one of the apparently most successful approaches on this site at the moment, Dennis’s “Trading the Strong/Weak currencies” is based entirely on measuring the price relative to an MA, and if we consider closing price to be a 1-period MA then this is a crossover system with a very delayed entry, but its value is in identifying mainly those trends that are already demonstrating a strong likelihood of being a “Matterhorn” amongst moves.
Interestingly, Dennis also recommends using the 1H 200ma in the same way as an exit/re-entry method (not a reversal).
As Eddieb suggests, a bad workman will always blame his tools, and if you don’t know how to use the tools you have, then you will never have enough of them.
This thread is not specifically about MA crossovers, it is about MA’s as a viable tool. I, and many, many, other traders use them in some form or another and consider them reliable and indeed, as @Tommor says, even essential - provided they are used in the right way according to what they are actually indicating or confirming is happening with price at that moment relative to the past - and what might be a reasonable projection of what could come next.
But this is just my personal view of MAs. As one can see there are various opinions of them. Each trader has the sole responsibility and obligation to assess what is right for them.
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sometimes i feel any kinds of indicator , its all about temporary , not for permanently at all.
I think, indicator can helps us by additional support with our technical & fundamental analysis but not as major.
Yes it is. I have explained the same issue about indicator , but fundamental indicator is dependable than others of course.
Technically yes, all indicators are reliable. But the most important thing is how much you know about the indicators. More or less every indicator works. Everything depends on your skills and knowledge. The best indicator is the indicators that work for you. That’s why learning trading needs time. You need to do a lot of experiment to find the suitable one for you.
are you using Fundamental analysis for all time when trading ? and how it work ? can you please elaborate?
Actually there is no specific fundamental analysis I use when trading, it’s all about my whole trading experience. NFP , FOMC I like most as a part of fundamental event.
You do realise that you’re talking nonsense?