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Jim Dean

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Joined: 9/21/2006
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Subject : RE: Two "Exponential" Moving Average Crossover
Posted : 7/13/2010 7:13 AM
Post #21115 - In reply to #21114

Moving AHEAD (hoorah!) to something NEW ... the Filter Block.

We will construct another variant of the DDE now, using a Filter Block INSTEAD of a Confirm Block. We'll put one of the MV2 pairs into the FB and leave the other in the SB, and see how that works. It WILL be different!

Strictly speaking, by doing this, we are moving outside the bounds of the original post. However, it is useful to check it out ... oft-times our original ideas need to be massaged a bit, even at their foundational levels ... or, at least, we should investigate alternatives to see if the foundation is actually a sound one.

It's worthwhile to read the Help sections about Filter (and Confirm) blocks. The primary distinction between them is that Confirm focuses on a POINT-EVENT in time ... the moment that the confirm-system fires ... but the Filter looks at a STATE/CONDITION that might last for a long time.

Since the original request was for two systems that fire at POINTS in time, I did not discuss the Filter Block. However, it's worth a look ... maybe the CONCEPT that originally was requested could be better handled with a Filter plus one System ... OR, maybe the DoubleDualEMA pair would be improved by a Filter, somehow. We'll wait on that second idea till later, though :~)

The "state" that the Filter will be testing is of course the relationship of the two EMA's to one another. If the faster of the two EMA's is on top, it's bullish ... and bearish if it's on the bottom. This is commonly referred to as "STACKING" ... what order are the EMA's "stacked up" on the chart. The Guppy strategies have this (as well as crossovers and other things) at their core, fwiw.

SO ... you should be able to do this in your sleep now ... let's once again use the DDE as our basis, and create TWO new strat's that use FB's ... the first strat will have the 5 & 20 (fast) EMA's in the Filter, and the second will have the 10 & 40 (slow) EMA's in the Filter.

But, this time, BEFORE we do the experiments, let's stop and THINK about which approach will "likely" work better ... but let's not get "married" to our presumptions (KISS "methods" without experimentation to back them up are often a KISS ... of DEATH ;~)

The filter is checking a "state" based on the stacking of two EMA's. AS LONG AS that state is true, then any signals that hit the filter are allowed to pass through it. Keep in mind that the signals that come INTO the filter are NOT a "state" ... they are points in time. Yes, the Vote Block lookback can be used to "stretch" that point out (our 5-bar setting is reasonable for those param's, IMO) ... but if the filter state is OFTEN DELAYED in its appearance till AFTER the system-signal fires, then the signal gets lost.

Maybe we want that ... maybe not. Let's assume, without being sure, that we DON'T want to "lose" any signals from the System block. That would mean that it would be better for our Filter "state" to "open up" BEFORE the SysB signal occurs. So, that means the "fast" 5+20 EMA pair should be in the Filter, and the "slow" 10+40 EMA pair should be in the System.

Our "prediction" on the basis of this reasoning is that the strat set up with a "fast" filter will be closer to the DDE strat than one which has a filter using the slow 10+40 EMA's. This prediction, btw, is often known as a "straw man". We set it up to scare away the scavengers ... but also to use as target practice. Sometimes, it falls apart upon examination. Other times, we actually decide to dress it up with some coverals and a hat and maybe even a corncob pipe.

Here are the two strat's for you to compare ... activate them with the DDE and find out which is closest in how the Vote line appears, for the DJ30/12mo test-bed.

Hint: this is a no-brainer. Enjoy it while you can!


To help you along ... please don't shortcut taking some time to review how a Filter Block is set up. The snapshot highlights some things that many folks overlook ... how to Rename, and most especially how to set up adjustable Parameters. Please ask any questions that come to mind!




[Edited by Jim Dean on 7/13/2010 7:39 AM]

Attached file : aJDgyDualEMA-FiltFast.ots (744KB - 535 downloads)
Attached file : aJDgyDualEMA-FiltSlow.ots (744KB - 479 downloads)
Attached file : Filter Block in Strategy.png (93KB - 743 downloads)

Deleting message 21115 : RE: Two "Exponential" Moving Average Crossover


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