ProfitTrader Buy and Sell Signals are mechanically generated without consideration
of trend. The ProfitTrader 7.0™ Trend B/S Signals will only plot signals in the direction of trend as indicated
by the EMA Trend Indicator. This will keep you in the market for longer-term
moves, allowing add on positions in the direction of trend as new signals
occur. However, if you are looking to take short-term profits or for trend
reversals, the standard Buy/Sell Signals should also be plotted in a separate
graph because they plot regardless of trend direction.
1 shows the blue 10DoubleStoc Setup and Buy Signals with the Trend
Indicator acting as a filter to plot only Buy Signals in the up trending
market. When the red line is above the blue, the trend is up and only
Buy Signals are generated. Seven of the 11 entry signals would have
been highly profitable.
2 shows only magenta 10DoubleStoc Setup and Sell Signals when the
red EMA is below the blue (indicating a downtrend); two Buy Signals
are shown that occurred when the red EMA was above the blue EMA. The
trading trend for a short-term chart is generated by the direction of
the dominant cycle in the next longer-term time frame. The trading trend
for the daily chart is set by the cycle in the weekly chart. When the
weekly cycle is moving down, the red EMA is most often below the blue
EMA; when the weekly cycle is moving up the red EMA is most often above
the blue EMA. The short-term/long-term cycle trend/EMA relationship
to determine trend also applies to intraday charts.
3 also shows the Buy Signals that were generated by the standard
10DoubleStoc for the same time period shown in Chart No. 2. Of the 10
buy signals generated against the EMA direction (when the red EMA was
below the blue EMA), only two would have been profitable.
Buy/Sell Signals are generated only in the direction of trend.
The old adage "trade with the trend; if it is up, buy the dips;
if it is down, sell the rallies" is now applicable with the Trend
Buy/Sell Signals. The trend is set by the EMA Trend Indicator -- the
dips are cycle bottoms; the rallies, cycle tops.
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