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Fast Crossings Part 2

In this part 2 about fast reliable crossing averages, I will introduce the formulas for a technique called zero-lagging; to further reduce the lagging of the averages.

I will make the specific required formulas available for MetaStock and for Metatrader.

Please note, this is not an invitation to trade using this technique, information given is to be used for training purposes only. Stocata.org will not accept liability for any loss or damage which may arise directly or indirectly from use of or reliance on this information.

Smoothing data with less lag or the so-called zero lag technique have been proposed in Stocks & Commodities magazine by Patrick Mulloy in the February 1994 issue and by John Ehlers in the March 2000 issue. It is a technique to compensate the lag in a moving average.

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In this part 2 about fast reliable crossing averages, I will introduce the formulas for a technique called zero-lagging; to further reduce the lagging of the averages. I will make the specific required formulas available for MetaStock and for Metatrader. Please note, this is not an invitation to trade using this technique, information given is to be used for training purposes only. Stocata.org will not accept liability for any loss or damage which may arise directly or indirectly from use of or reliance on this information. Pay a visit to my website at stocata.org and buy my book “Capturing Profit with Technical Analysis”, a complete technical analysis reference inclusive a trading method called LOCKIT.

Smoothing data with less lag or the so-called zero lag technique have been proposed in Stocks & Commodities magazine by Patrick Mulloy in the February 1994 issue and by John Ehlers in the March 2000 issue. It is a technique to compensate the lag in a moving average.
In the chart you can see:

• Red colored the 10 day TEMA average (Triple Exponential Moving Average) on closing prices.
• Blue colored the 10 day TEMA average on heikin ashi closing prices.
• And in green a 10 day TEMA "zero-lagging" average on heikin ashi closing prices.

This last zero lagging average has faster turning points than the 10 day TEMA average on the heikin ashi closing price without zero-lagging. The zero-lagging average on heikin ashi candles is clearly the best with a very good smoothing and fast and clear turning points.

First let’s create the zero-lagging TEMA average on the typical price.
For MetaStock, you can find a custom formula for this zero-lagging average at my website. Start from this URL: http://stocata.org/metastock/formulas.html
For MetaTrader4, you can find a custom formula for this zero-lagging average at my website. Start from this URL: http://stocata.org/metatrader/formulas.html

Compare the 30-period TEMA average on the typical price shown in red with the same average, but with the zero-lagging technique in blue. In general you will get faster more clear turning points. The disadvantage is that it will be more sensitive to the short term moves.

 

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Now we can create the formula for the zero-lagging TEMA averages based on the heikin-ashi re-calculated prices.
For MetaStock, you can find a custom formula for this zero-lagging average at my website. Start from this URL: http://stocata.org/metastock/formulas.html
For MetaTrader4, you can find a custom formula for this zero-lagging average at my website. Start from this URL: http://stocata.org/metatrader/formulas.html

In this chart you can see the most recent fast and profitable crossings between a 55-days zero-lagging TEMA average on the typical price and a 55-days zero-lagging TEMA average on the heikin ashi closing price on the S&P500 index.

In this EUR/USD 30 minutes we are using faster 20 periods TEMA averages. Generally you will see now more crossings, especially during consolidation phases. How can you avoid multiple entries and exits that will only cost you money?

At (1) you have a downward crossing and you sell the EUR/USD at 1.2575.
At (2) there is an upward crossing. You close the position with a profit of 44 PIPS. Now you buy the EUR/USD at 1.2531.
At (3) there is a sell crossing. However since price is falling exactly at the low of a previous support, you should wait half an hour for the next candle and only sell if this support is broken by a closing price. The support was not broken and you keep your position.
At (4) there is another sell signal. Since price is still nicely above the last support, you can effort to wait for half an hour for the next candle.
And again at (5) you get the same situation as at (3). You stay in the trade.
At (6) there is another break, but now you can see at the last top a shooting star candle pattern, confirmed with a big black candle and going further down. Here you would not take any further risk and close the position with a loss of just -2 PIPS. And you open a new position selling the EUR/USD at 1.2533.
Finally at (7) there is an up crossing, the signal to close your position with a profit of 58 PIPS. You are left with still a nice total profit of 100 PIPS in a difficult market, with the possibility keeping stops at very acceptable levels.
Applying some simple additional techniques to avoid losing trades can certainly boost profit.

This is the end of part 2 about fast but reliable crossings. In this second part we added a zero-lagging technique for creating even faster crossings. Tell your friends about these videos and while visiting my website order my book “Capturing Profit with Technical Analysis”. A complete technical analysis reference and a trading system called LOCKIT. Follow my weekly updates at my website stocta.org about the S&P500 index and the EUR/USD FOREX pair. See you in a next video.

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