Indicators and EAs in MT4

The Right Way to Trade Overbought/Oversold Oscillators -- With the Trend

The basic points discussed in the video are as follows:

1. Only go short if price is below the 50 simple moving average
2. Only buy if price is above the 50 simple moving average
3. If price is above the 50 SMA and the oscillator reaches an overbought level, wait for a pullback. If price rallies and goes back to where it was when the oscillator flashed the overbought signal, then buy
4. The same principle can be applied with oversold levels and shorting when price is below the 50 SMA

Al Brooks' Moving Average Gap Bar Strategy

The basic elements of the strategy are as follows:

1. Identify a market that is in a bear trend on the 5 minute chart
2. Wait for a retracement in which the low of latest candle is above the 20 EMA
3. Go short, targeting the low of the day.

To be clear, Brooks' approach to price action trading is much more thorough; this strategy is just one tool in his arsenal.

Interview With Al Brooks, Price Action Day Trader

Here is a summary of some of the key points:

1. Brooks is a price action trader with 27+ years of experience.
2. He is an active day trader, trading off the 5 minute chart. He trades the entire day.
3. He has a purely technical approach, relying totally on price action with just a few moving averages.
4. His approach is entirely rules-based; he not use any discretion and does not consider relying on intuition.
5. He states his setups have worked for decades and continue to work.

Brooks' analysis relies on measuring movements (i.e. retracements), gauging the strength of trends, and analyzing candlesticks.

Brooks has authored a number of books on trading. Interested traders may find it worthwhile to check out his page on Amazon.

Technical Analysis of Trading Indicators - Moving averages
Simple moving averages can be a powerful tool in your trading

How To trade forex using moving average

Magic Moving Average?

An introduction to Moving Averages and the quest for the perfect Moving Average.

How To Trade Moving Averages

Forex Trading Types Of Moving Averages

Trading with Moving Averages

This video gives insights and tips for how to trade with moving averages on a short or longer term basis.

Talking Points
- The 200-day simple moving average is one of the most widely watched technical indicators
- This moving average can be indentify a significant area of support in an uptrend
- The confluence of the 200-day simple moving average and a major price support zone provides a low risk trading opportunity to join an uptrend

Forex traders have an overwhelming selection of indicators to choose from to help them locate a trading opportunity. Some of these brand new indicators are costly and promise to be the “Holy Grail”. Others are free and not so new but have withstood the test of time. One such indicator is the 200-day simple moving average (SMA).

Since there are roughly 200 trading days in a year, a currency that is trading above its average 200 SMA is considered bullish. It can also be simply used to find major support so traders can enter an uptrend with an excellent risk to reward ratio.

Learn Forex: NZDUSD 200-Day Simple Moving Average Bounce



In the example above, we can see a strong uptrend in the daily NZDUSD chart. The trend started at the end of August at 0.7718 from below the 200-day simple moving average crossed above the 200-SMA on 9/16 and reached a high of 0.8434 on 9/19. Traders who missed the over 700 pip move had a second chance to join this powerful trend as NZDUSD retraced back and bounced from the blue 200-day simple moving average in the 0.8200 neighborhood.

In Forex, numbers ending in “00” usually act as significant areas of support and resistance as well. The confluence of these two factors gave traders added confidence in a resumption of the trend. From the rebound on 10/2, NZDUSD did not disappoint as the bulls as price pushed up over 300 pips higher topping out at 0.8543 on 10/22.

However, nothing moves in a straight line forever including NZDUSD. But after a 300 pip decline, NZDUSD has just rebounded from its 200-day simple moving average (0.8177) and prior round number support at 0.8200. This setup could be a replay of the 10/2 rally and the 200-day simple moving average is about 80 pips away with the old 9/19 high at 0.8434 is 182 pips away.
In sum, the confluence of an uptrend line, round number support and our old friend, the 200-day simple moving average point give traders a good 1:2 risk to reward setup. Traits of Successful Traders research by FXCM of over 12 million real trades by clients worldwide in 2009 and 2010 revealed that the number one mistake that traders made was not using a minimum of a 1:2 risk/reward ratio.

Locating where price is in relation to the 200-day simple moving average can help Forex traders find entries that have a greater chance of making more money than the amount placed at risk.

--- Written by Gregory McLeod, Trading Instructor

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