Filtering out the whipsaws

By Paul | Published: January 4, 2008

Whipsaws in pricing is the archilles’ heel in trend following system. As demonstrated by the previous 3 trading strategies, once the price is in a narrow trading range, trend following systems would trigger many erraneous trades to eat away the account.

An idea I’m having is to use ADX to filter out some of these trades. Either by comparing ADX to EMA(ADX)[1] or use DMI by ensuring + index > – index for long, for examples.

I tested a Momentum(ADX) idea by using MyADX > MyADX[10] as a condition on the 3-EMA crossovers strategy as discussed today. It doesn’t seem to be doing much as the DMI values jump around. Perhaps employing the MACD concept on ADX would yield some result.

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Related posts:

  1. Bollinger with multi-MACD system
  2. Reversal with Stochastic, CCI and Keltner Channel strategy
  3. 2MA w/ ADX and disappointing realization
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