DMA (Displaced Moving Average)
|September 20th, 2012, 09:05 AM||#21 (permalink)|
Futures Experience: Intermediate
Broker/Data: Stage 5 Trading
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Yes that is correct. Also put up the same moving average with 0 displacement. That way you can see when the crosses occur. You don't necessarily have to trade the crosses. You can use the crosses to tell you when the trend has changed and wait for retraces to get in. I've looked at that but have not studied it extensively.
I should also say that over all the back testing (2+ years) AND forward testing (6+ months), trading like that is a ~40% win rate and can take some pretty ugly losses. I use a 31 tick stop loss. So, you have to be able to weather the storm in order to overcome the draw downs. However, because this is a stop and reverse system, you get the big moves along with some disappointing trades where you see nice profit only for it to reverse to take most of it of even turn it into a loss. That begs the question, "why not implement a trailing stop?" Overall that just doesn't help profit at all. In fact, everything I've tried has caused profit to suffer significantly without helping the equity curve.