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DMA (Displaced Moving Average)
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DMA (Displaced Moving Average)

  #1 (permalink)
Private Trader
London UK
 
Futures Experience: Intermediate
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Broker/Data: Vankar + DTN.IQFeed (moved from Bloomberg)
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DMA (Displaced Moving Average)

Hi guys

I have recently been looking at 'Displaced Moving Average' and just wondered if any of the traders on futures.io (formerly BMT) have used or are using this in any of their signals?

I have been placing some DMA's on my charts and am currently using different +/- settings to try and see if these can give me any valid signals but im struggling a bit to see whether they give anything different than EMA's in a major way.

I usually just look at PA, volume, channels and support/resistance as a daytrader (mostly) but have read some articles where DMA's are given a good reading and could be good for more position/swing trades but as I say, im struggling to see much difference (in validity of signals) than standard EMA's but am very curious as to whether I can use the DMA as part of my signal toolbox (I like to keep signals/indicators to an absolute minimum where possible).

I appreciate any feedback/comments on this as i've only just very recently started to look at this.

Cheers
Bry

PS: @Mike & futures.io (formerly BMT) forum users, absolute thumbs up to you all, some very knowledgable traders on here, very much appreciate people's willingness to share and always reminds me that there are still good people around :-)

PPS: The DMA definition on Investopedia.com:

Definition of 'Displaced Moving Average'
A moving average that has been adjusted forward or back in time in order to forecast trends. Displaced moving averages are constructed by taking the moving average and shifting it by a number of intervals, either positive or negative. If the number is negative, the displaced moving average will lag the original moving average, and if the number is positive the displaced moving average will lead the original moving average.

Investopedia explains 'Displaced Moving Average'
The aim behind displaced moving averages is to allow traders to center the moving average or make the displaced moving average fit better with the price movement, thereby removing some of the noise in the moving average. Some traders believe that displaced moving averages have more predictive power than basic moving averages such as simple and exponential.

Read more: Displaced Moving Average Definition | Investopedia

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  #2 (permalink)
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  #3 (permalink)
Live Your Bliss
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Yes, worked with it a while ago with some success.

Try constructing a DMA channel.

Say,

SMA(25), based on LOW, displaced 5.
SMA(25), based on HIGH, displaced 5.

This channel gives you a very robust way to measure a trend... or lack thereof.

You can come up with many different techniques how to trade it.

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  #4 (permalink)
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brydubtrade View Post
Hi guys

I have recently been looking at 'Displaced Moving Average' and just wondered if any of the traders on futures.io (formerly BMT) have used or are using this in any of their signals?

I have been placing some DMA's on my charts and am currently using different +/- settings to try and see if these can give me any valid signals but im struggling a bit to see whether they give anything different than EMA's in a major way.

I usually just look at PA, volume, channels and support/resistance as a daytrader (mostly) but have read some articles where DMA's are given a good reading and could be good for more position/swing trades but as I say, im struggling to see much difference (in validity of signals) than standard EMA's but am very curious as to whether I can use the DMA as part of my signal toolbox (I like to keep signals/indicators to an absolute minimum where possible).

I appreciate any feedback/comments on this as i've only just very recently started to look at this.

Cheers
Bry

PS: @Mike & futures.io (formerly BMT) forum users, absolute thumbs up to you all, some very knowledgable traders on here, very much appreciate people's willingness to share and always reminds me that there are still good people around :-)

PPS: The DMA definition on Investopedia.com:

Definition of 'Displaced Moving Average'
A moving average that has been adjusted forward or back in time in order to forecast trends. Displaced moving averages are constructed by taking the moving average and shifting it by a number of intervals, either positive or negative. If the number is negative, the displaced moving average will lag the original moving average, and if the number is positive the displaced moving average will lead the original moving average.

Investopedia explains 'Displaced Moving Average'
The aim behind displaced moving averages is to allow traders to center the moving average or make the displaced moving average fit better with the price movement, thereby removing some of the noise in the moving average. Some traders believe that displaced moving averages have more predictive power than basic moving averages such as simple and exponential.

Read more: Displaced Moving Average Definition | Investopedia

The idea of displacement will give you a very good reading when used as HALF of the period of the original moving average. e.g. If you use a 50 SMA then by adding another 50 SMA with a PLUS displacement of 25 will give you an execellent reading of the wave of the original 50 SMA. This goes for any moving average. Just add HALF of the original as a displacement. What you are then seeing is the cyclic movement of the moving average.

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  #5 (permalink)
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brydubtrade's Avatar
 
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Hi anagami & perryg

many thanks to both for replying to my thread, it is very much appreciated.

Ok, so it seems there is some validity in using the DMA then. I think where I may have been getting myself slightly confused, is that I wasn't aligning the DMA with a standard EMA or SMA to try and remove some of the noise.

I can now see the possibility of using it for trend trades for which I shall delve deeper but do either of you use DMA for any intraday trades and do you have a preference on what timeframe tends to suit the DMA usage?

I have attached a couple of images from my charts using both the suggestions;

Please register on futures.io to view futures trading content such as post attachment(s), image(s), and screenshot(s).

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Again many thanks
Bry

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  #6 (permalink)
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brydubtrade View Post
Hi anagami & perryg

many thanks to both for replying to my thread, it is very much appreciated.

Ok, so it seems there is some validity in using the DMA then. I think where I may have been getting myself slightly confused, is that I wasn't aligning the DMA with a standard EMA or SMA to try and remove some of the noise.

I can now see the possibility of using it for trend trades for which I shall delve deeper but do either of you use DMA for any intraday trades and do you have a preference on what timeframe tends to suit the DMA usage?

I have attached a couple of images from my charts using both the suggestions;

Please register on futures.io to view futures trading content such as post attachment(s), image(s), and screenshot(s).

Please register on futures.io to view futures trading content such as post attachment(s), image(s), and screenshot(s).


Again many thanks
Bry

I have used it on intraday trading. It is good on any time frame but namely "time charts". The 50% displacement shows the cyclic movement of any moving average you use. Watch and see how price action moves on the cross of the MA with its MA displacement. You will begin to notice that the crests and troughs of the DMA is also the the highs and lows of the price action.

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  #7 (permalink)
Private Trader
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Futures Experience: Intermediate
Platform: VK (Futures) & TS (FX)
Broker/Data: Vankar + DTN.IQFeed (moved from Bloomberg)
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brydubtrade's Avatar
 
Posts: 18 since Jun 2012
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Hi perryg

Thanks, I shall check the PA today and play around with the DMA's. Im currently looking at a 15m timeframe but will also extend to higher charts.

Very much appreciated

Cheers
Bry

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  #8 (permalink)
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fwiw, Bill Williams "Aligator" indicator and Ichimoku Kinko Hyo indicator both use DMAs.

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  #9 (permalink)
Live Your Bliss
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Can use intraday or longer, doesn't matter.

You can trade the channel crossover. Crosses above, buy. Crosses below, sell.

Does great in a trending environment, gets killed in range.

So you need a contextual filter. That's the hard part.

OR

You can wait for the 1st pullback after a crossover and a strong move. You're trading price for information in that case.

"...the degree to which you think you know, assume you know, or in any way need to know what is going to happen next, is equal to the degree to which you will fail as a trader." - Mark Douglas
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  #10 (permalink)
Live Your Bliss
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cory View Post
fwiw, Bill Williams "Aligator" indicator and Ichimoku Kinko Hyo indicator both use DMAs.

Joe DiNapolli also has a few setups using DMA.

"...the degree to which you think you know, assume you know, or in any way need to know what is going to happen next, is equal to the degree to which you will fail as a trader." - Mark Douglas
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