What Is The Dickson Moving Average
A Dickson moving average is a moving average that places a greater weight and significance on the most recent data points. It combines the ZeroLagIndicator by Ehlers and the Hull Moving Average to deliver a result close to that of the Jurik Moving Averages.
Dickson Moving Average Indicator
The Dickson Moving Average is a trend indicator.
Why Use The Dickson Moving Average
The ‘zero lag’ code from John Ehlers and the Hull Moving Average tend to respond in complementary ways when adequately set up. If the input values are ideal, they blend to create a new moving average that responds with one (or maybe even half a bar) of lag. This is the Dickson Moving Average.
How To Use The Dickson Moving Average
This moving average places a greater weight and significance on the most recent data points. Like all moving averages, this technical indicator is used to produce buy and sell signals based on crossovers and divergences from the historical average. Traders often use several different lengths, such as 10-day, 50-day, and 200-day moving averages.
These are commonly used in conjunction with other indicators to confirm significant market moves and gauge their validity.
Defining a Bullish Scenario to generate a buy signal:
- When the price crosses above the Dickson moving average, it indicates that the current price is greater than the average of the defined period; hence the market is in an upward trend.
- When the shorter period moving average crosses over the longer time moving average, it indicates the start of a new uptrend.
Defining a Bearish Scenario to generate a sell signal:
- When the price crosses down the Dickson moving average, it indicates that the current price is lower than the average of the defined period; hence the market is in a downward trend.
- When the shorter period moving average crosses down the longer time moving average, it indicates the start of a new downtrend.
Building The Dickson Moving Average Trading Strategy On Mudrex:
As discussed above, lets first write our entry/exit conditions so that we know what to do:
BUY: When price crosses up the moving average
SELL: When price crosses down the moving average.
Overall Strategy: The overall strategy on mudrex looks like this
Testing: We can now run a quick back-test to see how our strategy performs.
For more trading strategies, check out our crypto trading strategies blog.
A few quick references below: