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Moving Averages
King Lodos
Posted: 04 October 2017 23:17:37(UTC)
#22

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My perspective is there's not much point making predictions .. 'I think we're going to get Brexit', 'I think rates are going to rise', etc.

a) Because you're playing that game against a million other people (and the collective can be much smarter than the median average); and b) Because it's very hard to work out what the market's already priced in, and what odds it's giving different outcomes.

A gambler who doesn't know the odds they're getting only has to be wrong once .. We have phrases like 'picking up pennies in front of a steamroller'.

So there is a school of thought that suggests markets are so smart (having insider knowledge, AI, the wisdom of crowds and emergent intelligence) that prices themselves give you the purest information about what the market's thinking, and have an eerie ability sometimes to spot things before they've happened .. And the greatest hedge fund of all (Medallion), as well as the UK's most successful (BlueCrest), go largely on price movements.

A Chinese billionaire's selling JD.com today .. Retail investors are dumping their Chinese funds 6 months later when the articles are coming out asking 'Is it time to sell China?' – when prices are down 15%, and smart money's long gone .. You can potentially decode these signals – volumes are the other useful piece of the equation
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Guest on 05/10/2017(UTC)
Micawber
Posted: 05 October 2017 05:40:00(UTC)
#23

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Relying on charts, or ignoring them altogether, seem equally daft to me.

The aim is to take account of available information of all accessible kinds. It's not about binary 'predictions' but assessing probabilities and weighting accordingly, or in the case of charts, forming a view on timing.

We all have different approaches and there's something to be said for most of them. It's a pity that some here spend more effort in reviling others than in affording them some respect and trying to understand them.
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The Spanish Inquisition on 05/10/2017(UTC), Guest on 05/10/2017(UTC), Mr Helpful on 05/10/2017(UTC), Chris Howland on 05/10/2017(UTC), srg751 on 05/10/2017(UTC), jvl on 05/10/2017(UTC)
srg751
Posted: 05 October 2017 08:54:26(UTC)
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And how many have looked at a chart in an uptrend, jumped in ( market timed), and seen the pattern reverse almost immediately. I'll wager ALL of us. A chart is a rear view mirror. 5 heads in a row is no guarantee of tails.
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Micawber on 05/10/2017(UTC), Tony Peterson on 05/10/2017(UTC), Tim D on 05/10/2017(UTC), Mickey on 05/10/2017(UTC)
Mr Helpful
Posted: 05 October 2017 10:38:05(UTC)
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srg751;51759 wrote:

And how many have looked at a chart in an uptrend, jumped in ( market timed), and seen the pattern reverse almost immediately. I'll wager ALL of us. A chart is a rear view mirror. 5 heads in a row is no guarantee of tails.


A chart is also a record of sentiment surrounding a security.
We all know to our cost that sentiment as well as fundamentals drive prices.
This irrationality enables many of us to add low, reduce high.

Looking beyond the first derivative can sometimes (but obviously not guaranteed) reveal a change in sentiment emerging, even before the price itself has started to change.
This may help in the unfortunate example outlined.

In line with Micawber's thinking, please can we keep our toolbox as full as possible?
Never to let TA become the master, merely an occasional assistant.
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jvl on 05/10/2017(UTC), Mickey on 05/10/2017(UTC), Micawber on 05/10/2017(UTC)
King Lodos
Posted: 05 October 2017 12:17:39(UTC)
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srg751;51759 wrote:

And how many have looked at a chart in an uptrend, jumped in ( market timed), and seen the pattern reverse almost immediately. I'll wager ALL of us. A chart is a rear view mirror. 5 heads in a row is no guarantee of tails.


There's a song about this by Ed Seykota (turned $5,000 into $15,000,000 in 12 years) – 'The Whipsaw Song':

https://www.youtube.com/watch?v=LiE1VgWdcQM


The song has everything you need to know .. You invest in an uptrend and see it reverse immediately? Cut the loss.

Seykota and I tend to use Pyramiding .. So a market's in an uptrend, I start with a 0.5% position .. If it reverses immediately, I get out on a 5% loss(?) – I've lost 0.025% across the portfolio .. If the trend persists, I keep buying into the uptrend.

So what are you doing? Well, actually the opposite of most investors: You're limiting downside when you're wrong; and you've got unlimited upside when you're right.


What most investors and fund managers do (as The Art of Execution shows) is hold onto losers too long (not wanting to 'crystallise' a loss), and sell winners on 20% gains (to secure profits) .. It's neurotic, and why they struggle to beat indexes and monkeys.
2 users thanked King Lodos for this post.
jvl on 05/10/2017(UTC), Mickey on 05/10/2017(UTC)
jvl
Posted: 05 October 2017 12:35:48(UTC)
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You start with a 0.5% position. How about the size of new buying if it goes up?
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Mickey on 05/10/2017(UTC)
King Lodos
Posted: 05 October 2017 14:52:34(UTC)
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jvl;51770 wrote:
You start with a 0.5% position. How about the size of new buying if it goes up?


There are conventional approaches to pyramiding .. One approach is you might start putting £100 on (representative – Tony Peterson obviously add 9 zeros), then £50, then £25, then £12 – all the while making sure your Stop Loss keeps you in profit, or breaking even .. Then when it comes to selling, you sort of go in reverse: start by halving your position, halving again, etc. or just sell out, so even if markets just zigzagged, you'd be buying more at the bottom, selling more at the top.

That ensures there's a skew that works in your favour – that's the kind of thing that ensures your system's profitable.

Now I don't do that .. I have issues with losing money that make me start with much smaller positions – and then buy more incrementally .. So I might keep buying 0.5% positions, ensuring the overall position is on an acceptable profit .. I might have a maximum position size I'm just aiming to get to, making sure I don't lose money on the way if the trend reverses, and then just let it grow on its own once it's there (which is where I've been with Euro Small-Caps for a while) .. When a trend starts going flat, I start selling, perhaps in 10% positions, but if it reverses, I'm halving quite quickly – so there's the skew .. What I'm basically trying to do is hold a position size that reflects how positive I am on a trade at any moment – and I go more on intuition and gut feeling than I'd like to
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jvl on 05/10/2017(UTC), Guest on 12/10/2017(UTC)
markus
Posted: 05 October 2017 15:02:54(UTC)
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The Spanish Inquisition;51751 wrote:


I just use a simple 200 day ma on the HL site in a weekly time frame.




I use 199 days so I'm out & in before everybody using 200 day ma :-)

2 users thanked markus for this post.
The Spanish Inquisition on 05/10/2017(UTC), Mickey on 05/10/2017(UTC)
Hank Elvis Dobbs (texan)
Posted: 05 October 2017 15:11:58(UTC)
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can you let me know what day you start?
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The Spanish Inquisition on 05/10/2017(UTC), wydffart on 06/10/2017(UTC)
King Lodos
Posted: 12 October 2017 00:18:21(UTC)
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There's a good Twitter account from a trader who really does use the 200 day moving average a lot.

These are two recent posts showing how the 200 day often acts as a support level (going up and going down), at least in dollars .. I think for us in the UK, we can either trade looking at dollars, or we've got to get used to the 200 day being more of a rough guide

https://twitter.com/LMT978/status/917957765213179906
https://twitter.com/LMT978/status/917961496222683136
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Mickey on 12/10/2017(UTC)
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