Don’t you hate it when watching a real-time chart, when the last value of indicators like fast moving averages wiggle in concert with the price? For example, you might buy when the price crosses above the MA while the MA is turning up, only to see later that the price fell back down and the MA is flat again? That used to really annoy me, because (among other things) it made me look dumber on review than I looked when I pressed the buy button.
Obviously you can’t stop the price from wiggling! But, one thing I’ve found that helps a lot with indicators is to use (H+L)/2 as their basis, rather than the closing price. This way, the indicator value will only change when new highs or lows are made on the current candle. This is a much less wiggly experience!
I didn’t change to (H+L)/2 indicators to keep the lines still… that was just a happy side-effect I noticed later. I changed to midpoint indicators intraday because I don’t want to put any special importance on where a candle happens to close. I frankly think it’s silly to do so. I’d rather be making decisions based on a summary of where price was during the whole candle, and of simple formulas available, I think the straight average of the high and low ought to work best.
I know a lot of people that venture away from close-based indicators move to the “typical price” of (H+L+C)/3. This will dampen the effect, but not remove it, because the closing price is still a big factor. When I chart (H+L)/2 indicators vs (H+L+C)/3 indicators, it’s rare when I see a big difference, although the more often the close is far away from the middle of the candle, the bigger the theoretical difference should be.
I have seen others shift their indicators over by 1 bar, so that they don’t deal with the noisy mess of the last point. To me, this is going too far. I want the current information… I just want it to be less of a moving target, if possible.
