This strategy is a trading strategy based on the McGinley Dynamic indicator, which combines the signal of the breakout to formulate the rules of selling and profit. The McGinley Dynamic indicator is a low-profile tool that many people don't realize, and it offers an innovative way to minimize the lag of moving flat** and react to fast-moving financial markets.
The McGinley dynamic indicator is provided by John RLaunched in 1990, McGinley is a unique tool designed to solve a common problem in the trading world – the "lag" associated with moving flat**. The most popular moving flats, such as Simple Moving Flats, Exponential Weighted Moving Flats, and Linear Weighted Moving Flats, ema2), are unable to adapt to fast-moving markets, meaning they lag behind the latest moves and often generate false signals.
McGinley Dynamic is a mobile level** that adjusts itself to the speed of the market. When the speed increases (represented by increased volatility), it pays close attention to the behavior without a noticeable separation from its lines. The indicator slows down in calmer markets and usually steers away from the washouts that are common in other moving flats.
At its core, the McGinley dynamic indicator is just another way to smooth out behavior and gauge the underlying direction of the market. But its ability to adapt and adjust sets it apart from other moving flats** and allows traders to understand the market dynamics more accurately. That's why many people in the know call it "the most reliable metric you've never heard of."
The formula for calculating the McGinley Dynamic indicator is:
variable:md1:=0,md2:=0;
if barpos=1 then
beginmd1:=close;
md2:=close;
endif barpos>1 then
beginmd1:=ref(md1,1)+(close-ref(md1,1))/(n1*pow (close/ref(md1,1),4));
md2:=ref(md2,1)+(close-ref(md2,1))/(n2*pow (close/ref(md2,1),4));
endmd1:md1;
md2:md2;
where n1, n2 are period parameters and are usually set to values similar to the moving average period (e.g. or 20).
In simple terms, this formula calculates the difference between the current and previous McGinley dynamic values. It then divides this difference by a value that changes based on the ratio of the current ** to the previous McGinley dynamic value. This result is then added to the last value to arrive at the current value.
The key part of this formula is the pow (c ref(md1,1),4). This factor allows the McGinley dynamic indicator to adjust itself to the speed of the market. This factor increases when moving fast, causing the indicator to react faster, and moving slowly in the opposite direction.
First, the principle of strategy
There are two main types of ** used in this strategy, and here the periods can be set to 7 and 34 respectively. When the short-term ** crosses the long-term**, it is regarded as a **signal; When the short-term **crosses below the long-term**, it is considered a sell signal.
In addition, the strategy also needs to meet the conditions of **above two** and break through the short-term ** at the same time before the **signal is generated. For sell signals, it is also necessary to meet the conditions of **below two** and below short-term**.
Second, the advantage analysis
1. The McGinley Dynamic indicator improves the lag of the traditional ** and can capture the change of the ** trend faster. Its adaptability to volatility improves its responsiveness and provides a more accurate reflection of the market, giving it an edge over other indicators.
2. Combined with double ** to form trading signals, it can effectively filter false breakouts.
3. Add a condition that is higher than or lower than McGinley Dynamic to avoid frequent trading in the range.
3. Risk analysis
1. In a sideways** market, false signals may be generated, resulting in losses.
2. The breakthrough of a large gap may lead to the inability to open a position in time, and the entry conditions should be appropriately relaxed.
3. Improper parameter setting will also affect the effect of the strategy, and the parameters should be optimized and tested.
Fourth, optimization analysis
1. You can test the ** parameters of different lengths to find a more suitable combination.
2. You can add other technical indicators, such as MACD, RSI, etc., to optimize the selection of buying and selling points.
Using the McGinley dynamic indicator with the MACD can be an effective strategy, as the McGinley crossover can be used to confirm reversal signals for the latter.
The Relative Strength Index (RSI) is a momentum** indicator that helps us identify potential market reversals by indicating overbought and oversold conditions. Unlike MACD, RSI is not associated with a moving flat**, but can still be used to gauge trend strength. When its value is above 50, it indicates a bullish trend; When it is below 50, the trend should be bearish. Combined with the aforementioned McGinley dynamic signals, using the two together can provide traders with an effective way to confirm their trend bias.
3. You can set trading positions and take profit in combination with ATR indicators to control the risk of a single transaction.
4. It can be combined with Hull Mobile Flat **Hull MA, and used in combination.
5. Summary
This strategy uses the fast-tracking ability of the McGinley Dynamic indicator, combined with the trading signals formed by the breakout, to effectively track the trend and switch in time when the trend turns. Compared with the traditional double-** strategy, this strategy can capture the trend change more quickly. However, the strategy also has certain risks, which need to be optimized, and the management of take-profit and stop-loss and trading positions should be added to effectively control the risks and further enhance the stability and profitability of the strategy.