Then follow the indexation, smoothing, and SlowK plotting of this calculation. The SlowD, which is SlowK's smoothed average, is traced as well. The values of SlowK and SlowD may vary (oscillate) from 0 to 100. The Stochastics direction follows the price movement, e.g. the increasing prices cause the Stochastics raise.
Non-confirming or divergent points can also be found out through Stochastics. E.g. a fake situation is observed when the Stochastics doesn't support the new price increase. Extremely high or low values of Stochastic may also be an indicator of an overbought or oversold market, while an opposite sign is given when the SlowD is crossed by the SlowK.
Both Slow Stochastic and a five-day moving average of a 12-day interval chart the stochastic. The accuracy of the indicators and volatility reduction are tried to be reached by the Stochastic Oscillator smoothing.
The obvious signals of the stochastic are oversold situation at values over 80 and overbought one with values lower than 20.
The mild trend having bias that are slightly up or down as well as broad trading ranges are best for applying Stochastics. The market trending persistently with only minor corrections is the worst for the stochastics usage. The stochastics give an opportunity to enter the trade at the period when the reaction for the trend signal weakens (which is shown by stochastic crossing taking place at any level.) and ignore any oversold or overbought signals that means trading by trend.
Friday, January 23, 2009
Intraday Momentum (IMI
combination of the Relative Strength Index and Candlestick Analysis gives the Intraday Momentum Index, that was developed by Tushar Chande.
The IMI calculation is similar to RSI, but intraday opening and closing prices relationships are used here in order to find out if the day is up or down. An up day means that the close is higher than the open. It is signified by white candlesticks. A down day means that the close is lower than the open and it is signified by black candlesticks.
As well as RSI, the index rise over 70 indicates overbought conditions, that mean lower prices in future. Index values lower than 30 mean a possibility of oversold situation that is followed by higher prices. You should estimate the forex market trendiness using all overbought/oversold indicators before taking any actions on an signals.
The IMI calculation is similar to RSI, but intraday opening and closing prices relationships are used here in order to find out if the day is up or down. An up day means that the close is higher than the open. It is signified by white candlesticks. A down day means that the close is lower than the open and it is signified by black candlesticks.
As well as RSI, the index rise over 70 indicates overbought conditions, that mean lower prices in future. Index values lower than 30 mean a possibility of oversold situation that is followed by higher prices. You should estimate the forex market trendiness using all overbought/oversold indicators before taking any actions on an signals.
momentum
The Momentum indicator calculates the value of the commodity price shifts during a definite period of time.
The main ways of using this indicator are the following:
Momentum is used as a leading indicator. This tool uses the notion that as a rule the last phase of upward tendency is followed by absolute price increase because everyone is sure that it'll go on. In its turn, the closing of the bears' market is usually followed by absolute decrease in prices because everyone seeks after leaving the market. This is a rather usual situation in the market but it's important to understand that still it is quite a general conclusion.
Like MACD, Momentum is used as an oscillator following the tendency. In this situation of usage, if the indicator makes trough and begins to grow, the signal to purchase is sent; if it comes up to its high and turns downwards the signal to sell is sent. It is worth using its short moving average to determine the indicator's turning points.
Momentum calculates the currency's rate-of-change, being a leading indicator. An oscillator that shifts above and below 100 is formed by the current plot. Bearish and bullish interpretations are found by seeking discrepancies, extreme readings and centerline crossovers.
The momentum can be of either positive or negative values. The prices fall if the current price of closing is less than the price of closing of days back so. Negative values of momentum mean that the current price of closing is higher than the price of closing or days back, and that's why the prices grow if Momentum is of the positive value.
The absolute value of Momentum characterizes the velocity of movement of the prices; the large absolute value of Momentum means fast movement of the prices.
About a zero point the chart of the Momentum shifts. If the chart crosses the zero line, it means changing of direction of shift, which means that the market has lost the moment of movement. The price still can grow, when the Moment already will reach the zero point. After crossing a zero line, the movement below zero is signal to sale, above zero - means a signal to purchase,.
A definite investing or trading style is also characterized by Momentum. The rational is that the hot get hotter and the cold get colder. Bullish momentum players purchase currency pairs or commodities that are popular or that they think are going to be popular. At last, popularity grows, the advance will quicken. Price acceleration resembles an increase in momentum.
The main ways of using this indicator are the following:
Momentum is used as a leading indicator. This tool uses the notion that as a rule the last phase of upward tendency is followed by absolute price increase because everyone is sure that it'll go on. In its turn, the closing of the bears' market is usually followed by absolute decrease in prices because everyone seeks after leaving the market. This is a rather usual situation in the market but it's important to understand that still it is quite a general conclusion.
Like MACD, Momentum is used as an oscillator following the tendency. In this situation of usage, if the indicator makes trough and begins to grow, the signal to purchase is sent; if it comes up to its high and turns downwards the signal to sell is sent. It is worth using its short moving average to determine the indicator's turning points.
Momentum calculates the currency's rate-of-change, being a leading indicator. An oscillator that shifts above and below 100 is formed by the current plot. Bearish and bullish interpretations are found by seeking discrepancies, extreme readings and centerline crossovers.
The momentum can be of either positive or negative values. The prices fall if the current price of closing is less than the price of closing of days back so. Negative values of momentum mean that the current price of closing is higher than the price of closing or days back, and that's why the prices grow if Momentum is of the positive value.
The absolute value of Momentum characterizes the velocity of movement of the prices; the large absolute value of Momentum means fast movement of the prices.
About a zero point the chart of the Momentum shifts. If the chart crosses the zero line, it means changing of direction of shift, which means that the market has lost the moment of movement. The price still can grow, when the Moment already will reach the zero point. After crossing a zero line, the movement below zero is signal to sale, above zero - means a signal to purchase,.
A definite investing or trading style is also characterized by Momentum. The rational is that the hot get hotter and the cold get colder. Bullish momentum players purchase currency pairs or commodities that are popular or that they think are going to be popular. At last, popularity grows, the advance will quicken. Price acceleration resembles an increase in momentum.
Other combinanciones moving average recommended
Exponential 5 13 14
Simple 4 9 18
. EMA 20
2. Momentum 14Signal to buy When the price pierces heavily to the EMA of 20 upwards Signal Sale When the price pierces the heavily EMA 20 to the low The indicator Momentum is a big help to tell the market trend
This strategy is very similar to the strategy of the tunnel. Indicators
1 exponential moving average of 20 high
2 exponential moving average of 20 low
3 exponential moving average of 20 close
4 exponential moving average of 4 close
5 exponential moving average of 70 close
Signal BuyWe hope that the EMA 4-enter the tunnel and is projected upwards by the central EMA, we expect to come out by the EMA 20 high.
We place a purchase order when the EMA 4 exit the tunnelSignal Sale We hope that the EMA 4-enter the tunnel and is projected downwards by the central EMA, we expect to come out by the EMA 20 under. We placed an order for sale when the EMA 4 exits the tunnelThe EMA 70 shows the trend of the market. Buy only when the price is above the EMA 70. Sell only when the price is below the 70 EMATake Profit
1. The half of lots exits the range that exists between the EMA 70 and the opening price
2. The other half of the lots, when the EMA 4 touches to the EMA 20 blue, or the EMA 20 yellow central
The Stop Loss place it in the price you tell us the EMA 70
Simple 4 9 18
. EMA 20
2. Momentum 14Signal to buy When the price pierces heavily to the EMA of 20 upwards Signal Sale When the price pierces the heavily EMA 20 to the low The indicator Momentum is a big help to tell the market trend
This strategy is very similar to the strategy of the tunnel. Indicators
1 exponential moving average of 20 high
2 exponential moving average of 20 low
3 exponential moving average of 20 close
4 exponential moving average of 4 close
5 exponential moving average of 70 close
Signal BuyWe hope that the EMA 4-enter the tunnel and is projected upwards by the central EMA, we expect to come out by the EMA 20 high.
We place a purchase order when the EMA 4 exit the tunnelSignal Sale We hope that the EMA 4-enter the tunnel and is projected downwards by the central EMA, we expect to come out by the EMA 20 under. We placed an order for sale when the EMA 4 exits the tunnelThe EMA 70 shows the trend of the market. Buy only when the price is above the EMA 70. Sell only when the price is below the 70 EMATake Profit
1. The half of lots exits the range that exists between the EMA 70 and the opening price
2. The other half of the lots, when the EMA 4 touches to the EMA 20 blue, or the EMA 20 yellow central
The Stop Loss place it in the price you tell us the EMA 70
moving average strategy
SYstem TradingAnd here we are again talking about the strategy that withstood the test of time. This commodity trading method is based on the same study of defining support and resistance levels and trading upon the fact of their violation.A trading setup requires only an open chart and no restrictions for the currency or timing preferences.Entry rules: Once the price makes it through the “pivot Line” - dotted white line on the figure below (drawn using the latest price peak) - and closes above (for uptrend) or below (for downtrend) the line buy/sell accordingly.Exit rules: not set. However, exit can be found using Fibonacci method; or traders can measure the distance between point 2 and point 3 and project it on the chart for exit.Additions: as an additional tool traders can use MACD (12, 26, 9). The rules for entry then will be next - let’s take a SELL order:When MACD lines cross downwards, you look for 1-2-3 set-up to form. When the price starts “attacking” the “pivot Line” you check that MACD is still in SELL mode (two lines are heading down). Once the price closes below the “pivot Line” – place Sell order.
Trading System
Can be used in any chart, but I recommend in 4 hours charts1. Moving averages- Exponential moving average of 3 (for my green) - Exponential moving average of 14 (blue) - Exponential moving averages of 28 (red)
All-closure2.
We place an RSI of 14 periods red, with a simple moving average of 7 periods of blue. We place the respective vertical lines of 70, 50 and 30
3. Put one of MACD: -
Period 9 -
Period quick 12 -
Period 26 slower
4. And finally a period of 7 ADX exponentially, so that he can indicate the strength of the pair. Place lines of references in sections 10, 20, 40 and 50
The first indicator that we have to do is the ADX, indicating the strength of buying or selling.
1. Buy when the moving average of 3 periods (green) crosses and 14 (blue) and 28 (red), the RSI crosses its moving average upward, and the MACD signal to buy into this. Wait for the opening of the next sail to enter.
2. Sell when the moving average of 3 periods (green) crosses and 14 Blue and 28 (red), the RSI crosses its moving average to low and the MACD signal in this offering. Wait for the opening of the next sail to enter.
Departures 1.
We must be alert to the candles. When you see a candle significant change in trend, it is sign of Departure.
2. We can also expect the RSI crossing its moving average
3. And if you want to risk more, letting tap the moving average of 3 to any of the other moving averages.
Trading System
Can be used in any chart, but I recommend in 4 hours charts1. Moving averages- Exponential moving average of 3 (for my green) - Exponential moving average of 14 (blue) - Exponential moving averages of 28 (red)
All-closure2.
We place an RSI of 14 periods red, with a simple moving average of 7 periods of blue. We place the respective vertical lines of 70, 50 and 30
3. Put one of MACD: -
Period 9 -
Period quick 12 -
Period 26 slower
4. And finally a period of 7 ADX exponentially, so that he can indicate the strength of the pair. Place lines of references in sections 10, 20, 40 and 50
The first indicator that we have to do is the ADX, indicating the strength of buying or selling.
1. Buy when the moving average of 3 periods (green) crosses and 14 (blue) and 28 (red), the RSI crosses its moving average upward, and the MACD signal to buy into this. Wait for the opening of the next sail to enter.
2. Sell when the moving average of 3 periods (green) crosses and 14 Blue and 28 (red), the RSI crosses its moving average to low and the MACD signal in this offering. Wait for the opening of the next sail to enter.
Departures 1.
We must be alert to the candles. When you see a candle significant change in trend, it is sign of Departure.
2. We can also expect the RSI crossing its moving average
3. And if you want to risk more, letting tap the moving average of 3 to any of the other moving averages.
Weekly 3 Bar Pattern by neeru
The Weekly 3 bar Pattern is a strategy which is ideal for position trading and is very effective on larger time frames, like the daily or the weekly chart.
Basically this technique allows a trader to stay with the trend for a longer period of time.
You can use a candlestick or bar charts along with the DMI indicator with a setting of 10. But I prefer the candlestick charts since reversal patterns are easier to spot on this.
Our strategy is to determine if the pullback of price in an ongoing trend will lead to a change in trend direction or will turn out to be just a retracement. Hence we choose an indicator which tells us when price is in the overbought/oversold area.
Any oscillators like the slow stochastic, RSI or MACD will give us this information but these oscillators have a basic drawback which defeats the very purpose of our strategy.
In a strongly trending market the oscillators remain overbought/oversold for an extended period of time, thus giving false signals. So we use the DMI indicator, which gives more accurate information on a change of momentum.
We will look at the technique for a short setup and simply reverse the rules for a long setup. The basic function of the DMI indicator is to confirmed a trend when the (+) DMI line has crossed the (–) DMI line (in case of the uptrend). The end of the current trend is signaled by the DMI when it reaches an overbought/oversold area and starts turning from there. This indicates a change in momentum of price, and we would expect price to start moving to the downside. But the change in momentum does not necessarily mean a change in trend. It could also mean that price is catching its breath to resume the main trend. (A reading of 45 on the DMI is considered overbought and we will use this setting to define the change in the DMI.) So we use price action for a confirmation, which brings us to the 3 bar pattern. We look for the highest high in an uptrend when the DMI reading is +45 and starts retracing down. It would probably be the bar where the DMI is at its peak. We then count back 3 bars from this the bar which has made the highest high (including the highest high bar) and we place our sell stop orders beneath the low of this third bar. We can define the exact parameters of our setup for this technique as-
Price is in an uptrend, with the (+) DMI line above the (-) DMI line.
The (+) DMI line exceeds the 45 reading and starts retracing down.
We identify the highest high at or before the price bar where the DMI turned down.
We count back 3 bars from this highest high bar (including the highest high bar.)
We place our sell stop order beneath the low of this third bar. Now if this retracement is just a temporary pullback, then price should not cross the low of this third bar. In which case our order does not get filled and we look for a long entry to remain in the uptrend. If, on the other hand, price does break this low of the third bar, it would mean that a change in trend has taken place. This low of the third bar is chosen because it is far enough away to give the market enough room for a pullback and also far enough away to avoid getting caught in stop running. This allows us to remain in the existing uptrend for a longer time and also get into a new trend much earlier as we can use the stop level as an entry level for a new position. Looking at this example of the NZD/USD weekly chart we have two situations where the DMI crossed the 45 mark (marked as the blue line). This is the identifying set-up for this technique and we follow the rules
Basically this technique allows a trader to stay with the trend for a longer period of time.
You can use a candlestick or bar charts along with the DMI indicator with a setting of 10. But I prefer the candlestick charts since reversal patterns are easier to spot on this.
Our strategy is to determine if the pullback of price in an ongoing trend will lead to a change in trend direction or will turn out to be just a retracement. Hence we choose an indicator which tells us when price is in the overbought/oversold area.
Any oscillators like the slow stochastic, RSI or MACD will give us this information but these oscillators have a basic drawback which defeats the very purpose of our strategy.
In a strongly trending market the oscillators remain overbought/oversold for an extended period of time, thus giving false signals. So we use the DMI indicator, which gives more accurate information on a change of momentum.
We will look at the technique for a short setup and simply reverse the rules for a long setup. The basic function of the DMI indicator is to confirmed a trend when the (+) DMI line has crossed the (–) DMI line (in case of the uptrend). The end of the current trend is signaled by the DMI when it reaches an overbought/oversold area and starts turning from there. This indicates a change in momentum of price, and we would expect price to start moving to the downside. But the change in momentum does not necessarily mean a change in trend. It could also mean that price is catching its breath to resume the main trend. (A reading of 45 on the DMI is considered overbought and we will use this setting to define the change in the DMI.) So we use price action for a confirmation, which brings us to the 3 bar pattern. We look for the highest high in an uptrend when the DMI reading is +45 and starts retracing down. It would probably be the bar where the DMI is at its peak. We then count back 3 bars from this the bar which has made the highest high (including the highest high bar) and we place our sell stop orders beneath the low of this third bar. We can define the exact parameters of our setup for this technique as-
Price is in an uptrend, with the (+) DMI line above the (-) DMI line.
The (+) DMI line exceeds the 45 reading and starts retracing down.
We identify the highest high at or before the price bar where the DMI turned down.
We count back 3 bars from this highest high bar (including the highest high bar.)
We place our sell stop order beneath the low of this third bar. Now if this retracement is just a temporary pullback, then price should not cross the low of this third bar. In which case our order does not get filled and we look for a long entry to remain in the uptrend. If, on the other hand, price does break this low of the third bar, it would mean that a change in trend has taken place. This low of the third bar is chosen because it is far enough away to give the market enough room for a pullback and also far enough away to avoid getting caught in stop running. This allows us to remain in the existing uptrend for a longer time and also get into a new trend much earlier as we can use the stop level as an entry level for a new position. Looking at this example of the NZD/USD weekly chart we have two situations where the DMI crossed the 45 mark (marked as the blue line). This is the identifying set-up for this technique and we follow the rules
Subscribe to:
Posts (Atom)