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88 posts
msg #112117
Ignore push5280
3/8/2013 7:53:44 PM

I'm looking for everyone's thoughts on what is the best / most accurate trend following indicator and the momentum indicator and if you could share why it would help.

Thanks again for your thoughts

124 posts
msg #112123
Ignore papagatorga
3/9/2013 11:57:05 AM

push - there are much better traders on here than me and hopefully some of them will respond. But my favorite is the Directional Movement Index. The red and green DI lines identify the trend for me, and the black ADX line indicates the strength of the trend. You can read all about it in the Indicators and Measures link. I use it in conjunction with MACD to help identify entry points and watch it for signs of weakness. It has worked the best for me. But as I say there are MUCH more knowledgeable traders on here than me. They have helped me in the past so I just wanted to help you if I could.

805 posts
msg #112127
Ignore marine2
3/9/2013 4:37:42 PM

For myself, I keep it simple and aim for the general trend for the SPY (S & P 500) index. If the SPY shows an uptrend has started you now have the green light to play other stocks following these 2 trend filters.

The filters I mention below are:

and price is above 5
and weekly macd(12,26,9)fast line is crossing above weekly macd(12,26,9)slow line at close

This filter will show a trend to the downside now beginning to make its way upward. The pivot point is the cross over action between the weekly Macd(12,26,9)fast line crossing above the slow line. Note, make sure the downside part of the weekly Macd trend has been long enough to produce real upside price action for a longer sustained uptrend.

The second filter to use if you want to be a hair early before the weekly Macd (12,26,9) trend upward begins, is to use:

and weekly slow stochastic(5,5) %K is crossing above weekly slow stochastic(5,5) %D at close
and weekly slow stochastic(5,5) %K is below 65 at close
and draw weekly macd(12,26,9)

Do your backtests against these two filters with a previous 3 month trend to give you an accurate feel for what those 2 filters will do against a positive stock action environment. I use the 06/01/2012 to 10/01/2012 time frame. The results will be pretty nice giving you assurance those two filters will work as nice upward trend filters.

Remember, there must be enough downside trend to create a good upside trend.

To exit each filter you:
Exit the weekly Macd trend filter you: exit when the weekly Macd(12,26,9)fast line looks like it has run out of gas and is begiinning to begin crossing down below the weekly Macd(12,26,9)slow line. Try and not leave the trend too early.

Exit the weekly slow stochastic(5,5) having two options
Option 1 (exiting early): when you know the weekly slow stochastic(5,5) %K has now risen high enough and begins to cross below the weekly slow stochastic(5,5) %D
Option 2 (exiting later): when you see the weekly Macd(12,26,9) has had a nice run upward and your weekly slow stochastic(5,5) %K has risen to an upper level and looks like it is beginning to decelerate and cross below the slow stochastic(5,5) %D.

Or you can exit using at a specific "profit stop" % (ie 3%, or 4%, etc). Note: the higher you go % wise the more "open" accts you will see (meaning stocks still out there trying to hit your high profit stop). So, don't be too greedy.

I use these two filters, I like them, they work for me. But, everyone has their favorites these two are mine. I hope you try them out and see for yourself if they are made for you. Goodluck and happy investing!

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