The Delphic Phenomenon

[DSteckler]

This comes from Scott Lowry's book, "The Magic of Moving Averages." It purports to get you into the major moves while minimizing minimize the false signals / whipsaws associated with MA cross systems.


1. When the 18SMA crosses above the 40SMA, start looking for the buying opportunity;
2. Wait for price to drop below the 18SMA for the first time;
3. Place a buy order above the 18SMA;
4. If/when filled, place protective stop below 40SMA;
5. If price moves in your favor trail your stop halfway between 18SMA and 40SMA.

[TFred]

Greetings ,
Thanks Dave,I just applied it to my most recent purchase,and it did show a great buy opp.About to get stopped out soon if bulls dont step up.

cordially tom

[SledDawg]

Dave,

1. Have you tracked any success you may have had with this strategery? I like simple and this is almost as simple as it gets, but there's not much info on it on the net aside from a somewhat negative review of the book:

http://www.esignalcentral.com/exchange/09_2005/investors_library.asp

"Stripped of its ponderous name, it is nothing more than the process of trading out of a retracement in the direction of an MA that has crossed a longer MA.

It is well known that this works some of the time. It is equally well known that congestions and narrow trading ranges are its nemesis and, unless countered by other means (not mentioned in the book), can account for a disheartening string of losses.

Whether the excellent profits attained in larger moves overwhelm the numerous smaller losses sufficiently to produce a favorable profit factor can only be determined by historical testing (not in the book). This commentator performed only enough back testing to know that he would be psychologically unable to use this approach, an admitted weakness on his part but shared with many traders of his acquaintance. "

2. What screener do you use? I'm trying to work with Trade-Ideas to model something like this, but I'm limited to certain #s. Best I've come up with so far is a filter to consider only stocks at least 1 bar above 50 SMA with an alert when stock crosses below 20 SMA

Thanks, Jeff

[DSteckler]

Hi Jeff,

No, I haven't backtested it.