[brownsfan019]

Every so often you can find a thread over at elitetrader that has some substance. I think this is one.

The technique is referred to as the SPM - simple profitable method - and having taken a closer look at it, there is some merit throughout it. I posted the link here for anyone that doesn't visit ET or maybe missed it as most threads there are rubbish.

This thread is where a good chunk started before being closed.

Take a look and you'll find there are some helpful folks there that will answer questions, post screenshots, etc. Again, something you don't find often at ET. There's a chance it could eventually get closed or deleted since these things have a habit of railroading off into another direction. Stop by now before it's too late.

[steve46]

As you know its a simple MACD crossover. So when volatility is up, the moves will last long enough for the trader to make some money. When volatility dries up a bit, you are in the trade too late because of the lag. Even with good vol, you will see problems on the entry because of pullbacks....It needs a filter to work and I haven't seen anyone get THAT part of it right. Notice no one posts a blotter...

For futures trading, general rule of thumb is don't trade in the middle (I have cleaned that saying up a bit for the audience). This is why I like MP...you trade from the outside in...you either get on and keep the position for a big winner or you get stopped out. Its pretty clean. Unfortunately not many willing to spend the time to see WHERE the real value is on that system (which is trading off the IB by the way).

But hey, maybe one or more of you can give it the old smoke test and trade it (on a sim or paper for instance). For those using Esignal, watch how the MACD oscillates as the signal line touches the zero line....You may THINK you have a signal and then boom it reverses on you and takes you out. Your choices are to A.) anticipate the cross or B.) wait for a close where the signal is "through the zero line". (again you will be late to the party). Ain't no free lunches in this business.

Good luck
Steve

[brownsfan019]

Originally Posted by steve46 »

As you know its a simple MACD crossover. So when volatility is up, the moves will last long enough for the trader to make some money. When volatility dries up a bit, you are in the trade too late because of the lag. Even with good vol, you will see problems on the entry because of pullbacks....It needs a filter to work and I haven't seen anyone get THAT part of it right. Notice no one posts a blotter...

That's not true at all. Blotters throughout both threads that I posted Steve. Take a look before commenting.

Here's one that was posted today - http://www.elitetrader.com/vb/attach...postid=2148719

Speaking of blotters adding to validity of a system, when's the last time you posted one in your thread? Just curious.

As for the validity of this, it is NOT MACD crossover only system. Again, you'll have to take the time to read the posts before commenting.

For futures trading, general rule of thumb is don't trade in the middle (I have cleaned that saying up a bit for the audience). This is why I like MP...you trade from the outside in...you either get on and keep the position for a big winner or you get stopped out. Its pretty clean. Unfortunately not many willing to spend the time to see WHERE the real value is on that system (which is trading off the IB by the way).

But hey, maybe one or more of you can give it the old smoke test and trade it (on a sim or paper for instance). For those using Esignal, watch how the MACD oscillates as the signal line touches the zero line....You may THINK you have a signal and then boom it reverses on you and takes you out. Your choices are to A.) anticipate the cross or B.) wait for a close where the signal is "through the zero line". (again you will be late to the party). Ain't no free lunches in this business.

Good luck
Steve

I'll defend anyone's right to post ideas on a thread, just as I did on yours, but all I ask in return is that you read what you are commenting on BEFORE criticizing.

As the threads I linked to show, main chart is a 2 minute chart. Again, if you had done any looking into it before posting, you would actually see that the 2 min is quite nimble and there are few 'too late' to the party trades. Of course there are some losers. Most systems have losers although I'm not sure we've ever seen one in your thread. Regardless, the SPM is a good idea or a base to work from. It's not perfect in and of itself, does require some work by the end user.

[steve46]

Well first of all, my own little thread is called "Ideas for struggling traders"...

So before you get upset, take a moment to read the title...

I am not suggesting that people trade any of the many ideas I present as complete systems. Instead I am suggesting that they use them as the basis for their own...

Since I am not trying to prove anything I don't post a blotter.


Steve

[brownsfan019]

Ok, just making sure that you can discount a strategy based on lack of blotters (when clearly there is many there) but yet you do not do that... Any particular reason why we've never seen one blotter in all the ideas presented there? Since you brought this up, I think it's interesting that you have not posted a blotter once, unless I missed it...

Again, you are totally wrong in your impression of the SPM. CLEARLY you have not taken any time to read the thread, so please refrain from commenting. Once you take the time to read it, then we can chat. Till then, your comments are wrong and incorrect and will be moderated appropriately.

So please stop posting incorrect information. I would like any trader reading the thread to get views from a person that actually has taken the time to read the thread to begin with.

[steve46]

I did see the blotters on the thread you posted. Yes you are correct.

I will however be deciding for myself what and where to post

Thanks for your comment

Steve

[brownsfan019]

No problem Steve. And when you are completely wrong, I'll be sure to let you know.

[steve46]

Alright then, lets continue with my original opinion.

First one should know that this comment relates generally to the use of MACD in its basic form (12, 26, 9) where the trader takes signals long or short when the "signal line" passes through the "zero line".

First the obvious, the signals lag...if one simply looks at the price action you see that the signal occurs after a significant portion of the move has occurred. The implication is that with big volatility there is more "sustained movement" to come, but if volatility dries up, that movement is likely to be over (or almost over) by the time you get filled. This last week would have been about perfect for a MACD system.

Second, the entry seems easy, but when you try it in real time, you see that it is not "cut & dried" for instance, as the signal line approaches the zero line it oscillates responding to the oscillation of price. As a result the signal line can closely approach the zero line and then get rejected. If you anticipated the move through and got long or short, you have a position on and you are starting on the wrong side (you better hope your stoploss is sized correctly). If you are right, well you are in a position and you have what I would characterize as "minimal trend" on your side (which is half of what you need for a successful outcome).

Third, and this was not part of my original comment. This indicator has already been backtested by numerous third parties. Using standard settings (12,26,9) MACD does not test particularly well when used without filters.

I think MACD can be adapted to provide a nice system. Here are some ideas that a trader could use to improve a basic MACD system.

1. You can vary the time frame on the chart. I suggest traders start with 1 minute and then step up 1 minute at a time taking note of the way that the signals "act" and as importantly, look at the how easy or difficult it is to visualize the entry. Do you have enough time to act, or do you feel hurried when the signal line approaches the zero line? How many false signals do you get? For newbies, I suggest you will find 1 minute charts hard to trade. One the other side, with 5 minute charts (especially with this volatility) you will see that you will need to set your stops at least 2.75 to 3 points wide. So you will want to find a compromise that works, giving you enough time to evaluate the signal without requiring too big a stoploss. Look at the length of the swings in the market you are trading. If 10 point swings are common you want to have a stoploss no greater than 2 to 2.5 points.

2. You can filter your signals. There are two primary elements of the MACD that tell the trader just how strong the signal is...one is the width (the distance between the signal line and the MACD line) between the lines, another is the slope or angle of the line as it passes through the zero line. The greater the distance between the signal line and the MACD line, the stronger the signal. The more acute the angle as the signal line passes through the zero line, the stronger the signal. Finally the MACD is composed of two lines for a reason. The "signal line" indicates the amount of trendiness, the "MACD" line indicates the amount of momentum. So to get the best odds of success, you want the signal line to pass through the zero line as close to vertical as possible and you want to see significant space between the signal line and the MACD line as it penetrates the zero line.

My comments about confluence of multiple signals applies here as well. What should work well is using a relatively long EMA and taking signals when they correspond to a move up or down through the EMA. Pivots would work as well as marking out the opening range (I can talk more about that if there is continued interest).

So my best advice is the same no matter what system you are evaluating. Look closely at the signal type, and the way it works. If like the MACD, the signal is comprised of both trend and momentum elements, you want to maximize both components. You want to minimize the amount of discretion you use and you want to have a suitable stop loss in place. You can do this by adding a filter (or filters) and/or taking signals based on "confluence".

Steve