Metatrader 5 Overview

Price Bar Reversals (2 of 9) - The Bearish Rejection Pattern

Price Bar Reversals (2 of 9) - The Bearish Rejection Pattern - Part 2 of a video series discussing short term price bar reversals such as the bearish rejection, the bullish rejection, the open close reversal, the closing price reversal, the hook reversal, the key reversal, the island reversal and the pivot point reversal.

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It is important to remember the following guidelines relating to bearish reversal patterns:

• Most patterns require further bearish confirmation.
  
• Bearish reversal patterns should form within an uptrend.
  
• Other aspects of technical analysis should be used as well.

Bearish Confirmation

Bearish reversal patterns can form with one or more candlesticks; most require bearish confirmation. The actual reversal indicates that selling pressure overwhelmed buying pressure for one or more days, but it remains unclear whether or not sustained selling or lack of buyers will continue to push prices lower. Without confirmation, many of these patterns would be considered neutral and merely indicate a potential resistance level at best. Bearish confirmation means further downside follow through, such as a gap down, long black candlestick or high volume decline. Because candlestick patterns are short-term and usually effective for 1-2 weeks, bearish confirmation should come within 1-3 days.


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Existing Uptrend

To be considered a bearish reversal, there should be an existing uptrend to reverse. It does not have to be a major uptrend, but should be up for the short term or at least over the last few days. A dark cloud cover after a sharp decline or near new lows is unlikely to be a valid bearish reversal pattern. Bearish reversal patterns within a downtrend would simply confirm existing selling pressure and could be considered continuation patterns.

There are many methods available to determine the trend. An uptrend can be established using moving averages, peak/trough analysis or trend lines. A security could be deemed in an uptrend based on one or more of the following:

• The security is trading above its 20-day exponential moving average (EMA).
  
• Each reaction peak and trough is higher than the previous.
  
• The security is trading above a trend line.

These are just three possible methods. Some traders may prefer shorter uptrends and qualify securities that are trading above their 10-day EMA. Defining criteria will depend on your trading style, time horizon and personal preferences.

based on this article.

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Price Bar Reversals (3 of 9) - The Bullish Rejection Pattern

The Bullish Rejection Pattern - Part 3 of a video series discussing short term price bar reversals such as the bearish rejection, the bullish rejection, the open close reversal, the closing price reversal, the hook reversal, the key reversal, the island reversal and the pivot point reversal.

More info - read this article - Candlestick Bullish Reversal Patterns

Price Bar Reversals (4 of 9) - Open Close Reversal

The Open Close Reversal - Part 4 of a video series discussing short term price bar reversals such as the bearish rejection, the bullish rejection, the open close reversal, the closing price reversal, the hook reversal, the key reversal, the island reversal and the pivot point reversal.

Price Bar Reversals (5 of 9) - The Closing Price Reversal

The Closing Price Reversal - Part 5 of a video series discussing short term price bar reversals such as the bearish rejection, the bullish rejection, the open close reversal, the closing price reversal, the hook reversal, the key reversal, the island reversal and the pivot point reversal.

How to Use the Accumulation/Distribution Momentum Indicator

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Accumulation Distribution uses volume to confirm price trends or warn of weak movements that could result in a price reversal.

• Accumulation: Volume is considered to be accumulated when the day's close is higher than the previous day's closing price. Thus the term "accumulation day"
• Distribution: Volume is distributed when the day's close is lower than the previous day's closing price. Many traders use the term "distribution day"

Therefore, when a day is an accumulation day, the day's volume is added to the previous day's Accumulation Distribution Line. Similarly, when a day is a distribution day, the day's volume is subtracted from the previous day's Accumulation Distribution Line.

The main use of the Accumulation Distribution Line is to detect divergences between the price movement and volume movement. An example of the Accumulation Distribution Line is shown below in the chart of the Nasdaq 100 exchange traded fund QQQQ:

Volume Interpretation

The basic interpretation of volume goes as follows:

• Increasing and decreasing prices are confirmed by increasing volume.
• Increasing and decreasing prices are not confirmed and warn of future trouble when volume is decreasing.

For more in-depth analysis of Volume.

High #1 to High #2

The Nasdaq 100 made an equal high at High #2; however, the Accumulation Distribution Line failed to make an equal high, in fact it made a lower high. On average, less volume was transacted on the move higher at High #2 than occured on the first move higher at High #1; thus, this could be interpreted as there being less strength and conviction behind the rally in the Nasdaq the second move higher. This failure of the Accumulation Distribution Line signaled a strong bearish divergence.

High #3 to High #4

Again, the Accumulation Distribution line made a lower high, even though the Nasdaq 100 this time made a higher high. This bearish divergence warned that the second move to make a higher high in price lacked conviction.

Low #1 to Low #2

The bearish divergence from Low #1 to Low #2 confirmed the later bearish divergence of High #3 to High #4. On average, more volume was occuring on down days than up days, even while the Nasdaq 100 was making higher highs and higher lows, which usually is considered a sign of strength.

In summary, the Accumulation Distribution Line is a very effective tool to confirm price action and show warnings of potential price reversals. It is important to incorporate volume into price analysis, and the Accumulation Distribution Line is one of many indicators to do just this. Other indicators that include price and volume analysis and could be considered more accurate than the Accumulation Distribution Line include the Chaikin Oscillator, Money Flow Index, and Price Volume Trend indicator.

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One Indicator Stock Traders Must Follow

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Price Bar Reversals (6 of 9) - Hook Reversal

The Hook Reversal - Part 6 of a video series discussing short term price bar reversals such as the bearish rejection, the bullish rejection, the open close reversal, the closing price reversal, the hook reversal, the key reversal, the island reversal and the pivot point reversal.

Price Bar Reversals (7 of 9) - The Key Reversal

The Key Reversal - Part 7 of a video series discussing short term price bar reversals such as the bearish rejection, the bullish rejection, the open close reversal, the closing price reversal, the hook reversal, the key reversal, the island reversal and the pivot point reversal.

Price Bar Reversals (8 of 9) - The Island Reversal

The Island Reversal - Part 8 of a video series discussing short term price bar reversals such as the bearish rejection, the bullish rejection, the open close reversal, the closing price reversal, the hook reversal, the key reversal, the island reversal and the pivot point reversal.

Price Bar Reversals (9 of 9) - The Pivot Point Reversal

The Pivot Point Reversal - Part 9 of a video series discussing short term price bar reversals such as the bearish rejection, the bullish rejection, the open close reversal, the closing price reversal, the hook reversal, the key reversal, the island reversal and the pivot point reversal.

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Discover a whole 'other world' of technical analysis, where novice traders fear to go.

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Technical Analysis of Moving Average Forex Indicator

Forex Trend Identification

The moving average can be used as an indicator for generating Forex trading signals. A buy or sell Forex signal is generated when price either moves above or below the moving average, respectively.

If the MA is heading upward in diagonal manner then the general Forex market trend is upwards.

If the on the other hand the MA is heading downwards in diagonal manner then the general Forex market trend is downwards.

Upward Forex Trend/Bullish Trend

If the MA is moving up, then the trend is upwards and the signal generated is a buy/bullish signal.

As long as the price location is above the moving average then the Forex trend will remain as an upward trend. The moving average will act as a “support level” and price action of the chart candlesticks should not close below the MA.

Moving Average Buy Signal

When the price moves above the MA and closes above the moving average, a buy signal is generated.

Forex Traders, who want to confirm the trade signal before implementing it, should wait until the MA line turns and starts to move in an upward direction. It is always best to wait for the confirmation signal so as to reduce chances of a whipsaw.




Downward Forex Trend/Bearish Market

If the MA is moving down, then the Forex trend is downwards and the signal generated is a sell/short signal.

As long as the price location is below the MA then the trend will remain as a downward bearish Forex trend. The MA will act as a “resistance level” and price action of candlesticks should not close above the MA.

Moving Average Sell Signal

When the price moves below the MA and closes below the moving average, a sell signal is generated.

Traders who want to confirm the signal should wait until the MA line turns and starts to move in a downward direction. This will reduce the chance of trading a whipsaw.






Range Market signals

Range Market signals can also be identified using the MA. Range Market signals will be illustrated in the next lesson.

Moving average crossover method

Moving average crossover method is also another Forex trend generation method that is more favored by the Forex traders compared to the above signal generation method. It is also the simplest form of a Forex trading system widely used by traders. This MA crossover method is combined with other Forex technical indicators to form more complex Forex trading systems

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Moving Average Whipsaws in Range Market

The MA is a useful indicator to trade with when a trend has formed. However the indicator is prone to whipsaws when the price is trading in range market.

The MA is prone to whipsaws during a ranging market because the price is volatile and keeps moving around the average, causing the indicator to give signals indicating upward trend and then quickly changing to give sell signals.

It is for this reason that the MA should not be used to trade in a range based market.




Ranging Market & Whipsaws

This is why it is best to combine this indicator with other indicators when generating trading signals to trade currencies with.

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Moving Average Support and Resistance Levels

Moving Averages can be used as points of support and resistance.

When price reaches the moving average, the MA level can act as a point of support or resistance for the price.

Buy Signal

If price is on an up trend and starts to retrace, then most traders might wait to buy at a better price when the price hits a support level. Traders will sometimes use the MA to determine the support level.

A buy signal is generated when price hits the MA, turns and starts moving in the upward direction. The signal is confirmed when price closes above the MA. Because many traders use the moving averages to generate trading signals, price will normally react to these levels.

A stop loss should be set just below the MA. Ideally it should be set a few pips below the previous low.




Sell Signal

If price is on a down trend and starts to retrace, then most traders might wait to sell at a better price when the price hits a resistance level. Traders will sometimes use the MA to determine the resistance level.

A sell signal is generated when price hits the MA, turns and starts moving in the downward direction. The signal is confirmed when price closes below the MA. Because many traders use the moving averages to generate trading signals, price will normally react to these levels.

A stop loss should be set just above the MA. Ideally it should be set a few pips above the previous high.


Resistance turns support

When a resistance is broken it turns into support and vice versa.

This happens when the fundamentals of a currency change and consequently the direction of a currency pair. The direction change is reflected by the moving average, the direction is confirmed when the resistance turns into support or vice versa (when support turns into resistance)

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