Does anyone use these? Anyone know whether any of them produce better results than just a buy and hold? Even if normally buy and hold is better, I would bet moving average systems would produce much lower drawdowns, particularly when the market is sky high like it is now. Seems like with a moving average, once the price starts to dip, you cover, and don't uncover again until maybe many percentage points more to the downside, thus hopefully missing the next bear market in large part. I'm trying to read up on these, but most don't seem to be all that great off hand. Anyone have any thoughts? Thanks!
Food for thought. Enjoy! http://stockcharts.com/school/doku.php?id=chart_school:technical_indicators:moving_averages https://www.investopedia.com/articles/active-trading/052014/how-use-moving-average-buy-stocks.asp
Undoubtedly, huge numbers of people! All but one of the genuinely independent, objective research studies I've seen reported on this subject said that they don't, overall, if their crossovers are used as trade entries and/or exits. (And that other one, that suggested otherwise, was very "iffy" indeed, IMO.) All the traders I know who look at moving averages at all (and that's quite a few, especially if you define it loosely enough to include "other, directly-MA-derived indicators" as well) are using them towards informing their broad, directional bias, rather than as trade entries, per se. I'm referring here - in very simple terms - to the huge difference between "enter a long trade when the fast MA crosses up above the slow MA" and "try to identify potential long entries from the price action and/or whatever else after the fast MA has crossed up above the slow MA". Just my perspective ... (with which many, doubtless, will disagree: it was ever thus!).
Who said using moving averages and buy-and-hold are mutually exclusive? I use moving averages but not for defining directional bias or determining entry and exit points.
Moving averages do not have a built-in positive expectation. They can be a helpful tool, especially for newer traders for certain strategies and may have some value for assessing trend strength and trend age. Many opportunities in trading are based on conditional probability. A setup is a set of conditions that has a profitable expectation. A trigger is an event to enter the trade. As each trader views the market differently according to their personality, experience, capital, risk tolerence, etc., it is up to each trader to find out what works for them. In most trading days, intraday traders including trend traders, range traders, reversion to mean traders, and scalpers can all make money by skillfully picking their spots. They have learned which conditions to wait for that gives them a reasonable chance for a profitable trade. When moving averages are combined with other analysis, such as tick action, time of day, relative volume, support and resistance, opening indicator, correlated money flows, and so on, one may be able to find it easier to visualize the market and put together a trading plan with this lagging indicator.
Yeah I tried for years to just use SMA's/EMA's. Stock D1 trading 9sma/21ema/50sma/200sma works great, day trading DAX/FX fails sadly. Day trading, 18sma + Envelope 18sma 0.04% and 9sma + BB 9 2.2 has been kicking ass. Bollinger bands are the way to go mostly. And don't think of SMA's as lagging, think of as current recent past direction was UP for instance ( 18sma ) so take longs where the BB 9 suggest reasonable pull backs or what ever shorter term logic you want to use.
Agree, moving averages aren't lagging, they take into consideration real-time price changes. You just have to know what purpose they serve.
As Xela said, they can act as a great filter. For example, I have a number of Long equity systems that take signals when price is above the daily 200 sma and some that take signals when price is below the the daily 200 sma.
Of course I do, moving average indicators are mighty useful when they are used in conjunction with other indicators and in light of sudden news and economic events. Remember, in light of black swan events, all technical indicators go out of the door!
You could use the hurricane warning chart: http://retirementoptimizer.com/ or just get out when 12 month MA or 200 DayMA turn down and re-enter when it turns up.