KookeBoy Interesting post re 200 MA, picking bottoms etc & as I am trying to finalise my trading plan (not a bad thing to do after 20 years in the market LOL, only the last 12 months or so interested in TA)
So let me share my thoughts:
When I first embraced TA I would have agreed with you wholeheartedly and the use of a reasonably LT MA (say200) to ensure there is an u/t seems so simple eg. If 200MA moving up and price above then its trending up (obviously) so buy and vica versa. What I have discovered is that this theory actually works fine in major long term trends (much of the 90s and naughties) but the market of last 2 years is much choppier.
Furthermore as I have posted on a cuppla other occasions even though long termers (another word for old guys) liked to think we were very clever through those long u/ts; fact is if you were in the market you were making $$$$$s. You did not need a 200 MA to make money from boring old WOW going from $4 to $30 or CBA floating at $5 (I think) and going to $60++ etc.
Sure the 200ma or any other indicator would have confirmed the u/t but $$$$ in the market was all you really needed.
IMO the GFC changed all that and market conditions have changed to a much more volatile and less predictable future; IMO they are likely to stay that way for the foreseeable future.
So lets check what 200MA was able to do for a random share; eg. market bell weather BHP
Refer chart below with my notes on it. I will add one last point: regarding the 08 down turn and the 09 rally. Using the 200ma cross for a sell/short signal in 09 would have resulted in a short at about $35 and close out on way back up in 09 of about $31, about 12% out of the down turn of over 60% ($50 down to $20).
Likewise on UT using 200MA would have given a potential gain of approx 25% out of an uptick of greater than 100% eg $20 to $45. Soooo even in this choppy market there is exceptional returns to be made IF one can gauge turning points. Not convinced 200MA alone is best way to collect gains.
So just 12months ago I did not know a macd from a stochastic and I thought a pitchfork was for digging in a garden LOL as for Fibonacci nos I thought they were for the fairies. I am now convinced that these & other simple TA tools allow one to not necessarily just predict tops and bottom and certainly should not be used to predict the future BUT they DO increase the probability that certain future performance will happen based on the past.
Was going to insert some chart examples here but cannot do it as well as the masters and noticed one of them Totterdell91 posted earlier on this thread, so refer Post: 5553386 which seems to align with this debate.
Jesus, just caught myself; I sound like I am preaching so apology there. Maybe quit there and would be delighted if anyone wants to challenge or debate anything I have written here??
