The person who started this thread never mentioned moving average crossovers,so I don't understand your reply. There seems to be this ridiculous notion on this site that anytime someone mentions MAs, it is automatically interpreted as being a "crossover system". There are an infinite number of ways to apply MAs, and probably one of the worst, IMO, is as crossovers. Because, as you pointed out, MAs are lagging indicators, all an MA crossover tells me is that yesterday, or sometime in the past, price showed strength. I can't profit from that information, unless I was already in the trade and wanted to use an MA crossover as a exit signal.
We dont see a lot of utility in using MA crossover systems in isolation: there are a few cases where we use a variation of this idea in combination with some other indicators but in general I agree with your statement .....
In addition to what lindq points out I have also found it helpful to factor in the direction and slope of the moving average. I generally would not buy on a cross above a moving average that is steeply sloping down nor on a move significantly below the MA if the MA is steeply sloping down. I am more interested in buying as the price reverts close to or below (and I really like it if it is significantly below) a MA with a steep upward slope. The opposite is what I look for for shorting.
As one who uses moving averages every single day....... I use 4 MAs.....and I use the smaller time frames against the longer ones......1,3, or 5 minute chart with a 5,15,65,195 MA or for that matter 5,20,50,200 MAs work just as well if you are restricted on your charts. A nice Keltner or Bollinger to define the range and the exits. But lately it is not as easy as it looks.....easy to be wiggled out. Most oscillators are based on moving averages and can be misleading to me. I prefer the raw data.
If you tune your Ma's to your equity, you have lag and an MA with about half the amplitude of the equity. Where they cross (beginning and ending hold duration is less than half the swing the equity made in value. You enter after the trough and you leave after the peak. To optimize profits you you can simply use a method less evident than a crossing. crossing seem like big deal strong signals but they cost so much in wealth building. Use other signals that make more money and are just as strong from a reasoning viewpoint. You do the MA to give you information that combines data points and "tells" you statistically significant stuff. Any point on the MA is just as good as any other. Knowing and believing that, you can step up to making more money using your data. When the price stops going away from the MA, you can make the deal to enter. (Divergence ends and convergence begins.) Play the same game to exit. (Divergence ends and convergence begins.) If you do both, you at least double your profits per entry and exit. You do not have to add any faith or trust or anything else to the picture either. Making an MA cross price or vice versa doesn't provide any more insurance than any other pair of points, one price and one MA. The easiest way to find the point I suggested is to draw a neutral axis for the MA and enter when the MA crosses down and exit when the MA crosses up. (This assumes that you tune the MA to the equity cycle)
Ok, take this one step further. I use a Movetrend instead of a 5 ma. Gives early warning. All my trades are actually on a 13 minute chart......using 1 minute chart crosses to exit and enter the trades. Bollingers define range nicely. A lot of my friends love oscillators. They mostly design their own. The one nice thing they do show is divergence. That happens before a larger than average move.
Don't know if this author is still around here. Why would he recommend "to use something other than close"? What's wrong with using the closing bar as a signal for an MA cross which would yield a trade at the next bar? Thanks in advance for any insight anyone might have on this. Bill
Jack, I came across this old post of yours. It's got so much clarity to it ; easy to understand even for an ordinary mortal like me.