Larry,
I've been backtesting a 26w EMA system as you know. I have a couple of questions.
1.Do you know of anyway on bigcharts to get both 26w EMA and the 200d sma on a chart at the same time?
2. When I stop out of a short 20% below the 200d sma, when do you suggest reentering the trade? 10% below, 5% below, an obvious downturn in price, something different?
3. I've been testing weekly because I'm using a weekly average, would it be valid to use a weekly sma to substitute for the 200d average?
Thanks for all your help in tweaking this system.
H
1.Do you know of anyway on bigcharts to get both 26w EMA and the 200d sma on a chart at the same time?
No, I don’t think you can do that with bigcharts.
2. When I stop out of a short 20% below the 200d sma, when do you suggest reentering the trade? 10% below, 5% below, an obvious downturn in price, something different?
You don’t want to be “stopped out” when it gets 20% below the 200 day sma. You just want to go ahead and take profits at that point. Maybe that’s what you meant. I’ve only tested getting back in when it gets within 5% of the moving average. It works well but quite frankly I haven’t done a lot of experimenting with re-entry on that one. We don’t have a lot of history to go by. It just doesn’t get oversold enough to get 20% below the average very often.
3. I've been testing weekly because I'm using a weekly average, would it be valid to use a weekly sma to substitute for the 200d average?
Yes. The 40 week sma is virtually the same as the 200 day moving average. However, with the 20% rule I prefer the 200 day sma because if it gets that oversold I want out right then. It may not be there for long and I don’t want to take a chance of it getting 20% below the 200 day but not 20% below the 40 week. Also, in the original study that I read the rule used the 200 day sma rather than the weekly average.