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optiontimer

Trend & Momentum - Indicators of Choice II

Which indicator should I use to determine long-term trend for my trading system?  

106 members have voted

  1. 1. Which indicator should I use to determine long-term trend for my trading system?

    • Single Moving Average
      23
    • Dual Moving Averages (Short MA relative to Long MA)
      46
    • MACD
      13
    • Bollinger Bands
      10
    • Donchian Channel
      5
    • Other (Please post your suggestion to the thread when choosing this option)
      9


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Thanks OT, for starting this valuable thread. I must have started to build a trading plan at least 5 times but never quite got to a working version. (I guess that sort of demonstrates the lack of discipline that a trading plan would help me address!) For that reason, I'm more than interested to see how yours develops.

I didn't find the thread early enough to vote on the oscillator but would have voted for RSI anyway.

As for what to trade, my vote would go to forex. It just seems so much easier to find trends to trade in the currencies. Unfortunately,many traders only find a trend once it's well established, and then either jump in just before it reverses, or they hesitate, unable to bring themselves to pull the trigger, and watch as this particular trend goes on and on... Hence the need for a solid trading plan that says "in this situation, here's what you do."

Looking forward to the next instalment.

 

Cheers

TC

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  ChartistLion said:
Nice and easy for trend :)

 

As Blowfish said, if it helps you "see it" that's all that matters, but I also agree with Blowfish that it looks like someone dumped a plate of spaghetti on top of your chart. It's good that it works for you, but I hope to keep it simple with this project.

 

Thank you,

 

-OT

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  SIUYA said:
if its reasonably automated and not too high frequency how about a range of products.

eg; CL, EURUSD, USDJPY, AUDUSD, ES...... some of the currencies will get a bit correlated maybe.

 

If going for just one instrument my vote is EURUSD

 

  Matt C said:
I would like to see options and keep it a little more simple so everyone can follow along and be able to possibly get a piece for their own trading plan.

 

It may not seem on the face of it that these two suggestions are compatible, but I am leaning toward an arrangement similar to these two suggestions. Again, a main criterion here is to keep it simple.

 

Thank you,

 

-OT

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This poll closes soon, and it looks like a safe bet that we will be using dual moving averages as our longer term trend indicator for out traderlaboratory.com trading system.

 

As with the specific parameters of the RSI that we selected as out short term momentum indicator, I reserve the right to select the specific moving averages for the system. Having said that, I'm open to suggestions. So ... anyone?

 

Thank you,

 

-OT

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Perhaps the 21EMA?

21 EMA - it seems to follow the action just below on an uptrend and above on a downtrend.

I use it on the weekly to show me the trend mostly by its angle. Climbing or Falling. If a candle pierces the 21 or the angle changes both are useful.

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  optiontimer said:
This poll closes soon, and it looks like a safe bet that we will be using dual moving averages as our longer term trend indicator for our traderlaboratory.com trading system.

 

As with the specific parameters of the RSI that we selected as out short term momentum indicator, I reserve the right to select the specific moving averages for the system. Having said that, I'm open to suggestions. So ... anyone?

 

Thank you,

 

-OT

It's not for me to make suggestions, OT, because whatever I have done before has brought me to this point - my cup is empty, and needs filling. Previously that cup has been full - information overload.

 

Is there anything in the belief that different RSI work better for different TF? I have observed that the short period RSI is too "noisy" when used on the higher TF, and the longer period RSI is too slow i the shorter TF.

 

What are your thoughts on that?

 

To be honest I was hoping members would have been a little more adventurous when choosing the indicators we will be using in the poll. Most of us have used the MA crosses unsuccessfully in the past, and my immediate thoughts are that most of us respondents are hoping that someone will confirm to us that there is a way we can stick to old methods and still make this work.

 

These are not my thoughts, tbh. In this exercise I have no preconceptions at all, other than to participate, and learn from someone who does have a clue.

 

I know that you understand how MA crosses can be used to advantage, else you would not have offered it as a choice in your poll.

 

I guess I was hoping that something less popular would get to fly this trip - to sweep away old concepts and ideas, and introduce something different that could be a centre of focus.

 

I have experimented with MA crosses in the past, and I have found that when combined with a trend indicator, the probability of discovering the likely direction that price might follow, is improved - almost reliably sometimes.

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Ingot - depending on how much trend following is to be done, often it does not matter what your entry system is.....the key to making a trend following system work is running your profits.

A momentum system is slightly different.....you are looking for continuation patterns and taking profits may be a part of taking a chunk out of the move.

Depending on OTs MO then my guess is the real value might be in how he approaches and then how he runs things....regardless of the indicator. I look forward to seeing the process.

 

 

(as an aside....recently I have been experimenting with a brand new indicator, no one seems to have mentioned it much, I use it as an alert more than an entry system - any day that closes above the close yesterday and also closes above the close of two days ago and yesterdays close was less than the close of two days ago....ie; c(0)>c(-1) and c(0)>c(-2) and c(-1)<c(-2)......works a treat - you are almost guranteed to get on a few winners - there maybe 60-70% loosers, but I assure you that it is a great pick of the bottoms! Set your stop 1 atr away, no problems.So long as you run the winners it will make money....and as I am such a nice guy I am giving it away for free.)

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  SIUYA said:
Ingot - depending on how much trend following is to be done, often it does not matter what your entry system is.....the key to making a trend following system work is running your profits.

 

A momentum system is slightly different.....you are looking for continuation patterns and taking profits may be a part of taking a chunk out of the move.

 

Depending on OTs MO then my guess is the real value might be in how he approaches and then how he runs things....regardless of the indicator. I look forward to seeing the process.

 

(as an aside....recently I have been experimenting with a brand new indicator, no one seems to have mentioned it much, I use it as an alert more than an entry system - any day that closes above the close yesterday and also closes above the close of two days ago and yesterdays close was less than the close of two days ago....ie; c(0)>c(-1) and c(0)>c(-2) and c(-1)<c(-2)......works a treat - you are almost guaranteed to get on a few winners - there maybe 60-70% losers, but I assure you that it is a great pick of the bottoms! Set your stop 1 atr away, no problems.So long as you run the winners it will make money....and as I am such a nice guy I am giving it away for free.)

 

That's an engulfing move that exceeds the past two days' closes, when yesterdays' close was a slight pullback from the day-before's close.

 

Not too hard when you draw the pattern, and yes, an excellent setup I imagine.

 

As you also alluded, Siuya:

  SIUYA said:
...the real value might be in how he approaches and then how he runs things....regardless of the indicator
Yes, this is the nuts-and-bolts part ... the trade management, and I suspect many of us have a piqued interest in this.

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Ingot 54 said:

 

  Quote
That's an engulfing move that exceeds the past two days' closes, when yesterdays' close was a slight pullback from the day-before's close.

 

That's the problem with many indicators - they just show you what's already visible on the charts, but they put it into numbers and pretty colored lines so it looks like science rather than just 'an indication'. The result is we give them too much credibility. The more complicated they are, the further they get from price action, and the more scientific and credible they look. An oscillator can tell you it looks like price may be 'oversold' - OK, what does that mean? It means that someone who devised the indicator told everyone that in his opinion some figure like 2 standard deviations from the mean, or variation x between two MAs, gave a good statistical indication that the market was oversold and may retrace. Statistically, that's fair enough. So you bought, and now you're still waiting for the retracement, and the damn thing's still going down, because the indicator is looking back at past price action, and you're trying to use it to predict a future in which the rules have temporarily changed and the 'statistically' probably action will have to wait until conditions return to 'normal'. You could have seen that from the chart and been in doubt as to what to do, but the indicator hit its magic line so you believed it and entered the trade.

 

Of course I'm sure we won't go down that path here, but the above is why I'd prefer to stick with the simplest indicators possible, those most closely related to price, which we can instantly relate to what's actually happening on the chart - e.g. 'I can see that a 2 candle (or whatever) break of this SMA/EMA quite often gives a good exit point on this chart', or similar.

 

Max

Edited by maxr

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  Ingot54 said:
Is there anything in the belief that different RSI work better for different TF? I have observed that the short period RSI is too "noisy" when used on the higher TF, and the longer period RSI is too slow i the shorter TF.

 

What are your thoughts on that?

 

My thoughts on that will become clear as the project progresses.

 

  Ingot54 said:
To be honest I was hoping members would have been a little more adventurous when choosing the indicators we will be using in the poll. Most of us have used the MA crosses unsuccessfully in the past, and my immediate thoughts are that most of us respondents are hoping that someone will confirm to us that there is a way we can stick to old methods and still make this work.

 

1) The wording in the poll said nothing about MA crosses. The choice winning choice is "Dual Moving Averages (Short MA relative to Long MA)." This will be used simply to determine the long-term trend. It is not in any way, shape, or form a signal to act upon. The choices I gave in the poll were deliberately "unadventurous," as one of my goals is to keep it simple.

 

2) The particular indicators do not matter at all. That is why I set up the polls. I did not want to be responsible for picking the indicators. I want to put together something that "works" based upon the result of a democratic vote.

 

3) What does matter with respect to the system we will develop here at traderslaboratory.com is the long-term trend and the short term-trend. This is why I had to reserve the for myself the decision as to the specific parameters of the indicators chosen by the forum-at-large.

 

  Ingot54 said:
I guess I was hoping that something less popular would get to fly this trip - to sweep away old concepts and ideas, and introduce something different that could be a center of focus.

 

Nothing wrong with the common, the popular, the "old," as in at least one respect, this project is meant to make what is old new again.

 

Thank You,

 

-OT

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  SIUYA said:
Ingot - depending on how much trend following is to be done, often it does not matter what your entry system is.....the key to making a trend following system work is running your profits.A momentum system is slightly different.....you are looking for continuation patterns and taking profits may be a part of taking a chunk out of the move. Depending on OTs MO then my guess is the real value might be in how he approaches and then how he runs things....regardless of the indicator. I look forward to seeing the process.

 

I am very much in agreement with you SIUYA, and I thank you for your excellent contributions thus far in support of the project. I hope you continue to help us along.

 

As to the trend following/momentum distinction, I would suggest that it might help some here to think of it this way: Liken "trend following" to what is commonly referred to as "position trading," and liken a momentum strategy to what is commonly referred to as "swing trading." I will attempt to develop and demonstrate a system that can be successfuly traded as either. Hence "Trend & Momentum," and the need for both a short term momentum-type indicator and a longer term trend-determining type indicator. But, as you said, "regardless of indicator"...

 

Thank you,

 

-OT

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  maxr said:
That's the problem with many indicators - they just show you what's already visible on the charts...

 

Max, I hear you, and I feel that you and I would agree on most of the important things. I would like, however, to suggest the following - let us, for the purpose of this project, assume that the problem with indicators is not that they show us what is already visible on the charts, and rather consider that the problem is not indicators at all. Let us consider the problem at hand to be "how does one learn to see the visible?" You and I, Max, can look at a naked chart, and we can see the major trend, the minor trend, and quickly determine whether we want to be long, or short, or flat. But how did that happen? How did we come to be so? And how do we help others get there?

 

This project is not about this or that indicator, nor is it meant as a debate between indicators-based traders versus price-action based traders. My purpose here is to discover a means or mechanism that will allow the one succeeding to help the one struggling to see what is already visible on the charts.

 

I hope you continue to help us as we move forward with this project.

 

Thank You,

 

-OT

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  mrcsidney said:
Perhaps the 21EMA?

 

Ok, mrcsidney, since you were the one lone soul to suggest an MA, I'll use it. I'll use the 21 ema as the shorter ema, and I will choose the longer term MA myself.

 

As you are a first time poster here at traderslaboratory.com, please give us some indication (perhaps your second post) that you are indeed following along with us.

 

Thank You,

 

-OT

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Ok, my fellow traderslaboratorians, we now have the two indicator components of our trading system. We will be using two MA's, one short, one long, to determine the overall trend. As we had one individual respond to my request for MA suggestions, I felt it only right to give it the green light. It is the 21 EMA, and for my purposes, it is a suitable short term MA. I will select the longer MA.

 

We will also be using the RSI as out indicator for determining short term momentum, aka overbought/oversold. I will select the RSI interval.

 

I will post a chart of something this weekend once I have selected the remaining indicator parameters in order to display the indicators we will be using to construct our system. Once I post that chart here, I will ask the moderators to close this thread, and I will start the thread where we will "get down to brass tacks" as they say.

 

Thank You, and Happy Father's Day to all the dads among us!

 

-OT

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OptionTimer, I'm paying careful attention. This is very timely for me as I have stopped trading and am in the process of reinventing my trading plan. I have started a search for long term indicators to help me to see the major, and intermediate trends. And, thankyou for your help OT.

MrC

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[quote name=optiontimer;1212211) The wording in the poll said nothing about MA crosses. The choice winning choice is "Dual Moving Averages (Short MA relative to Long MA)." This will be used simply to determine the long-term trend. It is not in any way' date=' shape, or form a signal to act upon. The choices I gave in the poll were deliberately "unadventurous," as one of my goals is to keep it simple.

 

2) The particular indicators do not matter at all. That is why I set up the polls. I did not want to be responsible for picking the indicators. I want to put together something that "works" based upon the result of a democratic vote.

 

3) What does matter with respect to the system we will develop here at traderslaboratory.com is the long-term trend and the short term-trend. This is why I had to reserve the for myself the decision as to the specific parameters of the indicators chosen by the forum-at-large.

 

Nothing wrong with the common, the popular, the "old," as in at least one respect, this project is meant to make what is old new again.

 

Thank You,

 

-OT[/quote]

 

Thank you for clarifying those things OptionTimer.

 

I am keen to follow what you are putting together here.

 

Ingot

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  optiontimer said:
Ok, my fellow traderslaboratorians, we now have the two indicator components of our trading system...

 

Here is a brief status update on our project:

 

1) The MA's we will be using to determine the overall, aka long-term trend will be the 21EMA (per mrcsidney's suggestion) and the 65 EMA.

 

2) I have a problem with the RSI indicator. I want this system to be very easy, clear, and unambiguous. I have been unable to come up with a consistently responsive and clear parameter using RSI. I will continue to do so, but I am also now considering substituting stochasticRSI for RSI (so we will still be based upon RSI, as the community selected, but we will be using (Yikes!) and indicator of an indicator. This may allow me to achieve the clear unambiguity I am seeking while also, potentially, satisfying the desire of some for a more "exotic" indicator.

 

3) Also, I have yet to decide what will constitute the universe of trading instruments. That will depend, in part, on what charting program I decide to use. I would like to use something that is low-cost, perhaps even free, because in addition to putting together an easy to read system, I also want to demonstrate that you do not need to spend hundreds on data and charting software each month in order to participate in these markets.

 

4) Finally, I have set up a dedicated account at IB to trade for the purpose of our project, and I have transferred 25020.00USD as starting capital. I received a message from IB this weekend that for some reason the account will be permitted for trading on the 27th of June (a week from tomorrow). I am not sure why the delay, but that is fine, as we are nowhere near ready to place out first trade.

 

I hope to have the main logistical details settled by the end of this week, i.e. the specific RSI or stochasticRSI parameter, the instruments we will trade, and the charting software/platform that we will use. At that time, I will post a screen capture of the chart we will be using, and I will ask the moderator to close this thread, so that the project itself may proceed from a "clean slate."

 

For now, we will keep this thread open, and any communication concerning the project can be made here.

 

Thank You,

 

-optiontimer

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  optiontimer said:
Here is a brief status update on our project:

 

...I have a problem with the RSI indicator. I want this system to be very easy, clear, and unambiguous. I have been unable to come up with a consistently responsive and clear parameter using RSI. I will continue to do so, but I am also now considering substituting stochasticRSI for RSI ....

 

It would be good if the indicator you choose is universally available in (almost) all trading platforms.

 

3) Also, I have yet to decide what will constitute the universe of trading instruments. That will depend, in part, on what charting program I decide to use. I would like to use something that is low-cost, perhaps even free...

 

Ninja Trader is free for simulated trading, even if expensive for real trading - perhaps not absolutely the easiest to set up, but good in many ways, particularly if you would like to use OCO orders or chart trading. Whatever you decide, Puleeeeeeaze, not the dreaded MT4! The problem there is that half of us will be complaining that we have different prices and fills on the same trade, due to the devilish connivings of the brokers.

 

Max

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I would like to suggest TOS ( ThinkorSwim ). It has great everything. There is education of both the platform and trading in general. They have something called Prodigio which is a powerful automated trading platform that also will do backtesting. There is a free version called PaperMoney that will do for delayed trading on FX, Option on eguity, Futures and FX futures. Some 20 or 30 contracts ( sugar, cocoa, nat. gas, oil, gold, silver, cotton, etc....) Anyway its worth a look see...

have a great day,

Charles

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I was speaking strictly about a charting, and not atrading platform. I will be trading real dough in an Interactivebrokers account using TWS, so for me the trading platform is settled. Those playing along at home are free to paper trade or trade real dough at the broker of his/her choice.

 

Right now, I have more or less decided to use TC2000 if I decide to trade stocks.stock options, and CSI Data if I decide to trade futures/forex.

 

TC200 is $29.99/month and is available from worden.com with a 14 day free trial.

 

CSI Data's unfair advantage is $36.54/month + $60 one time license, and you can find out more about it at CSI Market Data (Commodity Systems Inc.). They have a "trial offer" that gives you one year of historical data with daily updates for $20.

 

Both also offer a decent discount if you pay up for a year in advance.

 

I subscribe to both. For CSI Data, I pay $500/year for full history.

 

I will be posting screen captures of my own charts in the trading thread once I start it, so no one needs either of these to follow along with what I am doing. Your own charting package is likely fine, so don't run out spending money that could be deposited in your trading account instead.

 

Thank You,

 

-optiontimer

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When you start the new thread, can you please post a reference to it here just before you close this one, so we get email notification ?

 

Thanks, Max

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The only thing that actually causes inflation is printing money.   Between 2020 and 2022 alone, 40% of all money ever created in history appeared overnight.   That’s why inflation shot up afterward—not because of tariffs.   Back to tariffs today.   Still No Inflation Unlike the infamous Smoot-Hawley blanket tariff (imagine Oprah handing out tariffs: "You get a tariff, and you get a tariff!"), today's tariffs are strategic.   Trump slapped tariffs on chips from Taiwan because we shouldn’t rely on a single foreign supplier for vital tech components—especially if that supplier might get invaded.   Now Taiwan Semiconductor is investing $100 billion in American manufacturing.   Strategic win, no inflation.   Then there’s Canada and Mexico—our friendly neighbors with weirdly huge tariffs on things like milk and butter (299% tariff on butter—really, Canada?).   Trump’s not blanketing everything with tariffs; he’s pressuring trade partners to lower theirs.   If they do, everybody wins. If they don’t, well, then we have a strategic trade chess game—but still no inflation.   In short, tariffs are about strategy, security, and fairness—not inflation.   Yes, blanket tariffs from the Great Depression era were dumb. Obviously. Today's targeted tariffs? Smart.   Listen to the whole podcast to hear why I think this.   And by the way, if you see a Cybertruck, don’t key it. Robin doesn’t care about your politics; she just likes her weird truck.   Maybe read a good book, relax, and leave cars alone.   (And yes, nobody keys Volkswagens, even though they were basically created by Hitler. Strange world we live in.) Source: https://altucherconfidential.com/posts/the-truth-about-tariffs-busting-the-inflation-myth    Profits from free accurate cryptos signals: https://www.predictmag.com/       
    • No, not if you are comparing apples to apples. What we call “poor” is obviously a pretty high bar but if you’re talking about like a total homeless shambling skexie in like San Fran then, no. The U.S.A. in not particularly kind to you. It is not an abuse so much as it is a sad relatively minor consequence of our optimism and industriousness.   What you consider rich changes with circumstances obviously. If you are genuinely poor in the U.S.A., you experience a quirky hodgepodge of unhelpful and/or abstract extreme lavishnesses while also being alienated from your social support network. It’s about the same as being a refugee. For a fraction of the ‘kindness’ available to you in non bio-available form, you could have simply stayed closer to your people and been MUCH better off.   It’s just a quirk of how we run the place and our values; we are more worried about interfering with people’s liberty and natural inclination to do for themselves than we are about no bums left behind. It is a slightly hurtful position and we know it; we are just scared to death of socialism cancer and we’re willing to put our money where our mouth is.   So, if you’re a bum; you got 5G, the ER will spend like $1,000,000 on you over a hangnail but then kick you out as soon as you’re “stabilized”, the logistics are surpremely efficient, you have total unchecked freedom of speech, real-estate, motels, and jobs are all natural healthy markets in perfect competition, you got compulsory three ‘R’’s, your military owns the sky, sea, space, night, information-space, and has the best hairdos, you can fill out paper and get all the stuff up to and including a Ph.D. Pretty much everything a very generous, eager, flawless go-getter with five minutes to spare would think you might need.   It’s worse. Our whole society is competitive and we do NOT value or make any kumbaya exception. The last kumbaya types we had werr the Shakers and they literally went extinct. Pueblo peoples are still around but they kind of don’t count since they were here before us. So basically, if you’re poor in the U.S.A., you are automatically a loser and a deadbeat too. You will be treated as such by anybody not specifically either paid to deal with you or shysters selling bejesus, Amway, and drugs. Plus, it ain’t safe out there. Not everybody uses muhfreedoms to lift their truck, people be thugging and bums are very vulnerable here. The history of a large mobile workforce means nobody has a village to go home to. Source: https://askdaddy.quora.com/Are-the-poor-people-in-the-United-States-the-richest-poor-people-in-the-world-6   Profits from free accurate cryptos signals: https://www.predictmag.com/ 
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