How to avoid whipsaw

Discussion in 'Technical Analysis' started by ozzie123, Oct 19, 2006.

  1. ozzie123

    ozzie123

    First eightth? You mean my first eight whipsaw? And yes that is what I'm trying to minimize. Care to share how you avoid whipsaw?
     
    #11     Oct 20, 2006
  2. Stop trying to catch the first eighth!

    translation: stop predicting!
     
    #12     Oct 20, 2006
  3. give me a few example of your recent whipsaws, attach a chart pinpointing your buy point and sell point(s)
     
    #13     Oct 20, 2006
  4. ozzie123

    ozzie123

    I'm keeping it on my work computer and currently I'm away from it so I think I'll just post an online chart. Here it is (ACI):

    http://www.stockcharts.com/c-sc/sc?s=ACI&p=D&b=5&g=0&i=t78461860805&r=5093

    (you have to copy-paste it I think)
    I bought it right after the 5-20 MA golden cross and CCI produces buy signal. MACD is just going above its zero line and stoc is going up. I entered the trade on October 16th.

    Now it's October 19th and the candlestick doesn't look to good and I think is ready for a plunge.

    Here's another one:

    http://www.stockcharts.com/c-sc/sc?s=WAG&p=D&b=5&g=0&i=t78461860805&r=5093

    (you have to copy-paste it)
    I bought the stock on October 16th, there's already an imminent golden cross between 5 and 20d MA (hasn't happened yet but looking at the chart at that time, the probability is good). MACD is on negative area and is heading up, so does CCI and stochastic.

    Now it's 19th of october and the bull is loosing its power.

    All help is very much appreciated
     
    #14     Oct 20, 2006
  5. ozzie123

    ozzie123

    If you can't open the link, I attach the image below.
     
    • aci.png
      File size:
      21.9 KB
      Views:
      227
    #15     Oct 20, 2006
  6. ozzie123

    ozzie123

    another one
     
    • wag.png
      File size:
      21.1 KB
      Views:
      165
    #16     Oct 20, 2006
  7. ozzie,

    A few suggestions, if I might.

    1. Have you ever backtested these strategies? I think you will find they are at best random.

    2. MACD, Stochastics, CCI, really any momentum indicator or oscillator, are all measuring basically the same thing. Using more than one of them will just add confusion.

    3. The most powerful signal in technical analysis is the divergence. Learn to use it if you are going to use these indicators. Simple cross over methods will whipsaw you to death. (I have poted many times here on how to use divergences, just use the search function.)

    4. I am not a big fan of MA crossover systems for stocks, but they will work on trending issues. Your approach to using htem is all wrong however. A 5-20 MA crossover, or any MA crossover approach for that matter, is a long term method. The fact that the stock "looks weak" three days later means nothing. You need to cme up with an exit signal to take you out of the trade. The whole idea of trend following, whichis what this apporach is, is to sit tight and let the stock tell you what it is doing.

    5. You need to understand that any trend following system is a home run type strategy. Typically you will have only about 30% winning trades at best, but hopefully some of those will b ehuge winners that pay for all the losers.

    6. As for your trades, ACI was in a long downtrend. It produced a divergence on the double bottom and you might have justified a short term buy there. Waiting for the mA cross put you right up to retracement resistance from the previous downtrend. All the people who bought higher and held through the sell off telling themselves they would sell when "it got back to even" are beginning to bail out now, so a strong up move is unlikely.

    7. WAG was also in a steady downtrend. I can't see any technical reason to buy now or anytime in the near future.

    8. If you want to buy on MA crosses, you might want to look into Linda Raschke's "holy Grail" method, which requires a strong uptrend, ie ADX>30, and a pullback to below the 9 day MA and a recross to the upside. It's a lot easier for a stock that has pulled back from an uptrend to go higher than one that has been in a long selloff.
     
    #17     Oct 20, 2006
  8. You bought ACI in a clear downtrend... what is your motivation to buy ACI when the trend is clearly down?

    Another question, have you tested that particular method of entry, even manually?
     
    #18     Oct 20, 2006
  9. Once again you bought a falling stock... you may experience a tough time trying to buy when something is falling. Are you sure your entry signal is signaling a change of trend?
     
    #19     Oct 20, 2006
  10. well I can't share systems but I can point you in general direction.

    that AAAinthebeltway guy on page 4 or something gives you good advice when it comes to divergences of these classic indicators

    however I doubt he himself is using just that, you need to take a stock chart, and consider some really whacko ideas, (I am not joking)

    to look for edge, relax, make sure you have couple years in your life and start combining indicators and changing their
    parameters as you play with chart of some stock

    I'll give you big hint, (and probably hate myself later cause no one ever helped me)

    combine support and resistance studies of long term short term and intraday BINGO :eek:

    okay enough said, I am gonna go download some porn, haven't looked at shemails lately :D :D

    hey shut up, you all do it :D
     
    #20     Oct 20, 2006