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After staring at the past of index charts (like the Dow, S&P, etc.), it's not that easy to distinguish a short-term MA "pullback" to a long-term MA, versus a "crossover" at the "hard right edge."
Anyone care to share a tidbit on the subject?
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Sometimes it might be hard depending on scaling and if your merging the averages on the same side of the scaling.Using the data window (it looks like cross hairs on a video game) might help to determine their value.Hope this help.
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Thanks for the tip on detail...
...though I was hoping for some insight on interpretation -- ie: Rules-of-thumb on how to guage whether a slight crossover is likely to be a pullback to trend.
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How many pullbacks have occured in the past uptrend? Is the longer MA rising? How many bars did the current price fall?
Pullbacks usually last 3 to 4 bars. A slight touch of the MA might just be a pullback, but a cross where the close crashes through the support level would signal a change in trend
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just thoughts...
Measure the angle between the price and the MA. If the price is dropping vertically though the MA then consider it Cross(). If the angle is slight and the price is just "tickling" along the MA then its just a pullback, and maybe turning?
Another thought is to measure the height from where the price was to the MA. If the distance is large then any crossing of the price below the MA could be considered a cross. If the height is small, i.e. the MA is a good approximation of the price then a cross hasn't actually "occurred" until the price is a suitable distance below the MA.
Just like we dont know when a Peak() has formed until the price has fallen from the high, we don't know a cross has occurred unless the price has moved from outside a 'band' above the MA to outside a 'band' below the MA. The traversal across the band is a cross, internal movement is a pullback to a 'reasonable' level.
Hindsight is really good when trying to judge a pullback or a cross! It doesn't matter what 'system' you use, there are many factors to be taken into account:
the length and type of MA;
the volatility of the stock / index
news and reports
etc etc
Hope this has given you a few other ideas to play with..
wabbit [:D]
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