Here's a rough draft of what's coming, posted on another board last week. Very rough. Will clarify, simplify, and elaborate with charts soon. I'm needing a break. Keep saying that. ;)
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I use the 10, 20, 50, 75, 100, 150, and 200-day sma's with a focus on the first 3 and the last, the 200. Any variations--doesn't matter much to me. I can use any and see essentially the same thing. Just want MA's roughly equivalent to those specified above.
The price relative to these lines is super-important. Above the line--price likely to trend higher. Below the line--price likely to trend lower. This gives us our trading/investing timeframe. For example, a long-term investor can focus on the 50-day and 200-day ma's and be quite happy.
The larger the number, the more significant the information concerning the longer-term health of the market. A price above 50-day is a healthy price. Below 50, unhealthy, likely to decline. Ditto the 200-day.
The 20-day is the jugular vein of the market. This is where the life force of the market shows up. This is where the 5-week cycle happens. Every larger cycle consists of an endless string of 5-week cycles. So if all you did is look for every 5-week cycle and every double of the 5-week cycle (the 10-week), you will do great.
The significant information around the 20-day ma? The price above the line--healthy, likely to trend up. Price below the line, weakening, likely to decline. Also the angle of the line is SUPER-important. If the line has been descending, a flattening line and turning up is healthy, likely to trend higher. A line pointing up is healthy. A line that has been trending up and is now flattening? It's weakening, may trend down. If the line is pointing strongly up and price drops below the line a bit--high probability of a headfake or overshoot--likely to trend higher unless the 20-day flattens and threatens to roll.
The rolling process of the 20-day ma (before a price reverses and heads down) when the line has been steeply up usually takes 5 to 10 trading days including the back-test. The back-test is where the market becomes a shorting market--if the backtest fails that is. Common trader error is to short a market where price is trending above the 20-day ma and the 20-ma is pointing up. It is possible to short a situation like this but you're going against the flow of the market--so you better be clear about what you're doing. More money is lost this way than any other--fighting the market flow.
Regarding the 10-day ma: Ditto all the above except that the 10-day is an early warning system.
Trading secret: No price can trend higher unless it is above the 10-day ma and stays there. It can of course dip below and then weave back up, but unless it stays above the line, the price will not trend higher. Ditto the 20-day ma. Price must be above for price to trend higher. Price must be below the 20-day to trend lower. So to have a shorting market you want to see the 20-day ma rolling over and preparing to head down with price below the 20-day ma.
When price is above both the 10-day and the 20-day, it is a higher-probability trade. When price is above the 10-day, 20-day, and 50-day, it's an even higher probability trade. Buy as close to the cross above these lines as possible for the highest probabilities. Also, you want to see all these lines turning up or pointing up. Lately in the S&P, the 50-day has been flat. Now it's turning up. Both are a sign of a healthy price. Doesn't mean price can't descend to backtest that line.
Much of this is purely conventional TA. Purely. Conventional. But for some reason, very, very few are hitting 70+ percent stats. So before you come making fun of this very conventional stuff, bring your stats and show us how you achieve an accuracy rate above 70 percent.
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What makes my method unconventional is the way I bring every *detail* into an integrated whole. NOTHING is overlooked. EVERYTHING is included except my bias and my mind's wish to believe a crash is around the next corner--unless I see it in the configuration. I focus on the particular configuration of the lines, the angle of the lines, and the relation of price to the lines.
I especially look at the lines with NO PRICE or perhaps with just a dot. I want to see the FLOW of the ma's without the daily noise of price. I want to see the daily candlesticks too-but only after I've grasped the market dynamics through an ma analysis. Where is the price flowing now? It may change in the next 5 minutes. Where is it now? Trade the high-probability NOWs. Not the MAYBEs. "Maybe we crash. Maybe this is the top." Forget about it. What is happening now and where is the price going with the highest probability based on FLOW? Being able to see where the price is going to be is essential to skillful trading. It's about finding the high-probability trade.
Have you noticed the market is an ever-changing kaleidoscope where every time you learn something, it doesn't seem to work in the next phase of the market? The answer really does lie in what I'm expressing here. It is the ever-changing, UNIQUE combination of moving averages that reveal the nature of the current market and what it's likely to do next. I won't say this is easy to learn. It will take a year or two of practice so you have confidence with it, but it works and it works well. Learn to see, taste, feel the unique combination of the ma's and what they are telling us about RIGHT NOW. Sometimes the market is flat and tangled and sometimes it's trending steeply down and sometimes it's putting in an up-trending whipsawing top like now.
This last paragraph is HUGE and worthy of a separate course. It's my secret. If you start seeing what I'm seeing, your accuracy rate will go way up. You will have far more fun. I'm sure someone else knows exactly what I'm saying. I'm sharing because this is how I learn, and I want to see the ridiculous trades stop. They cause me pain. Don't know why but I hurt when I see crazy trades.
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About knowing and not-knowing
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I have a built-in NOT-KNOWING METER scaled 0 to 100. If it's at 50 or higher regarding any particular trade, I don't trade. There is absolutely nothing wrong with not knowing. I love not knowing. It's keeps my money safe. I keep not knowing until a chart gets a certain glow around it. All the lines start to look healthy. The configuration becomes structured and likely to trend higher. NOT THAT IT WILL DEFINITELY TREND HIGHER. My Not-Knowing meter might be reading 30 or even 40. So I still don't know. But the chart looks healthy and strong and ready to rock. I buy the structure and hold the structure. If the price falls below the 10 ma, it's a warning and a cross below the 20 is probably a violation. So I want to protect my entry position as if it were a queen or king in a chess game.
Basic stuff. Not wanting to offend anyone who is more advanced than I am. But I'm starting with the foundations. Getting us on the same page.
Strip price to the barest data that tells us BUY, HOLD, or SELL.
