Forum Archive Index - June 2001

["John and Beth Schwartfeger" <timestwo@xtra.co.nz>]

Do all of these programs change the results as more information is gained over time? The idea of buying and selling on cross overs is great in theory but is it always true?

 

Example. The program I am using had a sell cross over indicated on the 7th June for GPG. As time has progressed that cross over has disappeared altogether and the chart shows a steady buy signal all the way.No sell cross over on the 7th June exists anymore. In my case I asked Phaedrus at the time what his program was telling him and it was the opposite to mine. Thankfully I didn't sell.

 

This may highlight several areas where a problem could occur.

1)To use these programs you really need to know how to use them properly and not put blind faith in just one type of chart. eg. In my case it was a moving average chart that gave the sell signal. The program I use has a facility to supposedly automatically select the correct moving average time spans for the comparison.

2)The programs are always working in arrears (spelling), in past tense, and as such if there is a fairly wild and fast alteration in prices the program can put in a false signal that will alter as time averages out the information it works on.

 

If anyone looks at GPG's chart they will see it took a reasonable hit on the 21st May and only flicked around that lower level for a couple of weeks. This drop followed by the sustained low level price for that period allowed the moving averages to cross over and give the sell signal. A different range of moving average time spans would have given no doubt a different picture. But, as I mentioned the program I use supposedly selects the best time spans for the moving averages to work.

Now as time has moved on and the price has steadily increased the trend lines in the moving average chart have stayed apart and no cross overs have occurred.

The result of all this is the program definitely gave a false sell signal and definitely paints a different picture as it gains more information over time.

I am not criticising these programs or their place in ones arsenal to use as a tool but after what I saw happen with GPG it sort of becomes a moving goal post game.

I know when I was at a training session for the program I use there was much made of the cross overs and many a stock was held up as being a great money earner for you because of what the program showed you to do. Sounded easy. But, watching the program every day isn't the same information you get over a much longer period of time.

If all programs do in fact do what this one has done, I would suspect there could be a case made under both the Consumer Guarantees Act and the Fair Trading Act. I am not interested in pursuing such a course of action because like I said, I do believe there is a place for these programs in ones arsenal.

This could be why Phaedrus doesn't particularly like moving averages.??? This post certainly isn't a criticism of Phaedrus either because I am most impressed with his posts and use of his program.

Cheers. John.