Hello Terry,
I'm glad to hear it and thank you for telling me....
Your question is a very good one. I don't think there is "ONE" answer to it but I will give you mine.
Dahl is an excellent indicator and one that will make you money over the long haul. I truly believe that you could and would make money by just trading Dahl. In fact, I think that many people would make MORE money just trading Dahl then they do using the various systems that they now use.
Now that I've rattled all those chains out there let's talk about using one indicator as opposed to various indicators.
Please notice that I am using the OPEN price of the day AFTER I receive the buy signals. I am doing it this way because THAT'S REALITY and it's the way you should be running all your system test
Look again at IBM. Put up three screens, one for price, one for Dahl and one for MACD (13-34-89). Now run a system test using Dahl and see what you come up with. Dahl gave you a buy on 8/14/96 @ $55.81. Look at the chart and see what was going on at that time. If you have the 5-13-40-200 EMA's on the screen you will notice that all four are in the proper order AND MACD (13-34-89) is long.
Please note that I am using a histogram for the MACD and consider above 0 as long.
OK so Let's take a real close look at this and see what we can come up with. First of all, if I were using MACD (13-34-89) as my buy trigger I would have been into this trade a little earlier. That's a good point to note but right now we'll let that pass and move on to other things.
If I were using MACD (13-34-89) and Dahl as my buy trigger, I would not have taken this trade. Why? Because when MACD told me to buy Dahl was still below 0. Now if you were using MACD to create your final WATCH LIST and then waiting for the Dahl cross, you would be a very happy camper. Dahl would have confirmed on 8/14/96 and you would have enjoyed a very nice ride from $55.81 to $73.18 on 2/14/97.
Now let's take another close look at the chart and see where we might have made changes. First off, $55.81 to $73.18 is a very nice move BUT at one point during this ride (1/21/97) IBM closed at $84.00. Now anyone will tell you that a ride from $55.81 to $84.00 is much better then a ride from $55.81 to $73.18. That's what I mean when I say that Dahl will give some back at the tail end in it's efforts to keep you in for the entire ride.
Now if you were using MACD for the exit it would have told you to jump ship on 1/23/97 at $79.43. That sounds much better then $73.18 BUT remember that MACD would have taken you out of this trade three times before all was said and done. The first exit was on 10/29/96 at $62.87 and for all intent and purpose would have been your good-by to IBM.
Now, was a run from $55.81 to $62.87 in two Months or so enough or would you have rather stayed in the extra three months to pick up the additional run to $73.18.
These are the things you must look at before you decide what systems and indicators you want to use.
One other thing to look at on this chart. Just the fact that Dahl or MACD (13-34-89) are long does not guarantee price is moving in the right direction.
Example: On 12/2/96 both Dahl and MACD (13-34-89) were long and price closed at $81.50. Any systems that asked these two indicators for confirmation would have been told YES! Ten bars later, IBM closed at $74.31 so any short term one to two weeks systems would have lost money. On 1/21/97 Dahl was long and IBM closed at $84. It then proceeded to go down to $73.18 on 2/14/87.
Now these may sound like small items to think about <b<BUT at least recognize them and consider them when you are running your system tests and developing your systems. .
As you can see from this example, MACD (13-34-89) will trade more then Dahl. You should also notice that MACD (13-34-89) will not keep you in on the downside of the move as long as Dahl. On the other hand, Dahl will not whip you as much as MACD (13-34-89) and in most cases you will get better numbers from Dahl from a system test then you will from MACD (13-34-89).
Which one is better really depends on the way you want to trade. They are both good systems that will make you money IF you listen to what they are telling you.
Dahl's numbers are good because it STAYS in the trade until the last possible day. If you start using Dahl then jump out because you FEEL that price is going south you just may lose money. Price may turn back but you will not be on board. Therefor, if you intend to use Dahl you must be prepared to give back the difference between the $84.00 and $73.18 to consistently get the rides from $55.81 to $73.18.
Dave Evans |
