I have been testing a crossover system with good results. This system usen 3 moving averages. 2 fast ones for the crossover and a 200 EMA for trend direction, which also works as a direction filter.
But I can see when I back tested the strategy I need another filter. The problem arise when the crossover is rather flat, or should I say no angel on the cross over.
I am thinking about using ADX or some other oscillator on a lower timeframe. So if their is a strong trend their in conjunction with a clear crossover on the Daily then…
I don’t use crossovers but I do identify a potential trend by the sequence of MA’s - if the shorter MA is above the longer, that’s a potential uptrend. As you say, this sort of simple approach demands a filter.
I use price action rathe than an indicator, looking for a break plus close above/below a recent swing high/low.
To be honest, I used to use crossovers, but they didn’t work for me. In my opinion, the problem with MAs and indicators is that they lag. They confirm what’s already happening.
If indicators tell you what’s already happened, then why not just look at the original thing that the indicator is interpreting?
Maybe I’m wrong. But I say that looking at the price action is the most up-to-date source for information. That’s just my opinion. It’s not something I learned. I just kept backtesting and the signals were false over and over, and I decided to keep stripping my strategy down. What I was left with was apparently called price action. For me, it’s just deductive logic.
Take one step back. It’s order flow that moves price action. No orders, no price action.
So, it is important to ascertain likely places on the selected chart where losing traders will close their accounts or get stopped out.
Which is usually where I can see a potential S & R zone is or even a S & D. So you are looking at what’s been happening before. I use trend lines connecting PSAR balls - setting 0.09 - 04 for accuracy.
I’ve started paying a little more attention to that. There are S/R zones from a few days ago, and even apparently even weeks or months ago. I’ve gotten chewed up neglecting such zones. I’m starting to zoom out and search a bit. Zooming out changes my perception of the current trend.
Also, another thing I’m learning is to know when to leave your trade alone. Opening a trade and fiddling with it could ruin a perfectly good trade.
Actually, I think it’s possible to make any strategy work. If @ramddo wants to use MA crosses, it’s possible, for sure. It’s all about analysis.
Whatever the strategy, crosses or not, patience is the key. You gotta know when to trade. Knowing when NOT to trade is just as important as learning to read your strategy’s signals. That’s been my experience so far.
Price action, S/R zones are way to subjective. How can one trade based one that. Their has always been so many preaching that price action is the only way to goo, here I am including S/R zones. I have never seen this kind of trading work but in hindsight.
Of course a crossover system is lagging, but all one is doing in a crossover system is playing the probability, as one would do with any trading system. Looking at the past to play the probability in the future.
But for now I am thinking about testing the RSI 50 line as a filter, this would give me a clear feeling for the momentum of the market.
Thanks for your input guys , really appreciate it.
I’m sorry if I gave the impression that price action is the ONLY way to trade. For me, it seems the most logical. Everyone should feel that way about their strategy. They should backtest and see that, if done correctly, their strategy is the most logical (for their own personal use) and it works.
