Hi jonr..sometimes I think we try to make finding a trend, and staying on it, more complicated than it needs to be...part of the human quest for something better, I guess.
That's part of the genius of Ken Wong's system. He has deliberately intended to develop a simple system with a minimum of indicators. I think he has done that very well..the 4ma plus the Trix is a good system.
I have looked at both the simple moving average, and expotential moving average...it is a matter of personal preference...I sometimes look at both on the same chart at times of uncertainty of a trend change. The old bugaboo that all of us constantly face, when we try to follow trends, are whipsaws...and also losses (slippage) when an abrupt trend change occurs. I would be interested in any ideas proposed by anyone regarding those two items.
1. Slippage on abrupt trend changes (assuming one is using a 5ma indicator):
A. One approach is to use a 2 day ma...and use the rollover of that faster ma to lighten or even reverse the position.
B. A second approach that I can see in a look-back, but haven't verified that I can do going forward, is to use reversal candlesticks as an indicator that a short-term top or bottom has been reached. The closing sticks of the NDX on Tues and Wed of this week showed back to back sticks with large upper wicks.....both were ambivalent, imo...it would have been better if the body had showed no lower wick...as it was, they seemed to hint at a possible short-term top.
2. Whipsaws: A 5ma is prone to them, of course...and usually to the detriment of the account. I use a longer moving average to stay with the original trend of the 5ma a little longer..say a 20 or 25 day moving average. In other words, say in a downtrend, you one day get a rather large white candle, and the 5ma points slightly upward at just the end of that day....I usually look at the momentum indicators, and the longer moving average.....if the downtrend seems to be a rather strong one, and still intact, then I ignore the "one day counter candle" in the expectation that the trend will continue downwards.
Any ideas of how to best handle the slippage and whipsaw issues are welcomed. thanks.
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