Forum Archive Index - April 2003

[Phaedrus <Phaedrus@techemail.com>]

Bill,
     Here is a list of just a few of the many parameters that can influence the 
choice of a system:- 
    Time available
    $$$ available
    Preferred trading frequency
    Risk tolerance
    Stress tolerance
    Individual personality
    Financial situation
    Age, personal circumstances, etc. etc.
 It is only to be expected that almost everyone comes to a different conclusion 
as to their preferred system and thus tools. Even the same tools can be used in 
many different ways, depending on your objective. 

 Conventional use of the standard 12/26/9 MACD with TLS would have resulted in 
51 trades over the 5+ years of the chart. 34 of these would have been losses, 
leading to a 28% loss overall. Another popular choice of parameters is 5/34/7 - 
use of these settings would have led to a 51% loss. Optimising all three 
parameters results in a small profit, but the standard MACD is still markedly 
inferior to many other indicators that could be used with this stock. Don't 
write off the MACD because of these figures though. For example, some people 
look for divergences between prices and the MACD Histogram. Such signals are 
much less frequent and much more reliable than the standard MACD crossover 
signals. I do not use the MACD at all, but you will not find me criticising 
Phyllis for choosing it as one of her favourites. Significantly, she is not 
using the standard MACD signals - though these do suit some stocks and some 
traders. Not this one though!

           Phaedrus.



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