Comments on: PRO Membership

By: ThinkScripter

ThinkScripter — Thu, 13 May 2010 18:35:52 +0000

All good info but better posted in the forum instead of the comments here….
-Eric

By: iTrade

iTrade — Thu, 13 May 2010 04:06:27 +0000

For lagging entry signals, you only go long when the market closes above a positive 5-day moving average and pretty close to it, and you only go short when the market closes below a negative 5-day moving average and pretty close to it. Otherwise, you just DON’T trade! When you see the market oscillating above and below the 5-day moving average, you automatically conclude that this is a confused market, which offers no trading opportunities. Please take a look at the daily NDX candlestick chart from July 5 to July 16 2002, and note how the market oscillated three times above and below the 5-day moving. If you had traded based on those signals, you would have lost money in every single trade.

By: iTrade

iTrade — Thu, 13 May 2010 04:03:54 +0000

So? Where are our targets once we enter a trade? Simple! First, we need to plot TWO more moving averages: the 20-day and the 40-day moving averages. Do we use these to generate more buy/sell signals? NO! We rather use them to find targets and take profit! Therefore, whenever you enter a trade, the 20-day moving average becomes your primary target, i.e. whenever the market hits the 20-day moving average, you gotta square a portion of your trade, ideally a third. The fact that we’re using moving averages as target levels destroys a golden rule in TA, which is that targets are placed at fixed levels. Forget about that! Targets change, and they do so on daily basis. So there are no fixed levels, and there is no way of knowing in advance where you’ll be closing your trade. You gotta monitor the 20-day moving average on a daily basis in order to leave the proper order in the market.

Once the market hits the 20-day moving average and a third of the position is squared, two scenarios are possible. First, the market might reverse and break above/below the 5-day moving average, in which case you’d have to close the whole trade, and depending on the direction of the 5-day moving average, might have to reverse the trade. Second, the market might proceed higher/lower towards the 40-day moving average, in which case you’d have to square another portion of the trade, ideally another third.

Once the market hits the 40-day moving average and another third of the position is squared, two scenarios and foreseen. First, the market might reverse and break above/below the 5-day moving average, in which case you’d have to close the whole trade, and depending on the direction of the 5-day moving average, might have to reverse the trade. Second, the market might proceed above/below the 40-day moving average, in which case you’d wait until it reverses course and breaks above/below the 5-day moving average to close the whole trade, and once again depending on the direction of the 5-day moving average, might have to reverse.

But what if you go long, and the market is already above all three moving averages? And what if you go short and the market is already below all three moving averages? In this case, you simply ignore the 20-day and 40-day moving averages, and base the whole trade on the 5-day moving as well see in the following examples.

By: iTrade

iTrade — Thu, 13 May 2010 04:00:54 +0000

3) If a Lagging Buy signal is generated, the stop should always be trailed below the 5-day moving average regardless of its direction.
4) If a Lagging Sell signal is generated, the stop should always be trailed above the 5-day moving average regardless of its direction.

Now two VERY important things :
1) The market has to CLOSE above/below the 5-day moving average in order to validate your stop. Otherwise, intra-day breaks should be DISREGARDED.
2) The market has to break and close decisively above/below the 5-day moving average in order to validate your stop. A slight break above/below the 5-day moving average should also be disregarded. Therefore, please do not automate your stops, and please wait till the very last second of the session before validating your stop. As for the penetration level, please judge that with your eyes and don’t base it on any percentages. Always use 3-month charts, you can use shorter periods, but no longer than 3 month charts in order to clearly view any cross-overs and degree of penetration.

By: iTrade

iTrade — Thu, 13 May 2010 03:59:51 +0000

Lesson 4: The Entry – Lagging Method

It’s pretty straight forward, and is applied in the following conditions :

1) The market crosses above the 5-day moving average, the 5-day moving average is pointing up, you enter long. The only exception is if the market crosses way above the 5-day moving average, in which case, you’d wait for the first pull-back as we’ll see in case 3.
2) The market crosses below the 5-day moving average, the 5-day moving average is pointing down, you enter short. The only exception is when the market crosses way below the 5-day moving average, in which case you wait for the first reaction as we’ll see in case 4.
3) The 5-day moving average is pointing up, the market is already above the 5-day moving average but is pulling back towards it. As the market closes near the 5-day moving average (but doesn’t cross below it), you enter long.
4) The 5-day moving average is pointing down, the market is already below the 5-day moving average but is picking up towards it. As the market closes near the 5-day moving average (but doesn’t cross above it), you enter short.