Multiple Trend-Following Systems Combined: Attempting to Achieve

Lately I've been exploring the use of a couple of independent trend-following systems used in conjunction with each other. I have finally found something that seems to work like I intended when I undertook this project. It combines 2 separate trend following systems and it waits for confirmation from both systems before an entry is generated.

Basically, it combines a moving average crossover system with a volatility break-out system. This seems to work pretty well, however, there is still room for improvement. The improvement comes with multi-time frame analysis. For this, I've integrated a brilliant indicator that tracks MACD readings for 9 different time frames (look at the upper left-hand text within the chart below). Below is a screen shot.In order to get a signal, there must be both green or red lines on the trend following signals (the band looking lines that surround the price and change color: green=buy, yellow is caution/sell, and red is sell/sell short) and there must be a correlation to the signals with multiple time frames on the MACD for an entry. Just how many and which signals I will leave for you to experiment with...if you're so inclined. I've found that it depends on your time frame and also on your profit target.

Bottom line: combining volatility and moving averages with multiple time frame readings can give you some excellent trend following entry signals. Just remember, the hardest part of trend following is getting out of the trade. Trading is like law in that you always practice it(as in "practicing law") and there is always room for learning...no matter how long you've been doing it. I give you these ideas in hope that they will influence a trader to think a little more or maybe even for someone to turn the corner and become profitable. It's one big challenge that attracts the best of the best...and we all hope that's us.

Good luck out there.

TLT

Dow Down and Dollar Up

It's a bit counter intuitive, but it's what's happening right now. The best trade that I've seen lately is to short stock indexes and go long the dollar, particularly the Eur/Usd pair. The Eur/Usd has been trending nicely which has offered numerous opportunities to hop on board. Most recently, the rally to the 50 day moving average offered a great point to jump on board.

Judging by the above daily chart of the Eur/Usd, the rally in the dollar will likely stall soon. This happens; markets tend to snap back pretty quickly when they move as fast as they've been moving lately. I would at least wait for the price to fall back closer to the 10 day moving average (the aqua blue line) before taking a position.

As for the Dow, the chart pretty much says it all.

The Dow has blown through the short term support and looks to be in a free fall motion. Although it looks bad, and I will certainly be staying bearish for a while, the dow seems to be close to a bullish counter-trend rally. Take a look at the BB Width indicator at the bottom of the chart. It has moved all the way up to the 15 mark, which indicates that a near term bottom is either here or close. Notice that the last time the BB width was 15 was back in July.

Personally, I'll be looking for short-term counter rallies in order to load up on dollars and short stocks. The fed cutting rates at the up coming fed meeting would be an excellent catalyst to get a good counter trend rally which should provide some nice low risk entry opportunities. Good luck out there.

TLT

Dollar Analysis

There has been a lot of talk about the dollar's upcoming collapse due to the bail out. I wanted to get to the bottom of what's really going on in the short-term with the old green back because commentators tend to exaggerate or just be flat wrong when they talk about the dollar.

As you can see in the EUR/USD daily chart below, the dollar has broken through its recent intermediate trend channel. This tells me that I don't want to be long the dollar but, I'm not ready to go against it either. With all the chaos of late, its very hard to tell if these types of pullbacks are full blown trend reversals or just emotional reactions. My gut says that it's the latter.
One thing that I'll keep my eye on is the 50 and 200 day moving averages. So far, the dollar has fallen back to its 50 day moving average and stalled. One indicator I like to use for trading in forex is the 10 day ma along with the 50 day ma. Once the 10 crosses the 50, it will confirm an intermediate trend reversal and I'll look for a nice pull back to sell the dollar into.

Interestingly, there are some out there that see this recent pullback as a bullish opportunity for the dollar.