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Strategies & Market Trends : Technical Analysis- Indicators & Systems

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To: peter n matzke who wrote (3300)	3/17/2001 12:14:19 PM
From: Michael Watkins	Read Replies (2) of 3325

And a happy St Patricks day to you too! There is some proprietary code in there which unfortunately I can not share, but the basic gist of the system behind the trades pictured is: 1. No long trades (explained later) 2. Only trade short when 20 ema < 50 ema (a very simple trend filter, in real life I use a discretionary approach) 3. Short on the start of a new downswing. Cover when an upswing is detected. This is the proprietary bit, detecting when the downswing starts. Its all based on price bars alone, no indicators. I put together the chart and report as an example and part of an article I'm trying to finish on trend following systems. I don't hold it up as a practical, stand alone, system. A discretionary trader like myself could use it however - just let it plot buy and sell signals but do not act on them unless they are in the direction of the intermediate trend, or better yet, in the direction of both intermediate and long term trend. When I get a bit more energy I'm going to include in the article the performance differences of different scenarios - - trading with the short term trend against the intermediate trend and long term trend - trading in synch with all three - trading with intermediate when its against long term trend - etc... through all possible combinations and in both directions. The example only trades short because its an example of intermediate trend in the direction of the long term trend. The early indications are what you might expect - its possible to make a profit trading with the intermediate trend regardless of whether it is in synch with the longer term direction, but the best profits are trading the trend when the trend in all short, intermediate and long term time frames are all moving in the same direction. The other trick, which is not coded at all, is to automate the detection of trend changes as well. I haven't found a better approach than using price patterns, but I've not had the energy to try to code the patterns up. Michael

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