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Combining RSI and ADX
Both the ADX and RSI are valuable trading tools and a combination of the two would seem to offer some interesting possibilities. I like to use the RSI primarily as an indicator for buying on dips in an uptrend. The ADX is my primary indicator of trend strength.
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Contradictions in using ADX
I can see how there may appear to be some confusion on how the ADX should be applied. But there really isn't any contradiction if you understand that what we are trying to do with the ADX is very different in the two examples.
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Trading Messages From Mars I have learned to look only briefly at the entries of winning traders and to examine their exit System Trading very carefully. I am very fortunate that more than thirty years ago I learned from the Coke bottle trader that success in trading depends on our exits and not our entries.
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Switch Time Frames For Better Exits - While listening to Dr. Elder explain his multiple time frame strategy for entries, my thoughts wandered to the application of his ideas to my favorite subject - exits. One of my goals in trading is to find exit strategies that do a good job of protecting open profits.
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Moving Average Crossovers May Not Be The Best Entry Signals - Let's stop for a minute and think about what exactly is occurring at the point of a crossover. When the 10-day MA and the 30-day MA are at the same price, the trend is not nearly as clear as it should be. What we are really observing at the crossover point is that the average of the last 30 prices is exactly the same as the average of the last 10 prices.
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- The Chandelier Exit hangs a trailing stop from either the highest high of the trade or the highest close of the trade. The distance from the high point to the trailing stop is probably best measured in units of Average True Range. However the distance from the high point could also be measured in dollars or in contract based points.
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Trailing Stops - Now that we have taken the necessary precautions to avoid catastrophic losses by using disciplined money management stops, it is appropriate to concentrate on strategies that are designed to accumulate and retain profits in the market. When properly implemented these strategies are intended to accomplish two important goals in trade management: they should allow profits to run, while at the same time they should protect open trade profits.
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Taking Control -
When conceptualizing a new trading system and when going through the design and testing routine, be alert to issues of control. Look for what you can
control and make sure that you are controlling it to your benefit. Look at what you can not control and as a minimum have some plan that will minimize any possible damage
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Moving Average Crossovers May Not Be The Best Entry Signals -
There are many ways of using moving averages to trade but by far the most common method is to trade when a short-term moving average crosses over a longer term moving average.
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