Thursday, November 13, 2008

Qs / NYAD and the 816

I've mentioned the 8 and 16 MA cross in previous posts as a highly reliable trend indicator. Today certainly provided a great example of using the 816 with the NYAD to guide your trades in underlying securities. The 816 NYAD tell works best with the indices, especially ETFs like my sample basket. It was interesting today that virtually all the 816 crosses in the NYAD synced perfectly with the 816 crosses in the Qs. Where the 816 NYAD really earned its money today was in revealing the false cross in the Qs about 14:06. If you followed the lead of the NYAD you stayed in the trade and avoided being flushed out of the Qs bullish move and the subsequent impressive short term pop.
In my own experience, if I get stopped out of a daytrade with the 816 cross, I'm reluctant to re-enter the trade for at least 20 minutes, or until I'm confident that the trend has indeed resumed or reversed. That's just a little risk management tool I use because I'm old and my mind is easily confused. Watching the NYAD in lieu of the underlying and trading according to the NYAD 816 may cost you a few pennies in drawdown but it will typically keep you from being kicked out of trades prematurely as market makers run stops and play other head fake games.

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