This week we continue to look at the McGinley Dynamic. Obviously the most common and immediate thing
one would think of doing with a moving average is to look at how to trade with
it. The easiest thing we can do is to create a MACD using the McGinley Dynamic.
To make comparison easier we will create a MACD using two McGinley average
averages with the Dynamic tracking factors similar to the conventional MACD
which is 12 and 26. The McGinley MACD
clearly much smoother and is less prone to whipsaws. It keeps one in trade for
long catching big trends nicely. Of course there is always a price to pay for
this. The McGinley MACD is lagging by a few bars compared to the conventional
MACD. Well, it may be better than being whipsawed and losing money. Also the
peak draw down because of the lag is much better than being thrown out of trade
much earlier in most cases. I did not run a back test on the McGinley MACD. If
somebody does care to do the back test it please let us know the results. I am posting it here as it looks worth trying
out. AFL posted here for anyone who cares to try it out.
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