Trading Dictionary: Large Cap Stock
A video defining the term "large cap stock" and how it relates to trading/investing.
http://youtu.be/GH7gVjhMABE
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Trading Dictionary: Large Cap Stock
A video defining the term "large cap stock" and how it relates to trading/investing.
http://youtu.be/GH7gVjhMABE
Trading Dictionary: Money Market Fund
A video defining the term "money market fund," and what it means for investors/traders.
http://youtu.be/nbUqHGht-Xo
Trading Dictionary: Capital Gain
A video definition to help traders and investors understand the meaning of the term "Capital Gain."
http://youtu.be/BaPLwbDwcck
Trading Dictionary: Capital Gains Tax
A definition of capital gains tax for traders/investors.
http://youtu.be/YF8zQi-2BzQ
Trading Dictionary: Capital Loss
This video is designed to help you learn the meaning of the term "capital loss" as it applies to investing and trading.
http://youtu.be/GooGO7HWGQY
Trading Dictionary: Mutual Fund
This video explains what a mutual fund is, and how it relates to trading and investment finance.
http://youtu.be/zbkPLsHU-3A
Trading Dictionary: Passive Management
A video definition of the term "passive management" and how it relates to trading and investment finance.
http://youtu.be/-OBSTP0Pyn0
Trading Dictionary: Dow Jones Industrial Average
What is the Dow Jones Industrial Average ( DJIA )? Watch this short video to find out.
http://youtu.be/j9weGrbJfyw
Trading Dictionary: Benchmark Index
A video defining the term "benchmark index" and how it relates to traders in financial markets.
http://youtu.be/X2H7ipMaZms
Trading Dictionary: Active Management
A video explaining the meaning of the term "active management" with respect to trading.
http://youtu.be/HISAd_QIVmM
Supply and Demand Zones
This video explains what supply and demand zones are (price levels likely to attract many orders), and how to profit from trading around them.
http://youtu.be/2j-hS38GdXE
A Trend-Following Technical Analysis Method
The Technical Tools I Use
First, I largely recommend keeping it simple. I think it is better to focus on a few things and become really good at them rather than trying to learn everything but having a cursory understanding instead of real mastery of many technical analysis subjects. For me, at least, specializing in a few markets and methods is what gives me the edge I need to succeed.
The three technical tools I use are as follows:
1. Horizontal Support and Resistance Levels. Support and resistance is a concept I think is worth mastering; perhaps the most important technical concept, in my opinion. The basic idea is to look for levels that are acting as a “wall” of sorts; a barrier where price tends to have trouble breaking through, and often reverses from. Price levels where support (a lower barrier) and resistance (a higher barrier) emerge signal where buyers and sellers may be sitting. As a result, they are often good entry and exit points; levels where we can find a low-risk way of speculating upon a reversal in price.
Attachment 2715
2. Trendlines. Trendlines are a bit like diagonal support/resistance levels. In order for a trendline to be valid, I like for it to be touched three times, with the market failing to close below it each time, and preferably rallying strongly off it. Trendlines can also be a point that the market reverses from, and thus a potentially low-risk way to speculate upon a price reversal.
Attachment 2716
3. Candlesticks. The last technical concept I like to focus on is candlesticks. Specifically, I look for long wicks -- a condition where the straight line of the candlestick is much longer than the body of the candle. I view long wicks as an indication of where bulls/bears will step in to defend a price level and create a reversal. When a market forms a long wick off a trendline or a support/resistance level, I view it as a particularly favorable sign for a price reversal.
Attachment 2717
Trailing Your Stop
Of course, identifying levels that price will reverse from is only one part of the equation; stop loss placement (the price at which you will exit and take a loss) and position-sizing (how many shares, ounces, or currency units being purchased) are very important. My previous article on managing risk across timeframes illustrates my position-sizing strategy; I believe position-sizing and stop loss management need to be designed in a complementary fashion, in consideration of one another.
Here is my my basic approach:
1. First, I identify where buyers/sellers will step in to defend a price zone, and I place my stop just beyond that reach. Invariably I will miscalculate and incur some losses; I accept this and view it as almost inevitable. What percent of my account I am willing to risk on this trade depends on what timeframe the trade is being placed upon, as I previously noted.
2. Based on where I put my stop-loss, I enter a position size accordingly. For instance, if I purchase stock ABC at $10 per share and place my stop at $9, that means I am risking $1 per share. If I have $1,000 in my account and am willing to risk 2% per trade, that means I can risk $20. This means I can purchase 20 shares.
3. I re-evaluate the market after each candle on the timeframe I place the trade on. For instance, if I am trading off the daily chart, I re-evaluate the position each day, after the new candle forms. What I like to see is a big move in my favor, and a new support/resistance level established. Once I see a new support/resistance level established, I move my stop up accordingly.
4. Once I can move my stop up to break even, I look to take on more risk. One way I like to do this is by looking at a lower timeframe. For instance, once I’m able to trail my stop up to break even or lock in some profits on the weekly timeframe, then I’ll look at the daily timeframe to see opportunities there; once I can enter and safely trail up on the daily, I’ll look at intraday opportunities. Of course, I have to be sure I can manage this within the parameters of my lifestyle; trading on a 15 minute chart and re-evaluating the market every 15 minutes can be exhausting, and may require certain technological aids (smartphones to enable mobility, timers to remind me).
And that’s basically it; my goal is to ride trends until they are exhausted.
http://youtu.be/xEcHpYJqJkI
Moving Average and MACD Combo Strategy
The key steps of the strategy are as follows:
1. Wait for price to be at least 10 pips above the 50 SMA and the 100 SMA
2. At this point, check to see if MACD turned positive within the past 5 candles; if not, re-evaluate the next time MACD does
3. If those criteria are met, enter
4. Place your stop loss order below the 5 candle low
5. When price reaches 2X the distance between your entry and your stop, exit half your position for a profit, and move the remainder to breakeven
6. Exit the rest when price falls 10 pips below the 50 SMA
http://youtu.be/d-1YJvlDVBw
Understanding Standard Deviation in Trading
http://youtu.be/N9LvWy1IGPY
Understanding Standard Deviation in Trading, Part 2: The Math
http://youtu.be/XMLjQKvkOPM
Interview With Richard Duncan, Author of The New Depression
Richard Duncan's web site: http://www.richardduncaneconomics.com
Richard Duncan is author of the following book :
The New Depression: The Breakdown of the Paper Money Economy
Attachment 2943
Here's a summary of the points discussed:
1. The book starts with a discussion of fractional reserve banking, observing the connection between debt and money and how debt and inflation go together.
2. Richard views the current monetary system as flawed and in trouble, but does not view a return to a gold standard of any kind as possible. Rather, he thinks the best hope is for governments to attempt to borrow at very low rates and invest not in consumption but in growth -- invest in projects that will offer a high economic return. He cites investing in a new energy grid as an example.
3. Richard does not view China dumping US Treasuries, or the world decoupling from the dollar as a viable threat. This seems to be part of why he believes there are a few more years left where low interest rates are achievable.
4. In terms of investments, Richard favors real estate that can be turned into rental income. He finds public stocks to be a bit too close to the derivatives crisis, and does not think gold is immune to a severe decline if growth cannot be obtained.
http://youtu.be/QbE5dJjOCv0
Book Review: A Trader's Money Management System
A review of Bennett A. McDowell's book, a trader's money management system.
http://youtu.be/e1iitKeCfmA
Day Trading Methods So Easy Anyone Can Use
Trading price action with John Paul.
http://youtu.be/LBuCclDQb_4
Yes It is Possible to Make a Million Dollars Trading (Quote From Market Wizards)
Michael Marcus told Bruce Kovner that it was really possible to make a $1,000,000 trading
http://youtu.be/JCHNK7JATlo
How to Trade Forex Using RSI Tutorial
DeMarker Indicator
The DeMarker indicator is an indicator used in technical analysis that compares the most recent price to the previous candle's price, attempting to measure whether there is substantial demand for the currency pair.
http://youtu.be/Zky--lmMwXU
Bollinger bands - How To Master Bollinger Bands
Techniques for mastering Bollinger bands for maximum profit. 5 Bollinger bands set-ups and their variations that you must know if you want to use Bollinger bands effectively.
Bollinger bands are about the best indicator you will ever use to help identify high probability trades.
Bollinger bands measure a standard deviation from the mean or middle. Usually the "mean" or middle is a 21 day moving average of closing price.
So you would lay down a 21 day moving average and then a 2.0 standard deviation set of Bollinger bands and when price closed outside of either band it is said to have closed outside a 2 standard deviation band.
http://youtu.be/PONc9GkzFrA
Bollinger Bands and Forex
In this video I'll show you a set-up using Bollinger bands that you can use to make virtually unlimited profits with Bollinger bands.
All you have to do here is pay careful attention to swing structure and price actions failure to print a new swing high. In this case when the new high failed to print on the chart we ended up with nearly a double-top, which is equally as powerful but because the high was actually lower than the previous it wasn't quite a double top.
In this case it was a LOWER SWING HIGH.
When that happened we ended up with a consolidation, a pinching of the bands and then ultimately a nice Bollinger band expansion followed by a break of the lower support levels and a perfect low risk high profit entry into a move that collapsed down to a quick fast 400 pip profit in a total of 4 days.
http://youtu.be/Dge0Mjm4hrc
How to Trade Bollinger Bands - Stocks, Futures, Forex
text of this video :
Bollinger Bands are comprised of three bands which are referred to as the upper band, the lower band, and the center band. The middle band is a simple moving average which is normally set at 20 periods, and the upper band and lower band represent chart points that are two standard deviations away from that moving average.
Example of Bollinger Bands ...
Bollinger bands are designed to give traders a feel for what the volatility is in the market and how high or low prices are relative to the recent past. The basic premise of Bollinger bands is that price should normally fall within two standard deviations (represented by the upper and lower band) of the mean which is the center line moving average. If you are unfamiliar with what a standard deviation is you can read about it here As this is the case trend reversals often occur near the upper and lower bands. As the center line is a moving average which represents the trend in the market, it will also frequently act as support or resistance. The first way that traders use the indicator is to identify potential overbought and oversold places in the market. Although some traders will take a close outside the upper or lower bands as buy and sell signals, John Bollinger who developed the indicator recommends that this method should only be traded with the confirmation of other indicators. Outside of the fact that most traders would recommend confirming signals with more than one method, with Bollinger bands prices which stay outside or remain close to the upper or lower band can indicate a strong trend, a situation that you do not want to be trading reversals in. For this reason selling at the upper band and buying at the lower is a technique that is best served in range bound markets.
Example of Buying and Selling at the Upper and Lower Band ...
Large breakouts often occur after periods of low volatility when the bands contract. As this is the case traders will often position for a trend trade on a break of the upper or lower Bollinger band after a period of contraction or low volatility. Be careful when using this strategy as the first move is often a fake out.
http://youtu.be/XmE809RjzTQ
Forex Trading - How to Use the RSI Indicator
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RSI Indicator Forex Trading Strategy
Relative Strength Index or RSI is the most popular indicator used in Forex trading. It is an oscillator indicator which oscillates between 0 -100. The RSI is a trend following indicator. It indicates the strength of the trend, values above 50 indicate a bullish trend while values below 50 indicate bearish Forex trend.
The RSI measures momentum of a currency.
The centerline for the RSI is 50,crossover of the centerline indicate shifts from bullish to bearish and vice versa.
Above 50, the buyers have greater momentum than the sellers and price of a currency will keep going up as long as RSI stays above 50.
Below 50, the sellers have greater momentum than the buyers and price of a currency will keep going downwards as long as RSI stays below 50.
In the example above, when the RSI is below 50, the price kept moving in a downward trend. The price continues to move down as long as RSI was below 50. When the RSI moved above 50 it showed that the momentum had changed from sell to buy and that the downtrend had ended.
When the RSI moved to above 50 the price started to move upwards and the trend changed from bearish to bullish. The price continued to move upwards and the RSI remained above 50 afterwards.
From the example above, when the trend was bullish sometimes the RSI would turn downwards but it would not go below 50, this shows that these temporary moves are just retracements because during all these time the price trend was generally upwards. As long as RSI does not move to below 50 the trend remains intact. This is the reason the 50 mark is used to demarcate the signal between bullish and bearish.
The RSI uses 14 day period as the default RSI period, this is the period recommended by J Welles Wilders when he introduced the RSI. Other common periods used by forex trader is the 9 and 25 day moving average.
The RSI period used depends on the time frame you are using, if you are using day time frame the RSI 14 will represent 14 days, while if you use 1 hour the RSI 14 will represent 14 hours. For our example we shall use 14 day moving average, but for your trading you can substitute the day period with the time frame you are trading.
To Calculate RSI:
- The number of days that a currency is up is compared to the number of days that the currency is down in a given time period.
- The numerator in the basic formula is an average of all the sessions that finished with an upward price change.
- The denominator is an average of all the down closes for that period.
- The average for the down days are calculated as absolute numbers.
- The Initial RS is then turned into an oscillator.
Sometimes very large up or down movement in price in a single price period may skew the calculation of the average and produce a false signal in the form of a spike.
Center-line: The center-line for RSI is 50. A value above 50 implies that a currency is in a bullish phase as average gains are greater than average losses. Values below 50 indicate a bearish phase.
Overbought and Oversold Levels:
Wilder set the levels at which currencies are overextended at 70 and 30
http://youtu.be/5_vQIa5MrqY
RSI = 100 - 100/[1 - (Average Upward Price Change / Average Downward Price Change)] this calculation means oscillating momentum.
Wilder suggests should be 14, though some traders prefer using a 28 period RSI
After a little information.
As my experience;
FOR TRADE ENTER or EXIT
Wilder recommended using 70 and 30 and overbought and oversold levels respectively.
U can use it for finding the way of market. When the buyer stop buying, when the sellers stop selling.
A position WHEN BASIC MOVES
Attachment 3297
Another way ND told is only at
B position WHEN COMPLEX MOVES
Attachment 3298
LETS HAVE A LOOK MAKET;
Attachment 3299
Also A cross over the centerline of RSI, can be use as confirmation with other indicators.
Trading With Technical Tools in Non-Trending Markets
In this video Head of Development & Risk Management of MahiFX, Simon Coulter will be discussing ways to tell if a market is trending or ranging, and importantly when one is changing to another. He will also be looking at the specific technical tools which assist in trading ranges and trading ranges off support and resistance, economic conditions and currency pairs that support the best range trading.
Breakouts with the ATR
An Easy and Advanced Way to Set Stops
Talking Points:
- Stops are a necessity because no trading strategy wins 100% of the time
- Traders can use ATR to calculate stop distances based on recent price activity
- Price Action can be used to set stops in trending, or ranging market environments
As traders, we know we need them, but it’s much like the advice of ‘get your annual checkup with a Doctor,’ where most of us simply don’t want to do it.
But in the field of trading, risk management isn’t just a preference; it’s a necessity.
And the reason for this is simple: Because you cannot tell the future. And this means that no matter how hard you try, or how great a trader you become, you will simply never be able to avoid losing entirely. And as a natural extension of that fact, since you will lose on some trades, having sloppy risk management means that one or two losers can wipe away the gains of many small winners.
I know this may sound too simplistic; but this is exactly what was found to be The Number One Mistake that Forex Traders Make: They often win more frequently than they lose - but they lose so much when they are wrong that it wipes away all of the gains from their winners and then some.
The first step to avoiding The Number One Mistake Forex Traders Make is to set a stop. This allows you to cap the risk on any one trade, so that if it doesn’t go in your direction, you can stem the bleeding before it becomes too unbearable.
Below, we’re going to look at two popular, yet different ways of setting stops. One easy way that is often employed by professional traders for the sake of simplicity; and another more advanced method that may suit certain trading styles more adequately.
The Easy Way
First off, just because this is an easier way of setting a stop does not make it any less valid. This is classified as ‘the easy way’ simply because most traders can pick this up right now, and begin using it instantly with a minimum of instruction.
Average True Range is a favorite indicator of many professional traders, and one of the great things about it is that it’s rather simple in its design. While many indicators wear multiple hats and try to do a few different things at once, ATR is just a measure of price movements over a specific period of time.
If those movements increase in value, ATR goes up. If those movements decrease, ATR goes down./ATR measures volatility, and this allows traders to set stops based actual market behavior.
There are a few nuances of ATR that traders need to know before applying. We cover these, in depth in the article Managing Risk with ATR. The first is the format with which the indicator displays values. While it looks like an oscillator like RSI, and moves similar to an indicator like ADX; the real value of ATR is in its value. It will measure the ‘Average True Range’ of the last x periods, where x is the input you choose. The default, and most common input for ATR is 14 periods. The value of ATR will read in the price format of the currency pair being analyzed. So, for instance; if a value of .00760 is shown on EURUSD, that means 76 pips (4th place to the right of the decimal is a single pip in the quote).
There is a slightly easier option, and for traders that are using short-term techniques this can be extremely helpful. There is a custom indicator available for Trading Station desktop that automatically calculates, and displays ATR on the chart in a very easy-to-read format. This is completely free, and can be downloaded from the FXCM App Store at this link (link). As you can see below, not only does it display ATR, but it even rounds the ‘.6’ fractional pip as appropriate.
The Advanced Way
[/URL]Price Action can have a huge impact on a trader’s performance. Inclusion of price action into an approach will often take place regardless of the trader or type of trading being done. Price action can help traders read trends, find support and resistance, and perhaps most importantly - manage risks.
Because, after all - if prices are trending higher, and we’re seeing continuous higher-highs, and higher-lows, wouldn’t it be reasonable to consider closing the trade if the trend reversed? Remember, this is the number one mistake traders make, and this is the reason stops are so important. If the trend reverses, the trader’s best advice is often to close the trade and look for greener pasture elsewhere... because if the reversal continues against the trader, one loss can wipe away a lot of gains.
If traders are trading a trend, they can look to the previous opposing-side swing for stop placement. So, if an up-trend is being traded, we should be able to see higher-highs, and higher-lows. If we are buying to take part in the up-trend, we can look to place our stop below the prior swing-low (see picture).
On the other hand, if we’re selling in a down-trend, we would want to look to place our stop above the prior swing-high.
In How to Analyze and Trade Ranges with Price Action, we look at stop placement in
range-bound markets. If a range is being traded, the ‘peak-high’ and ‘peak-low’ should be identified.
Traders can look to place their stop just outside of the peak of the opposing side of their position. So, if buying, traders would look to place their stop just below the peak-low; and if selling just above the peak-high. This way, if the range turns into a breakout against the trader, the bleeding can be stopped before one loser wipes away the gains from a lot of winners.
If you’d like to become a better Price Action trader, we’ve put together the basics into a Brainshark curriculum. The link below will take you directly to the lesson, and after filling in a few pieces of information into the guestbook the session will begin.
http://youtu.be/fCVXbiUQcdg
Forex Channel Trading
A video on trading Forex Channels and how to discover where price is likely to break the channel.
Linear Regression Channel
Similar to the 200-day Moving Average, large institutions often look at long term Linear Regression Channels. A Linear Regression Channel consists of three parts:
- Linear Regression Line: A line that best fits all the data points of interest.
- Upper Channel Line: A line that runs parallel to the Linear Regression Line and is usually one to two standard deviations above the Linear Regression Line.
- Lower Channel Line: This line runs parallel to the Linear Regression Line and is usually one to two standard deviations below the Linear Regression Line.
The multi-year chart of the S&P 500 exchange traded fund (SPY) shows prices in a steady uptrend and maintaining in a tight one standard deviation Linear Regression Channel:
Attachment 3485
The upper and lower channel lines contain between themselves either 68% of all prices (if 1 standard deviation is used) or 95% of all prices (if 2 standard deviations are used). When prices break outside of the channels, either:
- Buy or sell opportunities are present.
- Or the prior trend could be ending.
Linear Regression Channel Buy Signal
When price falls below the lower channel line, a buy signal is usually triggered.
Linear Regression Channel Sell Signal
An opportunity for selling occurs when prices break above the upper channel line.
Other confirmation signs like prices closing back inside the linear regression channel could be used to initiate buy or sell orders. Also, other technical indicators should be used to confirm.
Trend Reversals
When price closes outside of the Linear Regression Channel for long periods of time, this is often interpreted as an early signal that the past price trend may be breaking and a significant reversal might be near.
Linear Regression Channels are quite useful technical analysis charting tools. In addition to identifying trends and trend direction, the use of standard deviation gives traders ideas as to when prices are becoming overbought or oversold relative to the long term trend.
http://youtu.be/CqTbv5K7PXg
Price Action Trading - Channel Breaks
A video on trading Forex Channels and Channel Breaks.
http://youtu.be/UzrwovWbflI
RSI Basics (Relative Strength Index)
This video is focused on how to use the RSI, understanding its construction, general strategies, how to apply divergence, and what its telling us.
RSI Indicator Divergence Trading Setups
Divergence is one of the trade setups used by Forex traders. It involves looking at a chart and one more indicator. For our example we shall use the RSI indicator.
To spot this setup find two chart points at which price makes a new swing high or a new swing low but the RSI indicator does not, indicating a divergence between price and momentum.
Example:
In the chart below we identify two chart points, point A and point B (swing highs)
Then using RSI indicator we check the highs made by the RSI, these are the highs that are directly below Chart points A and B.
We then draw one line on the chart and another line on the RSI indicator.
How to spot divergence
In order to spot divergence we look for the following:
- HH=Higher High- two highs but the last one is higher
- LH= Lower High- two highs but the last one is lower
- HL=Higher Low- two lows but the last one is higher
- LL= Lower Low- two lows but the last one is lower
First let us look at the illustrations of these terms
There are two types of divergence:
- Classic
- Hidden
RSI Classic Bullish and Bearish Divergence Trading Setups
Classic divergence is used as a possible sign for a trend reversal. Classic divergence is used when looking for an area where price could reverse and start going in the opposite direction. For this reason classic divergence is used as a low risk entry method and also as an accurate way of exit out of a trade.
- It is a low risk method to sell near the top or buy near the bottom, this makes the risk on your trades are very small relative to the potential reward.
- It is used to predict the optimum point at which to exit a trade
There are two types:
- Classic Bullish Divergence
- Classic Bearish Divergence
Classic Bullish Divergence
Classic bullish divergence occurs when price is making lower lows (LL), but the oscillator is making higher lows (HL).
Classic bullish divergence warns of a possible change in the trend from down to up. This is because even though the price went lower the volume of sellers that pushed the price lower was less as illustrated by the RSI indicator. This indicates underlying weakness of the downward trend.
Classic bearish divergence
Classic bearish divergence occurs when price is making a higher high (HH), but the oscillator is lower high (LH).
Classic bearish divergence warns of a possible change in the trend from up to down. This is because even though the price went higher the volume of buyers that pushed the price higher was less as illustrated by the RSI indicator. This indicates underlying weakness of the upward trend.
RSI Hidden Bullish and Bearish Divergence Trading Setups
Hidden divergence is used as a possible sign for a trend continuation. Hidden divergence occurs when price retraces to retest a previous high or low.
Hidden RSI Bullish Divergence
Forms when price is making a higher low (HL), but the oscillator is showing a lower low (LL).
Hidden bullish divergence occurs when there is a retracement in an uptrend.
This setup confirms that a retracement move is complete. This divergence indicates underlying strength of an uptrend.
Hidden RSI Bearish Divergence
Forms when price is making a lower high (LH), but the oscillator is showing a higher high (HH).
Hidden bearish divergence occurs when there is a retracement in a downtrend.
This setup confirms that a retracement move is complete. This divergence indicates underlying strength of a downtrend.
http://youtu.be/RrqQ5WGCbp4
Reversals with Bollinger Bands
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Bollinger Bands Indicator Bulge and Squeeze Technical Analysis
The Bollinger Bands are self adjusting which means the bands widen and narrow depending on volatility.
Standard Deviation is the statistical measure of the volatility used to calculate the widening or narrowing of the bands. Standard deviation will be higher when prices are changing significantly and lower when markets are calmer.
- When volatility is high the Bands widen.
- When volatility is low the Bands narrows.
The Bollinger Squeeze
Narrowing of Bands is a sign of consolidation and is known as the Bollinger band squeeze.
When the Bollinger Bands display narrow standard deviation it is usually a time of consolidation, and it is a signal that there will be a price breakout and it shows people are adjusting their positions for a new move. Also, the longer the prices stay within the narrow bands the greater the chance of a breakout
Attachment 3617
The Bollinger Bulge
The widening of Bands is a sign of a breakout and is known as the Bulge.
Bollinger Bands that are far apart can serve as a signal that a trend reversal is approaching. In the example below, the bands get very wide as a result of high volatility on the down swing. The trend reverses as prices reach an extreme level according to statistics and the theory of normal distribution. The "bulge" predicts the change to downtrend.
Attachment 3618
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http://youtu.be/fpafWldDpac
Technical Analysis Tutorial Candlesticks (it is the lesson + practics for the about 2 hours)
We wish to guide you through the fundamentals of technical analysis. In this first class, You will learn what really matters to get the basics of your technical understanding . This class will cover candlestick analysis, trend lines, and support and resistance. You will learn how not to be shaken on a shakeout and how not the be fooled by a false breakout. This is the basics but we go a little beyond the basics into things that many more experienced traders tend to miss. In the future we will progress with more advanced classes in this series covering everything all the way up to importing formulas into your charting package, Elliot wave analysis, and point and figure analysis. But it all starts with this class. Hope you enjoy it , we worked very hard on this class.
http://youtu.be/5Uw9zhmBBzA
MT4 Indicator Review: Heiken Ashi Smoothed (indicator attached)
In this video, we conduct a simple review of how we would trade the Heiken Ashi Smoothed MT4 indicator
In the Video above, the silver moving line is the price. The blue and red indicators are the Heiken Ashi bars. Blue indicates bullish momentum, while red indicates bearish momentum.
This indicator will probably work well in combination with another indicator. It reduces “fake-outs” and fake reversals while keeping you in trends with momentum indicated by the color of the bars.
Heikin Ashi is a type of trading chart that originated in Japan (heikin ashi translates as average bar). Heikin Ashi charts are similar to candlestick and bar charts in that they show similar information (the open, high, low, and close of the time frame), but Heikin Ashi charts calculate the information differently.
Heikin Ashi charts are used in trading in the same manner as standard candlestick or bar charts (i.e. chart patterns are used to indicate price movements). However, Heikin Ashi charts have an additional aspect in that the direction of the bar (i.e. its color for candlesticks) is supposed to indicate the overall direction of the market, while ignoring the intermediate direction (e.g. false changes of direction).
Attachment 3782
http://youtu.be/4tvy12b9xVk
Kuasa Forex trading system was once a very popular trading system among traders from Malaysia, Indonesia and Brunei. This system combined heiken ashi smoothed with bbands_stop_v1, kuskus_starlightv2, fibo_pivotv2 and EMA 34. All indicators attached except heiken_ashi_smoothed where New Digital already attached in previous post.
Attachment 3819
A video showing trades using the kuasa forex system :
http://www.youtube.com/watch?v=wYDsqd2FH3c
Pretty cool way to use the RSI. How to trade using RSI Trading Strategy
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Identify the Trend
The first step to trading any successful trend based strategy is to find the trend! One of easiest ways to find the trend is through identifying a charts swing highs and swing lows. Traders can work from left to right on their graph and identify the outliers in price. If you see the peaks and valleys of price declining consistently, you are looking at a downtrend. If highs and lows are advancing, traders would consider a currency pair to be trending upward.
Given this information, traders should look to sell the AUDNZD as long as price continues to decline towards lower lows. If the trend continues, expectations are that price will decline allowing traders to look for new areas to sell the market.
http://c.mql5cdn.com/3/25/rsi1.png
RSI for Entry
Once a strong trend is established, traders will look to join that trend with a technical market trigger. Oscillators are a family of indicators that are designed specifically to determine if momentum is returning to an existing trend. Below we can again see the AUDNZD 8 Hour chart, but this time the RSI (Relative Strength Index) indicator has been added. Since we have identified the AUDNZD as being in a downtrend, traders will look to sell the pair when the RSI indicator crosses back below a value of 70 (overbought). This will signal momentum returning lower after the creation of a new swing high.
Below you will find several previous examples of RSI entries signaled on the AUDNZD. Remember since the trend is down, only new sell positions should be initiated. At no point should a buy position be considered as price declines.
http://c.mql5cdn.com/3/25/rsi2.png
Manage Risk
Every good strategy needs a risk management component. When trading strong trends such as the AUDNZD, it is important to realize that they will eventually come to an end! Traders have a variety of choices when it comes to stop placement, but one of the easiest methods is to use a previous swing high on the chart. In the event that price breaks towards higher highs, traders will wish to exit any existing sell biased positions and look for new opportunities elsewhere.
Wether you are trading live money or just practicing on a demo it is also recomended to review your trades. This way you can track your progress while making sure you adhere to the strategy rules!
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http://youtu.be/rjZOFrOFO6s
Episode 69: The Aroon Indicator
Aroon Indicator Technical Indicator :
Developed by Tushar Chande
The Aroon indicator is used to determine if a trading instrument is trending or not.
It is also used to indicate how strong the trend is.
The Aroon indicator is used to identify the beginning of a trend, the name aroon means morning or dawn. This indicator is used to identify a trend early thus its name.
The Aroon indicator has two lines
- Aroon UP
- Aroon DOWN
Aroon UP
Percentage of time between the start of a time period and the highest point that price has reached during that period.
If price sets a new high Aroon UP will be 100. For each new high Aroon stays at 100. However, if price moves down by a certain percentage, then that percentage is subtracted from the 100 and Aroon UP starts to move down. This means that if Aroon UP stays at 100 then price is making new highs but when it starts to move down then price is not making new highs.
If However price is making new lows for a particular price period then Aroon UP will be at Zero
Aroon DOWN
Aroon DOWN is Calculated the same as Aroon UP but this time using the lowest point instead of the highest point.
When a new low is set Aroon DOWN is at 100 and when a new high is set Aroon DOWN is at Zero.
Technical Analysis of Aroon Indicator
Aroon uses the 50 % level to measure momentum of the trend.
Buy Signal and exit signal
Aroon UP above 50 is a technical buy signal
Aroon UP dipping below 50 is an exit signal if you had bought the currency.
Sell Signal and exit signal
Aroon DOWN below 50 is a technical sell signal.
Aroon UP rising above 50 is an exit signal if you had sold the currency.
http://youtu.be/UUe3dh82ZlU
How to trade the Relative Vigor Index (RVI) in Forex
Relative Vigor Index Technical Indicator
Developed by John Ehlers
The RVI index combines the older concepts of technical analysis with modern digital signal processing theories and filters to create a practical & useful indicator.
The basic principle behind the RVI index is simple –
- Prices tend to close higher than they open in up-trending markets and
- Prices close lower than they open in down-trending markets.
The momentum (vigor) of the move will therefore established by where the prices end up at the close of the candlestick. The RVI plots two lines the RVI Line and the signal Line.
The RVI index Indicator is essentially based on measuring of the average difference between the closing and opening price, and this value is then averaged to the mean daily trading range and then plotted.
The makes the RVI index a responsive oscillator that has quick turning points that are in phase with the market cycles of prices.
Technical Analysis Ehlers Relative Vigor Index Technical Indicator
The RVI is an oscillator indicator. The basic method of interpreting the RVI Index is to use the crossovers of the RVI and the RVI Signal Line. Signals are generated when the there is a crossover of the two lines.
Bullish Signals- A buy signal occurs when the RVI crosses above the RVI Signal Line. Bearish Signals- A sell signal occurs when the RVI crosses below the RVI Signal Line.
ADX - Average Directional Index
This lesson describes the ADX with the DI+ and DI- Directional Indicators, and also shows how they are commonly use
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.
Using MACD to Determine Buy and Sell Points
MACD Oscillator Technical Analysis Fast Line and Signal Line
MACD is used in various ways to give technical analysis information.
- center line crosses indicate bullish or bearish markets; below zero is bearish, above zero is bullish.
- MACD crossovers indicate a buy or sell signal.
- MACD oscillations can be used to indicate oversold and overbought regions
- Used to look for divergence between price and indicator.
MACD Construction
The MACD is constructed using two exponential moving averages and MACD indicator plots two lines. The two default exponential moving averages used are 12 and 26. Then a smoothing factor of 9 is also applied when drawing.
Summary of how MACD is plotted
MACD uses 2 EMAs + a smoothing factor (12, 26 Exponential Moving Averages and 9 smoothing periods)
MACD only plots two lines- the fast line and the signal line
- The Fast Line is the difference between the 26 EMA and 12 EMA
- The signal line is the 9 period moving average of the MACD fast line.
Implementation
The MACD indicator implements the MACD line as a continuous line while the signal line is implemented as a histogram.
The fast line and signal line is used to generate trading signals using the crossover method.
There is also the center-line which is also known as the zero mark and it is a neutral point between buyers and sellers.
Values above the center-mark are considered bullish while those below are bearish.
The MACD being an oscillator indicator, oscillates above and below this center line.
MACD Technical Analysis Buy and Sell Signals
Since the MACD uses 26 and 12 EMA to plot, we shall compare these two EMAs with the MACD indicator to determine how these signals are generated.
The MACD is a leading indicator meaning it generates signals that are leading compared to price action as opposed to lagging indicators that lag behind the price.
MACD Buy
A buy signal is generated when there is a MACD fast line crosses above the signal line. However, as with any leading indicator these signals are prone to whipsaws/ fake out signals.
To eliminate the whipsaws it's good to wait for confirmation. The signal is confirmed when the two lines cross above the zero mark, when this happens the buy generated is a reliable trading signal.
In the example below, the Moving average generated a buy, before price started to move up. But it wasn't until the MACD moved above the zero line that the signal was confirmed, and the Moving Averages also gave a crossover signal. From experience its always good to buy after both the MACD lines move above zero.
MACD Sell
A sell signal is generated when there is a MACD fast line crosses below the signal line. However, just like the buy signal, these are also prone to whipsaws/ fake outs.
To eliminate the whipsaws its good to wait for confirmation of the signal. The signal is confirmed when the two lines cross below the zero mark, when this happens the sell generated is a reliable trading signal.
In the example below, the Moving average generated a sell confirmed after MACD moved below the zero line at the same time that the Moving Averages gave a crossover signal.
http://youtu.be/U8mIhSf1X2o