How To Simple with Metatrader 4

30. How to trade Extreme Bollinger Band Reversal in Forex

Extreme Bollinger Band reversal are so easy to trade as long as you follow the rules in this video. Make sure that you wait for all the time frames to hit the Bollinger Band and wait for the m5 time frame to show you a flat side before you trade in the opposite direction.

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A Forex trader should wait for the price to turn in the opposite direction after touching one of the bands before considering that a reversal is happening.

Even better one should see the price cross over the moving average.

Double Bottoms Trend Reversals

A double bottom is a buy setup/signal. It occurs when price action penetrates the lower bollinger band then rebounds forming the first low. then after a while another low is formed, and this time it is above the lower band.

The second low must not be lower than the first one and it important is that the second low does not touch or penetrate the lower band. This bullish Forex trading setup is confirmed when the price action moves and closes above the middle band (simple moving average).



Double Tops Trend Reversals

A double top is a sell setup/signal. It occurs when price action penetrates the upper bollinger band then rebounds down forming the first high. then after a while another high is formed, and this time it is below the upper band.

The second high must not be higher than the first one and it important is that the second high does not touch or penetrate the upper band. This bearish Forex trading setup is confirmed when the price action moves and closes below the middle band (simple moving average).

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31. How to trade support/resistance bounce in Forex

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Support and Resistance is one of the widely used concepts in Forex trading. Most traders plot horizontal lines to show support levels and resistance levels.

There is also an indicator used to plot Support levels automatically and indicate the resistance and support levels.

When it comes to these levels price can either bounce off these levels or break these levels.
If a resistance level is broken price will move higher and the resistance level will turn to a support.
If a support level is broken price will move lower and the support level will turn to a resistance.

Price where the majority of investors believe that prices will move higher, while resistance levels indicate the price at which a majority of investors feel prices will move lower.

Once price has broken through a support level or a resistance level then it is likely that the price will continue moving in that particular direction until it gets to the next support or resistance level.

The more often a support or resistance level is tested or is touched by the price and bounces, the more major that particular support level or resistance level becomes.

Technical Analysis of Resistance and Support Technical Indicator

These levels are calculated a trend lines method.

Upward Trend

In an upward trend the resistance and support will generally head upwards

Downward Trend

In a downward trend the resistance and support will generally head downwards

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32. How to trade Stochastics divergence in Forex

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Stochastics gives its strongest sell signal when the two moving averages that comprise it have first been above 80 and then close below the 80 level. The strongest buying signal is given when the two moving averages have first been below 20 and then close above 20.

Ideally, we should use Stochastics, and any other indicator for that matter, only to take trades in the direction of the Daliy trend. So if a trader determines that a pair is in an uptrend, they would then consult Stochastics to time their entry after Stochastics has been below 20 and then closed above the 20 level. In a downtrend, such as we have on the Daily chart of the USDCHF below, they would look for Stochastics to have been above 80 and then close below it for the signal to sell the pair.

See the chart below for an example of this :




For Stochastics to close below 80 in a downtrend or above 20 in an uptrend is a much stronger signal than if Stochastics simply goes above or below those levels during the course of the time that the candle is open.

For example, let's say that a trader is using a 1 hour chart. When that 1 hour candle closes at the end of the hour, the trader can check Stochastics to see if the two moving averages were above 20 or below 80 after the close occurred. That will confirm that the indicator did indeed close above or below the requisite level.

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Developed by George C. Lane in the late 1950s, the Stochastic Oscillator is a momentum indicator that shows the location of the current close relative to the high/low range over a certain number of periods.

New traders typically want to know the difference between Fast Stochastics and Slow Stochastics. They also want to know whether the typical default settings of 5,5 (Fast Stochastics) or 5,5,5 (Slow Stochastics) as seen in most charting packages developed for FX are better or worse than the typical default settings of 14,3 (Fast Stochastics) or 14,3,3 (Slow Stochastics) seen in stock and futures charting packages.

First of all, the difference between Fast Stochastics and Slow Stochastics is just a moving average.

When calculating Fast Stochastics using the values of 5 and 5, the first “5” is the raw value for Stochastics, while the second “5” is a 5-period moving average of the first “5”. When using Slow Stochastics, the first two 5’s are the same as with the Fast Stochastics, with the third “5” being a moving average of the second “5”. Yes, that’s right, a moving average of the moving average. This slows the movement of the indicator down even further, hence the name of Slow Stochastics.


By slowing the movement of the indicator down, we will see fewer signals to buy or sell on the chart, but they should be more reliable signals. By using a larger value in calculating the raw value of Stochastics, we slow the indicator down even more. This is why I recommend to traders using FX charts to use the Slow Stochastics with values of 15,5,5. This combination offers fairly reliable signals that can offer solid entries into trading opportunities. The chart below shows the difference between Fast Stochastics with values of 5,5 compared to Slow Stochastics with values of 15,5,5.





You can see how much easier it is to identify the signals using the Slow Stochastics. Being able to use the technical tool effectively is most of the battle. By keeping things simple and consistent, we should start to see consistent results in our trading.

As with all indicators, entering a trade only when the indicator generates an entry that is in the direction of the trend can result in a higher probability of success.

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• 9 Rules for Trading Divergences
• How To Trade Divergences
• DIVERGENCE

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2. Difference between ECN brokers, Market Maker brokers and STP brokers

In this Forex broker video we discuss the main differences between ECN, STP and Market Maker brokers. This is especially useful if you are a new Forex trader so watch the full video for a detailed explanation.

3. Market maker brokers pretending to be ECN brokers

If you desire true market conditions to trade in then you need to use an ECN broker for your trading. However, there are a lot of market maker Forex brokers that pretend to be ECN brokers so watch the video to see how they can fool new traders.

4. Difference between Fixed spreads and Variable spreads in Forex

Fixed spreads are hard to find these days. Variable spreads however, are used widely by various Forex brokers. You just need to make sure that your broker is not using varibale spreads to hunt your stop loss. Watch the video to find out more.

Just received update on FXCM MT4. It is build 574. I guess the new version of metatrader is going live now.

5. Forex Broker delays and re-quotes

Forex brokers can delay the point at which you are able to enter the market. You could wait for 5 or 6 seconds and sometimes, not be able to enter the market at all.

6. Why you need to use a DEMO trading account in Forex

The importance of having a demo account is usually skimmed past by a lot of new traders. A demo trading account is the key to your success, especially if you are new to trading. Watch the video above to find out why.

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Find a Server by the Broker's Name

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Flag breakout with ADX, Momentum and 10EMA

This is a very simple usage of the ADX and Momentum indicator along with the 10EMA to trade a flag pattern. Remember to check the next biggest time frame to confirm direction and then trade the flag in the original time frame.

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How to choose a moving average to trade with

A trader can choose a moving average based on the time frame that he is trading; the trader might choose the moving average to measure minute chart, hourly charts, day charts or even weekly.

The trader can also choose to average the closing price, opening price or median price.

Moving average is commonly used devices to measure strength of trends. The data is precise and its output as a line can be customized to ones preferences.

Using the moving average is one of the basic ways to generate buy and sell signals which are used to trade in the direction of the trend, since the moving average is a lagging and a trend following indicator. The Moving average indicator as a lagging indicator means that it will tend to give late signals as opposed to leading indicators. However, the Moving average as a lagging indicator gives more accurate signals and is less prone to whipsaws compared to leading indicators.

Traders choose the moving average period to use depending on the type of trading they do; short-term, medium-term and long-term.

• Short-term: 10 -50 Period Moving Average
• Medium-term: 50 - 100 Period Moving Average
• Long-term: 100 - 200 Period Moving Average

The period in this case can be measured in minute chart, hourly charts, day charts or even weekly. For our example we will use 1 hour period.

Short term moving averages are sensitive to price action and can spot trends signals faster than the long term moving averages. line more closely than a long term (200 period) average. Shorter term moving averages are also more prone to whipsaws compared to long term ones.

Long term averages help avoid whipsaws, but are slower in spotting new trends and reversals.

Because long term moving averages calculate the average using more price data, it does not reverse as fast as a short term moving average and it is slow to catch the changes in the trend. However the longer term moving average is better when the trend stays in force for a longer time.

The work of a trader is to find a moving average that will identify trends as early as possible while at the same time avoiding fake-out signals (whipsaws).

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Average Directional Movement Index (ADX)

Developed by J. Welles Wilder
The ADX is a momentum indicator used to determine the strength of a price trend; it is derived from the DMI –Directional Movement Index which has two indicators
+DI- Positive Directional indicator
–DI - Negative Directional Indicator
ADX is calculated by subtracting these two values and applying a smoothing function, example a function of ten to come up with a 10 period ADX.

ADX

The ADX is not a directional indicator but a measure of the strength of the trend. The ADX has a scale of Zero -100.
The higher the ADX value the stronger the trend.
ADX value below 20 indicates that the market is not trending but moving in a range.
ADX value above 20 confirms a buy or sell signal and indicates a new trend is emerging.
ADX value above 30 signifies a strong trending market.
When ADX value turns down from above 30, it signifies that the current trend is losing momentum.
ADX indicator combined with DMI- Directional Movement Index
Since the ADX alone is a directionless indicator it is combined with the DMI index to determine the direction of the currency pair.
When the ADX is combined with DMI index a trader can determine the direction of the trend and then use the ADX to determine the momentum of the forex trend.




Technical Analysis of ADX indicator

Buy Signal
A buy signal is generated when the +DI is above –DI, and the ADX is above 20
The Exit signal is generated when the ADX turns down from above 30.

Sell Signal
A short signal is generated when the –DI is above +DI, and the ADX is above 20
The Exit signal is generated when the ADX turns down from above 30.

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Momentum Technical Indicator

The momentum indicator uses equations to calculate the line of plotting. Momentum measures the velocity with which price changes. This is calculated as the difference between the current price candlestick and the average price of a selected number of price bars ago.
Momentum indicator represents the rate of change of the currency’s price over those specified time periods. The faster that prices rise, the bigger the increase in momentum. The faster that prices decline, the bigger the decrease in momentum.
As the price movement starts to slow down the momentum will also slow down and return to a median level.


Technical Analysis of Momentum Technical Indicator

The Momentum indicator is used to generate technical buy and sell signals. The three most common methods of generating trading signals used in Forex trading are:

Zero-Centerline Crossovers Signals:

• A buy signal is generated when Momentum indicator crosses above zero
• A sell signal is generated when Momentum indicator crosses below zero

Overbought/Oversold Levels:
Momentum is used as an overbought/oversold indicator, to identify potential overbought and oversold levels based on previous indicator readings; The previous high or low of the momentum indicator is used to determine the overbought and oversold levels.

• Readings above the overbought level mean the currency pair is overbought and a price correction is pending
• While readings below the oversold level the currency is oversold and a price rally is pending.

Trend Line Breakouts:
Trend lines can be drawn on the Momentum indicator connecting the peaks and troughs. Momentum is a leading indicator and it begins to turn before price thereby making it a leading indicator.

• Bullish reversal- Momentum indicator readings breaking above a downward trend line warns of a possible bullish reversal signal while
• Bearish reversal- momentum readings breaking below an upward trend line warns of a possible bearish reversal signal.