Yang on Moving Averages

Discussion in 'Technical Analysis' started by Avalanche, Apr 24, 2003.

  1.  
    #21     Apr 28, 2003
  2. I mainly trade the sp and nd. Most of my systems only have two consequential parameters but the one I was referring to only has one if you simply use the entry to reverse. TradingSystemDesign.com under 'systems' if you want it.

    How do you structure your option writing methodology?

    Good trading.
     
    #22     Apr 28, 2003
  3. 1 word: drawdown.
     
    #23     Apr 28, 2003
  4.  
    #24     Apr 28, 2003
  5. I just checked the site and it is up and running, please try it again.

    Interesting methodology. Looks like you are only selling one leg and have a premium stop. Looks viable, good for you. I do quite a few strangles but use underlying price for the exit.
     
    #25     Apr 28, 2003
  6. Yes I sell only one leg at the time but sometimes I have both legs on.
    I have tried stop loss exit when option went into money, but it was more costly and i did not usually get chance to sell higher strike again in the same contract.
    Walter
     
    #26     Apr 29, 2003
  7. hwaxen

    hwaxen

    Another way to look at moving averages is from a post I did several weeks ago and that is comparing the time spent above to the time spent below a significant moving average. A significant moving average would be a 50 or 200 day.

    Since the time involved here are either 50 or 200 day averages this is a longer term tool.

    As the average time above a significant moving average outpaces the average time spent below, this points to a change in the longer term trend.

    We have seen this recently in the 50 day average as the average time below the 50 was dropping while the average time above the 50 was flat to increasing.
     
    #27     May 3, 2003
  8. man

    man

    hwaxen
    I like the basic idea. though I guess it suffers the problem of being late in the trend. did you do testing on this?


    peace
     
    #28     May 5, 2003
  9. SQRT((261*(2002-1970))-1)*1*100*3 = +/- 27415 %

    this is just a very rough order estimation of performance for buying or selling randomly between 1970 and 2002 that is to say a person could make a POSITIVE performance of an order of 27415% and an other a <FONT COLOR=RED>NEGATIVE</FONT> performance of <FONT COLOR=RED>- 27415%</FONT> and not be more or less competant than the first one whose people could think he has a financial genious touch whereas it could be just by chance :D. And since I used an understimated law by taking a random normal law this order should be much greater in reality and reach 50000 or 100000% so that the numbers below are not significant statistically and that's what economists have already said :).

    This is a classical flaw in Stock Market similar to the gambler's flaw in casino gambling. The more frequent the trading and the more expanded the total time period the more big the cumulative percentage. As an other consequence and for exactly the same reason it is also a flaw comparing 1 or 2 days moving average results with 200 days moving average because the law of variation is not the same and is more volatile by definition for short than long MA.

    This is kind of myth like the martingale for gamblers keep people abreast of finding the holy grail for making eally rich without any effort ... and real edge :D. Of course counting on chance it's always possible but it is also possible to get ruined as rapidly : -50000% could be as probable as -50000% cumulating all the years.

    The vendors of trading systems use the same kind of trick for showing superformance. In fact many if not all trading system testers are flawed with that kind of presentation tool when it is the main if not single possibility of visualising performance. This is only "apparent" performance not true that is to say comparable performance.

     
    #29     May 24, 2003
  10. Many people say that this is due to psychology. It is rather due to lack of applying knowledge. For example when I began as a quality engineer there was a dispute between two chiefs one was quality engineer in a plant and the other quality chief at the headquater. The first affirmed that he has improved the quality because statistically he said that all the products were in statistical controled zone and the other said that obviously the quality was bad and get too many complaints from clients and above all the CEO was very angry and howling like a beast (I once heard him myself :D) that he was surprised that statistics was so good :D. I was invited to give an arbitrage by the superchief and unhappily for the first engineer he has made a flaw when estimating his statistical zone since he overestimated by a factor of 250% :D. He was even threating the other man of being incompetent whereas although he was an engineer it was him that showed incompetency. He was mocking the other and in fact he wanted to get him sacked and get his post with higher salary :D. it was him who got ridiculous at the end and didn't get the promotion he wanted to stealth to an other.

     
    #30     May 24, 2003