RTC vs DMA

[jkeech]

Hi,

I understood the AGet suggestion is to use the 6/4 DMA for breakout entries, unless the RTC has a Pearson's R in excess of 93 (or some use >95).

Sometimes though, the 6/4 DMA would provide an earlier entry (by far) than waiting for the RTC (in an example I had recently which was a very close match to prices, with a Pearson's R of 97). In that situation, do you just use the indicator which provides the earlier entry (which in this case was the 6/4 DMA), or do you tend to use the RTC (if Pearson's R is >93), even if this provides a much later entry?

[MR]

Hi John,

In the seminar tapes Tom Joseph is quoted as saying use which ever provides the best entry for that Type 1 or 2. I was under the impression you would like a good Pearson rating of 91 or greater, not that it matters. You are correct, we do prefer a higher Pearson as that indicates usually a better breakout fit.

It is still and always has been a judgement call of the user trying to take the trade with technique to use.

Another idea mentioned in the seminar videos if interested in a quicker trigger, to try a cross-reference look at a lower level and use those crossovers of those RTC or 64 DMA Channels for a quicker trigger. Again, it still is a user defined judgement call which to use.

Finally, I have always, personally, preferred a combined technique where both are used. One may trigger, but until both are triggered I am always still a little defensive. When both confirm I would tend to start moving up a trailing stop.

[jkeech]

Thanks Marc,

so you're saying that to enter a type 1 or type 2 trade, you'd wait til BOTH the 6/4 DMA and RTC were broken (either on your regular, or shorter time frame)?

[MR]

Hi again John,

so you're saying that to enter a type 1 or type 2 trade, you'd wait til BOTH the 6/4 DMA and RTC were broken (either on your regular, or shorter time frame)? ...Originally posted by jkeech

No, John, that is not what I would do. If that is what you think I said, I apologize, that is not what I meant.

I would still recommend to anyone out there take Tom's Joseph's advice, as defined in the seminar video tapes. Tom says to take one or the other technique, whichever is best for that setup.

In addition, He teaches it is possible, if you wish, to cross-reference to a lower lever and possibly get a quicker crossover rather than wait, if you wish.

My previous statement was simply my own personal opinion to explain another idea that I find attractive when I am monitoring for a trade setup.

By nature I am an extremely cautious and overly careful person. I, therefore-- based on my personality and personal preference-- prefer a method of taking the best RTC OR 6/4 DMA Channels breakout just as defined in seminar video tapes, in the AGET Technical section, in the "Mechanical Trading System" book. The only difference is I still watch for another confirmation of the other breakout technique to add another dimension to that setup. It is my observation that when both are broken, you can use the lower DMA to help with a trailing stop strategy of some kind. It is simply a way I would like to use for managing a trade setup after being in the trade. When both are broken, I start to breath just a little more freely, that maybe, just maybe that trade is going to work out.

It is my personal opinion that when both are broken, odds begin to improve in our favor more follow-through should happen for that setup. It makes me more confident. It makes me want to then trigger a trailing stop up a little bit to start lock in a little profit, or to breakeven the trade idea sooner.

I hope this helps better clarify my previous comments. -marc

[jkeech]

Thanks Marc,

By the way, in my technical section of the AGET manual I do not see specifically the 'Mechanical Trading System' book. Which page/s are you referring to in the technical section?

Kind regards, John.

[MR]

.

Originally posted by jkeech ... in my technical section of the AGET manual
I do not see specifically the 'Mechanical Trading System' book.
Which page/s are you referring to in the technical section?

Hi John,

It isn't in the Technical Section, it is a separate publication...
Click here to access the Mechanical Trading System PDF file.

Let me know you can get this link. Take care and hope
you have a very good week! - marc

[jkeech]

Ah, got that now - thanks.

I note it says 7 periods displaced by 5 though. I presume the updated / more finely tuned method is to now use 6 and 4 ?

[MR]

Correct John. The technique has evolved over time. The 7/5 DMA was one technique. The 6/4 DMA Channelling technique better filters out false breakouts.

[MR]

Overview of DMA

Overview of 6/4 DMA

Question: “In some charts posted I see the 6/4 DMA mentioned. Can you explain this one and how to use it?”

Answer: DMA is abbreviation for Displaced Moving Average.
(More details to come in the following posts)

[MR]

Moving Average Review

A moving average is an indicator that shows the average value of an issue over a specific time period.

For example, a six period moving average would take the sum value (often the closing price of the bar) over six days, compute the sum, and divide by six. The longer the length of the moving average, the slower it reacts to the market and, conversely, the shorter the moving average, the more sensitive the moving average will be to a price change.

[MR]

Some ways moving averages can be used are to “smooth-out” price fluctuations and help emphasis the direction of a trend, if even a minor trend.

For example, if a price is above a moving average, speculators and investors tend to buy; if a price is below a moving average, speculators and investors tend to sell....

[MR]

Moving averages can be displaced, or offset by a given number of bars-- this is called a displaced moving average, or DMA. It is meaningful when the current price crosses the DMA....

[MR]

Early in AGET history the crossing of one DMA line was used as a signal for a trade entry. Over the years we researched for a better way to reduce premature entries or exits of trades.

There is even an optimization routine in the AGET Moving Average menu which creates new variations of DMA settings based on the data and pivot swings provided. (see the AGET Moving Average default menu)

All are good methods or techniques, but the 6/4 DMA channeling technique has become the best moving average related standard to date.

[MR]

6/4 Displaced Moving Average

The “6/4 Moving Average” is the same thing as the “6/4 DMA Channeling” technique, which is referred to in the Advanced GET manual, seminar video tapes, and demo disk. It combines two moving averages, which have slight variations, and says that trend reversal is not complete unless both the moving averages are crossed.

[MR]

The 6/4 DMA crossing both lines identify those issues that are higher probability candidates for a trend reversal. The 6/4 DMA Channeling technique should be used with a Type 1 or 2 Buy or Sell setup to help confirm that trend reversal. Here is an example of this crossover confirmation.....