What to do if I know Moving Average of the next bar?

 

Hello all,

I am just new to forex, still playing with my test account. I traded stock few years ago with no much of success.

i am find a new way to approach by putting some support from my programming skills. I can code in C#, and I can implement neural network into the problems. I have a question about prediction result.

What can a trader do if he know pretty accurately the moving average (SMA, EMA, HMA) of the next 1 bar (90% sign accurate) and 2 bars (85% accurate) (any time frame)? For example, at a time, the network can give next EMA14, EMA20, and EMA50.

In other words, what is the best trading strategies that can make use of these prediction?

I hope to hear from the real traders.

 

I have done something similar using Rapidminer with support vector machines and the process is outlined in the advanced elite section. From my experience, extrapolating a moving average has limited value. You might be able to create a better trading system by using your NN to estimate the next bar high and low.

In strong up trends for example, you could use the estimated low as an entry point with a stop below the next fractal. In ranging markets, you could take a position across the H+L/2 and sell on a hit of your NN projection.

Give this a try and see how close your NN can estimate the range over a few weeks of trading. You should also see if your NN can outperform more traditional statistical methods like standard deviation.

 

Hi hughesfleming,

Thanks for your answer. I played around with neural networks and support vector machines for a few months, and did not have any success on predicting correct real values of OHLC bars. The highest accuracy that I can achieve is current bar and next bar moving average down to 5 days (higher periods will have more accuracy).

Do you think that knowing in advanced (right direction) moving average and some indicators of the next 1-2 bars of daily, H4, H1, and M15 will have any/more advantages than just using current data?

 

With such a extrapolated length precision deterioration (which is normal for any extrapolation) best to use it for scalping. You can not use it for any long term trading

 
techmac:
With such a extrapolated length precision deterioration (which is normal for any extrapolation) best to use it for scalping. You can not use it for any long term trading

I totally agree with the term "scalping". I tried on another indicators such as RSX and RSI, "directional accuracy" (where precision in value is not guaranteed) the system can achieve is 85.63% on RSI/RSX(14).

Is it a good sign and how can it be used in short term trading?

 

I think best to keep it at the averages level. The more complicated the calc the less accurate the extrapolation. With predictable ranges and averages, you are more or less on a known ground (as much as it is possible) for that first bar

hyperpro:
I totally agree with the term "scalping". I tried on another indicators such as RSX and RSI, "directional accuracy" (where precision in value is not guaranteed) the system can achieve is 85.63% on RSI/RSX(14). Is it a good sign and how can it be used in short term trading?
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