chessnut1 58 posts msg #32553 - Ignore chessnut1 |
7/11/2004 6:58:42 PM
stmintz,
So glad you posted about this! I too recently noticed the power of the ema(2)/ma(3) crossover (and the slightly less sensitive ema(3)/ma(5) crossover). It is a very useful and sensitive reversal indicator, and can be successfully added to ANY favorite filter, such as a Bollinger band squeeze, a bottom "muddy"-type filter, a modified Darvas Box filter, etc, to find stocks that have just experienced a bullish price reversal.
However, sensitive is the key word here with the ema2/ma3. I am finding that this is its strength and it's weakness. When you open up any chart and note the crossovers, it becomes evident how sensitive this indicator is, which means it generates a number of "false positives" as well as true reversal points.
So how to keep the power of this early indicator and also minimize the false-positive effect? The solution I've come to is to use a slightly higher crossover setting on my charts -- ema3/ma5-- while maintaining the super-sensitive indicator in the lower portion of my PN charts in the form of the rsi2/rsi3 crossover introduced long ago by HolyGrail. The rsi crossovers corresponds 100% with the ema2/ma3 crossovers, so nothing lost. This way I can have the more reliable (but still very sensitive) ema/ma lines on my upper Prophet.Net charts, and not have to clutter them with 2 more lines to get the more sensitive crossover indicator working for me. [With PN, when you add an ema or ma indicator, it automatically places it in the upper chart area, and it doesn't appear as if it can be placed in the bottom indicator area].
If you happen to be a member of TXTrapper's bottomlines group(http://finance.groups.yahoo.com/group/bottomlinestocks/?yguid=179439516), or if you join, you will notice my recent posts about the ema3/ma5 (msg 1101 and 1105) and the reference to ema2/ma3 as more sensitive (msg 1149). I posted what I did because like you, I was very exited to discover this tremendously useful and reliable crossover. I highly recommend it.
--BJ
|