Why Trading Moving Averages Fail? Nr. 1 Loser Indicator

[pipbanker 10]

Ok

I know a lot of you are using the most popular indicator in the Market (Moving Average). What you do not realize is that is that MA is the #1 loser in the market. Don't get me wrong, all indicators are losers, but MA is the leader.

 

Here is the bottom line.

Indicators are not really the problem. It is the instruction that comes with them and people that use them is the problem.

 

Let's take for example MA.

This is by far the most abused indicator in the world. It has lost so much money it should have been illegal to use it. Incidentally, no one seems to realize that.

Most trading system in the market follows the wisdom of the MA crossing strategy. 90% of trading system has some type of MA crossing scheme in it. Most indicators (MACD, Stoch, ADX, CCI) are build around that concept. That is why all indicators or EA (automated trading system) in general are garbage. Yes, I said it. They are all garbage.

 

What is the reason for MA cross failure? When looking at MA or any indicators based on MA one needs to understand that price does not care where your moving average is in relation to current price. Market does not care where moving average is pointing or if your indicator is overbought or oversold. MA cross happens too late for an entry and usually when you see the cross and ready to put on a trade the price will go the opposite direction. Tadah! Not again. And you will wander why? You did follow your trading plan as you were taught but there was another loss...Frustration? No, it is more than that...

 

Having said all that, where do a wanna forex trader should turn for help? The truth is there no one that can help you because the answer would be too simple for you to accept and follow. No one can help you except for yourself.

 

For example:

I trade against everything that I have learned in forex trading classes. I trade against everything the books, the technical gurus, the TV, the market analysis, the news, even the TREND. Yes, I trade against the trend. So when I talk about trading most traders will stay away from what I am saying because it makes no sense to them. Others will hate me for making money trading against all the rules that market "gurus" preach.

 

I am going to share what I do and get some stones and mud thrown at me in the process.

It should be fun to watch and read the comments I will be getting. So sit back and relax as I am going to unleash my sac of garbage.

 

Here is how I trade.

I only Buy Low and Sell High using my naked eye and simple support and resistance levels. I DO NOT USE MA CROSSING. IT IS DUMB TO USE MA CROSSING.

 

Bellow is a summary of what I do to prepare for a trade:

(and yes, I do trade without indicators )

 

1. I don't do any analysis on weekends or days before. When I open my chart I look at a Daily Time Frame. I am not too concern about all these technical analysis. They are too confusing and too boring for me to be wasting my time on. As you may already know, most of your trades are always ending up in the wrong side. So the forex market itself does not follow technical analysis when it comes to taking my money so why should I?

2. I determine the intermediate term trend with the H4 and H1 to see where the price is in relation to past price action. This is easy to do with your naked eye. No need for expensive indicator. If you are addicted to indicators then do like the others are doing. Drop a 200 EMA on your charts and say to yourself if the price is above the 200 EMA, the trend is up and if the price is below it the trend is down.

3. I look at where the price is located in relation the highest point in the chart and the lowest point. Or for new guy, this means the highest the price has been before returning back down and the lowest the price has been before returning back up. You can do all this with your naked eye.

4. I am waiting for the price to reach my levels to take the trade.

5. I do use 5M to spot and trade true support and true resistance.

6. I only risk less than 2% of my account on any trade.

7. I follow my stop loss rules and let life goes on.

 

And yes, sometimes I do trade even without all this stuff described above. Just be there in the right time and with right order. Sometimes I am lucky to reach my day target in first 5-10 minutes of session opening. This does not happen everyday, but this happens pretty often to mention it. With no indicators at all.

 

So if you want to learn trading you have to get rid off anything that clutters your chart.

 

Now go ahead and crucify me. I might enjoy some of your comments.

[ValueAreaTrader 10]

Yep you're right, you'll be crucified for just being another vendor trying to get people and their credit cards excited. If you made money trading, you wouldn't be offering a trading room.

 

Here are the ONLY three ways to consistently make money in the markets:

 

1) Be at the top of a company during an IPO and be granted thousands of shares

2) Privileged inside information that catches a company or general market(of your choosing) off guard

3) Have enough money to continually double down forever at increasing quantities until the market turns in your direction and then stagger your exits. Oh wait, that's our good friend Golden Slacks receiving infinite money at .25%

 

Kurtosis and statistics don't even work anymore. HFT robots battling each other day after day has made all the markets truly random.

 

Edit: I forgot a fourth method that works in the markets. Sell a trading room or something of the like for $200-$500 per month and hook people for 2-3 months before they move on. You can probably make a comfortable living of $50k-$100k per year doing this.

Edited January 2, 2012 by ValueAreaTrader

[gianno 10]

MAs work fine for me and several people I know. All have made a killing using MAs. Most robust trend indicator. Not good for scalpers and penny chasers.

[pipbanker 10]

Yep you're right, you'll be crucified for just being another vendor trying to get people and their credit cards excited. If you made money trading, you wouldn't be offering a trading room.

 

Here are the ONLY three ways to consistently make money in the markets:

 

1) Be at the top of a company during an IPO and be granted thousands of shares

2) Privileged inside information that catches a company or general market(of your choosing) off guard

3) Have enough money to continually double down forever at increasing quantities until the market turns in your direction and then stagger your exits. Oh wait, that's our good friend Golden Slacks receiving infinite money at .25%

 

Kurtosis and statistics don't even work anymore. HFT robots battling each other day after day has made all the markets truly random.

 

Edit: I forgot a fourth method that works in the markets. Sell a trading room or something of the like for $200-$500 per month and hook people for 2-3 months before they move on. You can probably make a comfortable living of $50k-$100k per year doing this.

 

Ok, I see you are a little upset with people who are able to make money trading, but this is not your fault. Let me comment on few things you said.

1.There is no IPO in forex and futures, probably you know that, but I need to say that for any newbies who could be reading this post.

2. Yes, you can make money without having insiders in forex and futures. It would be hard to imagine that many people have access let's say to numbers prior to NFP.

3. Not all traders are willing to join the market without proper education. It might sound unbelievable to you but there are traders who want to be educated properly. I am not talking about education quality here, cause that would take us in to long debate.People can make their choice if they want to learn or not. We only give the opportunity to learn profitable trading, please don't get so angry about it. I don't think you get angry at people who teach English or other stuff.

4. Turning a struggling trader into a profitable one is not about watching videos and reading manuals. If you give me a valid reason why I should spend my personal time educating a trader for free then I will enroll you at no cost. You will like to be on the other side.

There are many things to be discussed on this matter, but I will stop here.

Yes, people can join our trading room for free.

[pipbanker 10]

Since we have people happy with MAs, I think it would be interesting to know how many people are trading with MAs and if they are happy about performance.

Would you agree that having a poll would be the right thing here?

 

I've created a poll here

Take a look at this screen to see where exactly the poll is. http://screencast.com/t/HWzDs4dLlon

 

2 weeks to vote should be enough to get some valid info. I will post results in 2 weeks here.

[joshdance 10]

What a waste of server space this thread is. :doh:

[malocclu 10]

No two traders that I know trade exactly alike. Whatever works for you is the best way to trade imho. And I've been trading for over 20 yrs. The markets change their MO almost daily so there is no one best method or indicator. Price is the only indicator of value. If you are new to trading you need to do some reading and take some courses from the recognized leaders in trading education. Then you can truly learn to trade by piecing together a strategy and methodology that works for you. Since we all learn at different speeds and trading is so psychologically influenced by our individual personalities, some will learn quickly. Some will take years to learn (I did) and some will never learn and eventually give up when they run out of expendable funds.

[Tams 20]

trading with MA is like flying an airplane...

 

those who can fly looks like god to those who can't.

 

those who can't fly but fly anyway will have a predictable future

 

there are those who can't fly, believes nobody should either

 

there are those who can't fly, have other means of transportation, therefore not flying is not a big deal

[MCM 10]

trading with MA is like flying an airplane...

 

those who can fly looks like god to those who can't.

 

those who can't fly but fly anyway will have a predictable future

 

there are those who can't fly, believes nobody should either

 

there are those who can't fly, have other means of transportation, therefore not flying is not a big deal

 

I just got a warm feeling inside Tams..

 

Both optimists and pessimists contribute to the society. The optimist invents the aeroplane, the pessimist the parachute.

 

— George Bernard Shaw

[marketboy 10]

Ha.... I wish I had an airplane, Sometimes I think I'm just driving a tractor or golfcart or something!

 

For other newbies, beware that MA is just univariet time series analysis. The next tick can't be predicted. The market is a complex system that can't be predicted based on past action. So time series analysis is a method that doesn't fit the model.

 

MA are only useful if others make decisions based on them. So a system using MA might work, but only until it stops working...

 

Look instead for ways to understand other traders, buyers and sellers, supply and demand. The price history is their footprints. Are they running ahead or are they trapped?

 

Good luck to everyone in 2012!

[im4XTrader2 10]

Ok

 

1. I don't do any analysis on weekends or days before. When I open my chart I look at a Daily Time Frame. I am not too concern about all these technical analysis. They are too confusing and too boring for me to be wasting my time on. As you may already know, most of your trades are always ending up in the wrong side.

 

:wtf:Gee, I wish someone had told me last year that using moving average strategies were losers. I guess making 4.3 % month over month (60% per year) for the last 16 months using a moving average strategy is just a total loss.

 

With your above quote I can see why you will always lose money in the long run and badmouth successful strategies. Using technical analysis is too confusing and too boring??? What I am hearing is you don't want to put the effort into making your strategy a winner. Sorry guy, but I think I would rather study hard, analyze the data and come to my own conclusions without being distracted by someone who can't be bothered with confusing and boring technical analysis.

 

I know I sound harsh but I have heard this too many times in too many forums and yet with perseverance, research, copious back and forward testing, I am able to tweak the moving averages to give me a profit on 87% of my trades.

 

I will grant you one thing, too many indicators will make trading more difficult and confusing, the same as trying to watch too many currency pairs.

 

Good luck with your trading. I think I will stick with mine.

[JCII100 10]

One of the best and certainly most consistent traders I know successfully uses Moving Averages coupled with cycles.

 

You should reconsider.

[tiger29 10]

One of the best and certainly most consistent traders I know successfully uses Moving Averages coupled with cycles.

 

You should reconsider.

 

"Cycles"? If you dont mind expanding on this. Never heard of cycles before

[pipsaholic 10]

I have heard and read many stories of successful traders using MA on various places on the net but never seen it with my own naked eyes, however from the last years experience in trading I can say they do work not that I use them but they seem to strong sign with some delay not good for agressive traders but better for conservative. I use 30, 50, and 100 MA's looking for bounces between the 30, 50 I understand market movers use these MA's.

[pipbanker 10]

We are getting interesting results on the vote, but it is still open.

If you have an opinion on this subject put your vote in at http://www.pipbanker.com

The poll is in the right top corner. We will put the total count here after we close the poll.

 

And by the way, Friday 13th had fantastic moves, congrats too everyone who was able to catch that drop in markets.

good weekend to everyone

[pipsaholic 10]

I see a cross over on the 1 min chart on EUR/USD at 10.47am MA it worked, but still stick to market structure along with MA system.

[henryduncan12 10]

There are number of traders using indicators and claiming that they are using profitable indicators as well. So, it is really new for me to know that all indicators are losers, but MA is the leader.

[pipsaholic 10]

Moving Averages work all the time anyone who says they dont they dont know what a chart is or what one looks like.

 

Backtest it last few months and you will see its best to trade after a multiple cross when there is angle and seperation and price always bursts in that direction.

 

the 20, 50 and 200 MA are used by most traders.

[pipbanker 10]

Moving Averages work all the time anyone who says they dont they dont know what a chart is or what one looks like.

 

Backtest it last few months and you will see its best to trade after a multiple cross when there is angle and seperation and price always bursts in that direction.

 

the 20, 50 and 200 MA are used by most traders.

 

Hey mate,

 

in back testing they work fine, dont they?

But there is a problem, my broker does not let me trade in the middle of the chart. And that's where all problems begin. MA fail in forward testing or in real trading. Otherwise all those traders out there would be rich by just trading MA cross. But we know what the truth is... they are not making money.

[rforexdad 10]

Moving Averages work all the time anyone who says they dont they dont know what a chart is or what one looks like.

 

Backtest it last few months and you will see its best to trade after a multiple cross when there is angle and seperation and price always bursts in that direction.

 

the 20, 50 and 200 MA are used by most traders.

 

could u explain further...Have you used Moving Averages in live trading and what are your results...

please also tell us what time frame do you use ?

[Tams 20]

.

 

 

 

Moving Averages are always useful to those who can benefit from them.

 

 

 

.

[BlueHorseshoe 10]

We are getting interesting results on the vote, but it is still open.

If you have an opinion on this subject put your vote in at Forex Learn Profitable Trading Without Indicators | A Unique Forex Trading Course | Forex Trading Strategies | High frequency trading | Daytrading for dummies | Day Trading | Scalping | Best Forex Secrets

The poll is in the right top corner. We will put the total count here after we close the poll.

 

And by the way, Friday 13th had fantastic moves, congrats too everyone who was able to catch that drop in markets.

good weekend to everyone

 

I have been using the following MA Crossover formula with tremendous success:

 

If average(vendorpost,3) crosses over average(tolerancelevel,8) then exit thread at market;

 

I think perhaps it works so well because the MA lengths are both fib numbers - what do you think PipBanker?

 

Bluehorseshoe

[Ingot54 13]

We are getting interesting results on the vote,

but it is still open.

If you have an opinion on this subject put your vote in.

We will put the total count here after we close the poll.

... and ... ?

 

I assume the poll is still open, since we have not had the result posted :shocked:

[Beachmaster 10]

I know a lot of you are using the most popular indicator in the Market (Moving Average). What you do not realize is that is that MA is the #1 loser in the market. Don't get me wrong, all indicators are losers, but MA is the leader.

 

Here is the bottom line.

Indicators are not really the problem. It is the instruction that comes with them and people that use them is the problem.

 

Let's take for example MA.

This is by far the most abused indicator in the world. It has lost so much money it should have been illegal to use it. Incidentally, no one seems to realize that.

Most trading system in the market follows the wisdom of the MA crossing strategy. 90% of trading system has some type of MA crossing scheme in it. Most indicators (MACD, Stoch, ADX, CCI) are build around that concept. That is why all indicators or EA (automated trading system) in general are garbage. Yes, I said it. They are all garbage.

 

What is the reason for MA cross failure? When looking at MA or any indicators based on MA one needs to understand that price does not care where your moving average is in relation to current price. Market does not care where moving average is pointing or if your indicator is overbought or oversold. MA cross happens too late for an entry and usually when you see the cross and ready to put on a trade the price will go the opposite direction. Tadah! Not again. And you will wander why? You did follow your trading plan as you were taught but there was another loss...Frustration? No, it is more than that...

 

Having said all that, where do a wanna forex trader should turn for help? The truth is there no one that can help you because the answer would be too simple for you to accept and follow. No one can help you except for yourself.

 

For example:

I trade against everything that I have learned in forex trading classes. I trade against everything the books, the technical gurus, the TV, the market analysis, the news, even the TREND. Yes, I trade against the trend. So when I talk about trading most traders will stay away from what I am saying because it makes no sense to them. Others will hate me for making money trading against all the rules that market "gurus" preach.

 

I am going to share what I do and get some stones and mud thrown at me in the process.

It should be fun to watch and read the comments I will be getting. So sit back and relax as I am going to unleash my sac of garbage.

 

Here is how I trade.

I only Buy Low and Sell High using my naked eye and simple support and resistance levels. I DO NOT USE MA CROSSING. IT IS DUMB TO USE MA CROSSING.

 

Bellow is a summary of what I do to prepare for a trade:

(and yes, I do trade without indicators )

 

1. I don't do any analysis on weekends or days before. When I open my chart I look at a Daily Time Frame. I am not too concern about all these technical analysis. They are too confusing and too boring for me to be wasting my time on. As you may already know, most of your trades are always ending up in the wrong side. So the forex market itself does not follow technical analysis when it comes to taking my money so why should I?

2. I determine the intermediate term trend with the H4 and H1 to see where the price is in relation to past price action. This is easy to do with your naked eye. No need for expensive indicator. If you are addicted to indicators then do like the others are doing. Drop a 200 EMA on your charts and say to yourself if the price is above the 200 EMA, the trend is up and if the price is below it the trend is down.

3. I look at where the price is located in relation the highest point in the chart and the lowest point. Or for new guy, this means the highest the price has been before returning back down and the lowest the price has been before returning back up. You can do all this with your naked eye.

4. I am waiting for the price to reach my levels to take the trade.

5. I do use 5M to spot and trade true support and true resistance.

6. I only risk less than 2% of my account on any trade.

7. I follow my stop loss rules and let life goes on.

 

And yes, sometimes I do trade even without all this stuff described above. Just be there in the right time and with right order. Sometimes I am lucky to reach my day target in first 5-10 minutes of session opening. This does not happen everyday, but this happens pretty often to mention it. With no indicators at all.

 

So if you want to learn trading you have to get rid off anything that clutters your

 

Beachmaster

 

First post. You do what works for you. To win in this game you must have a plan. To take money from brokers

[Ammeo 10]

There are number of traders using indicators and claiming that they are using profitable indicators as well. So, it is really new for me to know that all indicators are losers, but MA is the leader.

 

Not only MA is the leader but MA is enough (alongwith S/R levels) ...RSI,Stochastics or MACD may be the other options to put onto charts but imo they are not needed either as they are some form of moving averages themselves...