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Category: Forex Indicators (page 1 of 2)

84 FOREX TECHNICAL INDICATORS EXPLAINED

Accumulative Swing Index
The Accumulative Swing Index is a cumulative total of the Swing Index, which calculates the strength of a security by comparing the open, high, low and close prices with previous values.

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GANN Theory Explained

WILLIAM DELBERT GANN (1878 – 1955)

Gann’s life story is very colorful and compelling. Born in Texas in farmers family, he started trading when he was 24 (1902).

It is a known fact (mainly through his books) that he was a religious man but also interested in science. His rich knowledge of ancient mathematics as well as Greek and Egyptian cultures was most likely acquired due to the fact he was a Freemason of the Scottish Rite Order.

Gann developed many tools such as Gann angles, Square of 9, Hexagon, Circle of 360. His analysis are based on ancient mathematics, astrology, astronomy and geometry. Very wide range of methods which in my opinion explains why the gap between the critics who admire his work, and the ones that are strongly against it, is wide.

EARLY PREDICTIONS

He is famous for many but probably one of the most distinguishing ones is during the World War I, when Gann predicted the abdication of the Kaiser on November 9th, 1918 which was the end of the war.

According to many he also forecasted the Japanese attack on Pearl Harbor which started the air war between the two countries, in his book from 1927 “Tunnel Through The Air”. Right or wrong I will leave it to you to judge.

When it comes to financial forecasts he predicted the continuation of the rally in 1929 due to speculations and that the market will reach new high – until early April.

Gann published his daily forecast “The Supply and Demand Letter” where he would analyze commodities and stocks. In a while when his newsletter picked up more and more readers, he issued several books. “Truth” which was featured in the Wall Street Journal turns out to be one of his best works. This is when he released to the public his trading methods, knows as the Gann Studies.

GANN STUDIES A.K.A. GANN THEORY

The GANN theory is basically the correlation between patterns, price and time and how all three relate to the market. According to GANN those are the 3 most valuable aspects of trading that could best describe and predict the future movements of the markets.

Any of these 3 elements could provide a signal on its own but according to the GANN theory if you are patient enough, to wait for all three to “tell” you the same thing, your odds will tremendously increase. This is exactly what happened in the early years of Gann’s trading career when he found “the market time factor”. The year was 1908, Gann opened two accounts ($300 and $150) to test out his new findings and strategy. In only one month he managed to turn the $150 into $12,000 and the $300 brought him a profit of $25,000 in a quarter. These achievements gained him the respect of Wall Street, making him one of the pioneers of technical analysis as well as one of the best analysts!

Fascinating, isn’t it?

MATHEMATICS IN GANN THEORY

As it was already mentioned above, Gann had a huge passion for numbers and mathematics. He applied his knowledge towards finding patterns in the market, and judging by his results, he found the correlation. The square of numbers for example, plays a significant role in his trading and analysis. The numbers, that he believed are really important are : 16, 25, 36, 49, 64, 121 and 144. As per his understanding, the market would move in patterns that was strongly correlated to this numbers and their squares. For example a specific rally might find strong resistance 64 cents or 64 days from the bottom.

KEY NUMBERS IN GANN THEORY

Some of the numbers that Gann would use in his analysis: 12 (it has biblical and astrological meaning – 12 disciples, 12 houses of the zodiac), 3.5, 144 and 365.

BREAKING DOWN GANN THEORY

Looking back at his way of thinking, I can only admire the way his brain worked. He managed to figure out 100 years ago, that the market is a complex creature and we can’t and shouldn’t try to predict it, looking at it from only one angle. He generalized the market as a whole, defined the main factors that are making it move, and tried to look at each factor independently. Once all three factors agreed, he would make his move. Brilliant!

Price study– This uses support and resistance lines, pivot points and angles.
Time study – This looks at historically reoccurring dates, derived by natural and social means.
Pattern study – This looks at market swings using trendlines and reversal patterns.

It is like driving a car. Weather is factor 1, proper tiers for the season is factor 2, driving after you have been drinking is factor 3. So if it winter, and temperature is -15, road is all covered in ice, you better wait until you get your winter tires and until you sober up. If you are not patient enough, you might and will probably end up on the side of the road after a few turns. To make this journey successful you should have all three factors lined up to achieve best results.

Best is to wait a bit until sun comes up, ice melts, you have your winter tires setup, you are sober and well relaxed after a good sleep as opposed to driving drunk, with summer tires in the middle of the night. Same goes in trading, if you have the patience, you might turn pretty much the same situation, from total disaster into huge profits.

GANN ANGLES (VS TREND LINES)

Of all of W.D. Gann’s trading techniques available, drawing angles to trade and forecast is probably the most popular analysis tool used by traders. Many traders still draw them on charts manually and even more use computerized technical analysis packages to place them on screens. Because of the relative ease traders today have at placing Gann angles on charts, many traders do not feel the need to actually explore when, how and why to use them. These angles are often compared to trendlines, but many people are unaware that they are not the same thing. (To learn about trendlines, see Track Stock Prices With Trendlines.)

A Gann angle is a diagonal line that moves at a uniform rate of speed. A trendline is created by connecting bottoms to bottoms in the case of an uptrend and tops to tops in the case of a downtrend. The benefit of drawing a Gann angle compared to a trendline is that it moves at a uniform rate of speed. This allows the analyst to forecast where the price is going to be on a particular date in the future. This is not to say that a Gann angle always predicts where the market will be, but the analyst will know where the Gann angle will be, which will help gauge the strength and direction of the trend. A trendline, on the other hand, does have some predictive value, but because of the constant adjustments that usually take place, it’s unreliable for making long-term forecasts.

Constructing Gann Angles
Before we begin, it is important to realize that this form of analysis – like most forms of technical analysis – is not set in stone but constructed out of empirical methods. Without further ado, here is the process used to construct a Gann angle:

Determine the time units – This is one of the empirical processes. One common way to determine a time unit is to study the stock’s chart and take note of distances in which price movements occur. Then, simply put the angles to the test and determine their accuracy. Most people use intermediate-term (such as one to three-month) charts for this as opposed to long-term (multi-year) or short-term (one to seven-day) charts. This is because, in most cases, the intermediate-term charts produce the optimal amount of patterns.
Determine the high or low from which to draw the Gann lines – This is the second empirical process, and the most common way to accomplish it is to use other forms of technical analysis–such as Fibonacci levels or pivot points. Gann himself, however, used what he called “vibrations” or “price swings.” He determined these by analyzing charts using mathematical theories like Fibonacci.
Determine which pattern to use – The two most common patterns are the 1×1 (left figure above), the 1×2 (right figure above), and the 2×1. These are simply variations in the slope of the line. For example, the 1×2 is half the slope of the 1×1. The numbers simply refer to the number of units.
Draw the patterns – The direction would be either downward and to the right from a high point, or upward and to the right from a low point.
Look for repeat patterns further down the chart – Remember this technique is based on the premise that markets are cyclical.
Again, this requires some fine-tuning with experience in order to perfect. Because of this, the results will vary from person to person. Some people, like Gann, will experience extraordinary success, while others – who don’t use such refined techniques – will experience sub-par returns. However, if the system is followed and sufficient research is put into finding the optimal requirements, above-average returns should be attainable. But remember, technical analysis is an odds game -add more technical indicators to increase your chances of a successful trade.

Using Gann Angles
Gann angles are most commonly used as support and resistance lines. But many studies have support and resistance lines. What makes this one so important? Well, Gann angles let you add a new dimension to these important levels – they can be diagonal.

Here you can see how Gann angles can be used to form support and resistance levels. Diagonal trend lines are commonly used to determine times to add to existing long positions, to determine new lows and highs (by finding significant breaks of the trend line), and to help discern the overall trend.

Sources and references: Wikipedia, Investopedia, StockCharts

Link:https://vladimirribakov.com/gann-theory-underappreciated-genius-behind/

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Bollinger Bands Indicator Tutorial

BOLLINGER BANDS INTRODUCTION,TUTORIAL AND GUIDE:

Bollinger Bands are applied directly to price charts, providing a gauge for how strong a trend is, and spotting potential bottoms and tops in stocks prices. Band width fluctuates based on volatility; the ability for Bands to adapt to changing market conditions makes it a popular indicator amongst traders. To use Bollinger Bands effectively, we must understand how they work, their trading applications, and pitfalls.

WHAT ARE THE BOLLINGER BANDS?

Bollinger Bands® are a volatility based indicator, developed by John Bollinger, which have a number of trading applications.

There are three lines that compose Bollinger Bands: A simple moving average (middle band) and an upper and lower band. These bands move with the price, widening or narrowing as volatility increases or decreases, respectively. The position of the bands and how the price acts in relation to the bands provides information about how strong the trend is and potential bottom or topping signals.

Bollinger Bands are used on all timeframes, such as daily, hourly or five-minute charts. Bollinger Bands have two adjustable settings: the Period and the Standard Deviation. The Period is how many price bars are included in the Bollinger Band calculation. The number of periods used is often 20, but is adjusted to suit various trading styles.

The Standard Deviation is typically set at 2.0, and determines the widths of the Bands. The higher the Standard Deviation, the harder it will be for the price to reach the upper or lower band. The lower the Standard Deviation the easier it is for price to “breakout” of the Bands.

Bollinger Bands denoted (20,2) means the Period and Standard Deviation are set to 20 and 2, respectively.

The indicator is calculated using the following formula. First calculate the Middle Band, then calculate the Upper and Lower Bands.

Middle Band = 20-day simple moving average (SMA).
Upper Band = 20-day SMA + (20-day standard deviation of price x 2).
Lower Band = 20-day SMA – (20-day standard deviation of price x 2).
Where SMA = the sum of closing prices over n periods / by n.

Figure 1 shows how Bollinger Bands looks on a chart as they move and adapt with price.

22 Bollinger Band Rules

Bollinger Bands provide a relative definition of high and low. By definition price is high at the upper band and low at the lower band.

That relative definition can be used to compare price action and indicator action to arrive at rigorous buy and sell decisions.
Appropriate indicators can be derived from momentum, volume, sentiment, open interest, inter-market data, etc.
If more than one indicator is used the indicators should not be directly related to one another. For example, a momentum indicator might complement a volume indicator successfully, but two momentum indicators aren’t better than one.
Bollinger Bands can be used in pattern recognition to define/clarify pure price patterns such as “M” tops and “W” bottoms, momentum shifts, etc.
Tags of the bands are just that, tags not signals. A tag of the upper Bollinger Band is NOT in-and-of-itself a sell signal. A tag of the lower Bollinger Band is NOT in-and-of-itself a buy signal.
In trending markets price can, and does, walk up the upper Bollinger Band and down the lower Bollinger Band.
Closes outside the Bollinger Bands are initially continuation signals, not reversal signals. (This has been the basis for many succeuful volatility
breakout systems.)

The default parameters of 20 periods for the moving average and standard deviation calculations, and two standard deviations for the width of the bands are just that, defaults. The actual parameters needed for any given market/task may be different.
The average deployed as the middle Bollinger Band should not be the best one for crossovers. Rather, it should be descriptive of the intermediate-term trend.
For consistent price containment: If the average is lengthened the number of standard deviations needs. to be increased; from 2 at 20 periods, to 2.1 at 50 periods. Likewise, if the average is shortened number of standard deviations should be reduced; from 2 at 20 periods, to 1.9 at 10 periods.
Traditional Bollinger Bands are based upon a simple moving average. This is because a simple average is used in the standard deviation calculation and we wish to be logically consistent.
Exponential Bollinger Bands eliminate sudden changes in the width of the bands caused by large price changes exiting the back of the calculation window. Exponential averages must be used for BOTH the middle band and in the calculation of standard deviation.
Make no statistical assumptions based on the use of the standard deviation calculatio in the construction of the bands. The distribution of security prices is non-normal and the typical sample size is most deplyments of Bollinger Bands is too small for statistical significance. (In practice we typically find 90%, not 95%, of the data inside Bollinger Bands with the default parameters)
%b tells us where we are in relation to the Bollinger Bands. The position within the bands is calculated using an adaptation of the formula for Stochastics .
%b has many uses; among the more important are identification of divergences, pattern recognition and the coding of trading systems using Bollinger Bands.
Indicators can be normalized with %b, eliminating fixed thresholds in the process. To do this plot 50- period or longer Bollinger Bands on an indicator and then calculate %b of the indicator.
BandWidth tells us how wide the Bollinger Bands are. The raw width is normalized using the middle band. Using the default parameters BandWidth is four times the coefficient of variation.
BandWidth has many uses. Its most popular use is to indentify ‘The Squeeze., but is also useful in identifying trend changes…
Bollinger Bands can be used on most financial time series, including equities, indices, foreign exchange, commodities, futures, options and bonds.
Bollinger Bands can be used on bars of any length, 5 minutes, one hour, daily, weekly, etc. The key is that the bars must contain enough activity to give a robust picture of the price-formation mechanism at work.
Bollinger Bands do not provide continuous advice; rather they help indentify setups where the odds may be in your favor.

A note from John Bollinger:

One of the great joys of having invented an analytical technique such as Bollinger Bands is seeing what other people do with it. These rules covering

the use of Bollinger Bands were assembled in response to questions often asked by users and our experience over 25 years of using the bands. While there

are many ways to use Bollinger Bands, these rules should serve as a good beginning point.

FINDING TOPS AND BOTTOMS WITH BOLLINGER BANDS

After setting your Bollinger Bands to 2.5 standard deviations, you will see that price reaches the outer bands less often. At the same time, the meaning of such signals becomes much more important because it shows significant price extremes.

We highly recommend combining the Bollinger Bands with the RSI indicator – it’s the perfect match. There are two types of tops that you need to know about:

1) Price spikes into the outer Bollinger Bands which get rejected immediately >> Reversal signal.

2) After a trend move, price fails to reach the outer Band as the trend becomes weaker. This signal is usually accompanied by an RSI divergence >> Continuation signal.

The screenshot below shows both scenarios: the first is the market top after a divergence – see how the trend became weaker and lost momentum and then eventually failed to reach the outer Band before reversing. I marked the second spike with an arrow – this was a trend continuation signal as price failed to break higher during the downtrend. The strong spike that was followed by a fast rejection showed that bulls lacked power.

A note from John Bollinger:

One of the great joys of having invented an analytical technique such as Bollinger Bands is seeing what other people do with it. These rules covering

the use of Bollinger Bands were assembled in response to questions often asked by users and our experience over 25 years of using the bands. While there

are many ways to use Bollinger Bands, these rules should serve as a good beginning point.

FINDING TOPS AND BOTTOMS WITH BOLLINGER BANDS

After setting your Bollinger Bands to 2.5 standard deviations, you will see that price reaches the outer bands less often. At the same time, the meaning of such signals becomes much more important because it shows significant price extremes.

We highly recommend combining the Bollinger Bands with the RSI indicator – it’s the perfect match. There are two types of tops that you need to know about:

1) Price spikes into the outer Bollinger Bands which get rejected immediately >> Reversal signal.

2) After a trend move, price fails to reach the outer Band as the trend becomes weaker. This signal is usually accompanied by an RSI divergence >> Continuation signal.

The screenshot below shows both scenarios: the first is the market top after a divergence – see how the trend became weaker and lost momentum and then eventually failed to reach the outer Band before reversing. I marked the second spike with an arrow – this was a trend continuation signal as price failed to break higher during the downtrend. The strong spike that was followed by a fast rejection showed that bulls lacked power.

TREND-TRADING WITH THE BOLLINGER BANDS

In contrast to most other indicators, the Bollinger Bands are non-static indicators and they change their shape based on recent price action and accurately measure momentum and volatility. Thus, we can use the Bollinger Bands to analyze the strength of trends and get a lot of important information this way. There are just a few things you need to pay attention to when it comes to using Bollinger Bands to analyze trend strength:

During strong trends, price stays close to the outer band.
If price pulls away from the outer band as the trend continues, it shows fading momentum.
Repeated pushes into the outer bands that don’t actually reach the band show a lack of power.
A break of the moving average is often the signal that a trend is ending.
The screenshot below shows how much information a trader can pull from using Bollinger Bands alone. Let me walk you through the points 1 to 5:

1) Price is in a strong downtrend and price stays close to the outer bands all the time – very bearish signal.

2) Price fails to reach the outer band and then shots up very strongly, even showing an engulfing pattern. This is a classic reversal pattern where the bearish trend strength faded.

3) 3 swing highs with lower highs. The first swing high reached the outer band whereas the following two failed – fading strength.

4) A strong downtrend where price stayed close to the outer band. It tried to pull away, but bears were always in control.

5) Price consolidates sideways, not reaching the outer band anymore and the rejection-pinbar ended the downtrend.

As you can see, the Bollinger Bands alone can provide a lot of information about trend strength and the balance between bulls and bears.

THE ROLE OF THE MOVING AVERAGE

During trends, the moving average holds very accurately and a break of that moving average is usually a meaningful signal that the sentiment has shifted. The screenshot below shows nicely how price trended between the outer bands and the moving average both on the way up and down. During the trend, the moving average could have been used as a re-entry signal to add to existing positions during pullbacks.

Furthermore, the moving average can be used as a trade exit signal where a trader does not close his existing positions unless price has broken the moving average. By combining the Bollinger Bands with the moving average, a trader can already create a robust trading method.

You can see, the Bollinger Bands are a multi-faceted trading indicator that can provide you with lots information about trend, buy/seller balances and about potential trend shifts. Together with the moving average and the RSI, Bollinger Bands make for a great foundation for a trading strategy.

BOLLINGER BANDS STRATEGIES

DOUBLE TOP FORMATION:

The M pattern is commonly known as the double top, using a Bollinger band strategy can add more meaning to this term in practice.

When prices are repelled by the top band twice it can mean that the market has run out of steam and a race to the bottom band could occur, these instances are a feature of volatility within the market.

In the above chart, prices were repelled twice, and then pushed down to the bottom band.

This double top also marked the beginning of a downtrend.

In this Bollinger bands strategy, you should look for three things to happen to pick out a double top formation and confirm the pattern.

Firstly the price puts in a reaction high to the upper band.
Next a pullback to the simple moving average.
Then price moves back to the first high but will fail at or below the upper band.
The waning momentum causes the failure of the second high, we can then look for confirmation of the top with a break of support and I like to see two candles close whose real bodies are below the MA line.

Double bottom formation:

The opposite will also occur regularly at significant lows.

Where prices drop to the bottom band twice in short order and then are repelled upwards, beginning an uptrend in the market.

In the chart above two W patterns formed in the uptrend, adding weight to the trend and signifying that a trader should stick with the trend.

There is a four step process in this Bollinger bands strategy to confirm a W bottom is in place.

Firstly a low forms, usually below the lower band.
next a retracement to the middle band.
then a new low forms but will hold on or above the lower band showing a slowing of downside momentum.
And lastly, the pattern is confirmed when the price rallies to the upper band and completes two candles whose real bodies are above the middle band.
A trader should always wait until all of the four steps are complete before trading the move. this will reduce false signals and spare your capital in the long run.

I will commonly use a stop loss order to trade this setup, using the higher ‘price low’ of the formation as the stop loss position.

Bollinger band squeeze:

The Bollinger band squeeze happens when price movements contract to a narrow range.

This causes the Bollinger bands to move inwards towards each other.

It is almost like a pressure is building within the market and it will lead to a sharp movement in prices sooner rather than later.

In the example above, a squeeze always occurred before any significant move in prices.

It is a valuable indication of the possibility of volatility ahead.

So a trader will always be aware of the position and trend in the Bollinger bands. And if you notice the Bollinger bands ‘squeeze’ together, you can start to position yourself because a significant price movement is straight ahead.

How does it work?

When trading using this Bollinger bands strategy, we are looking for contraction in the bands. Above is the EURCHF 60 minute chart lets see what sort of signals are generated from it.

The chart above shows 20 point increments in EUR/CHF, every time the Bollinger band width is approaching 0.0010 or about 10 points, we get an average move away from the moving average of about 40 points sometimes more.

In the above case, a trader could use the squeeze as a signal generator, a signal is generated when:

the bands squeeze to within about 10 points
and a full candle completes above or below the moving average line.
depending on which side the candle completes that is the side you trade.

So, if a candle completes above the MA, then you go long, and if a candle completes below you go short. your stops should be placed at the opposite extreme of the candle.

BOLLINGER BANDS AS SUPPORT AND RESISTANCE:

Along with giving the trader an indication of future volatility ahead, this Bollinger bands strategy will show support and resistance in a trending market, often repelling prices back into the trend once more.

In both the downward trend and the upward trend i the chart above, the bands acted as consolidation points.

The fact that prices were repelled by the bands showed the trader that they could stick with the trend.

RIDING THE BANDS:

Another Bollinger bands strategy is riding the bands, this is when we use the bands as a trend recognition tool.

During strong trend moves, the candles tend to almost stick to the upper or lower band.

This occurrence shows the trader that the trend is likely to continue and has power behind it.

John Bollinger, the bands creator, calls a move that touch the bands a ‘tag’ of the band. this is not exactly a signal but it does denote a strengthening or weakening market.

Take note for a second;

the bands are placed 2 standard deviations away from the 20 period simple moving average on both sides. So the bands contain 95.6% of all the price moves in the last 20 periods.

If the price tags the upper or lower band, it shows us that there is significance in that move. Because it is more powerful than 95.6% of all the moves in the last 20 periods.

IF a powerful move occurs, it can be common for the simple moving average to act as support for the price. The price will usually stay above or below the SMA in a trend move. This knowledge can be used in managing your position when you are trend trading.

THINGS TO TAKE AWAY:

When used alone the bands offer little in the way of timing or trade entry indicators.

But,

The Bollinger bands do give the trader a useful benchmark to judge how the price action is likely to act given certain action.
They can be a great tool to measure volatility, or lack thereof, in the market.
And they can show you where likely support and resistance might occur within a trend.
Bollinger band strategy uses these phenomena to trade trend moves within a market
These points alone are evidence enough that we all should take heed of the bands!

Forex and Some Important Facts about Bollinger Bands.

Forex trading is nowadays one of the most looked after occupation for many persons of all ages around the world. This is due to its great advantages over other capital markets and its high profitability potential; among these advantages you will find that is extremely easy to access a trading platform from the best forex broker firms thanks to the internet; and also you will notice that Forex has a high liquidity along with a high leverage.

But having a good broker firm and great trading platform is only one part of what you need in order to make your forex trading career a winning and profitable one. You need to have the right knowledge and techniques in order to forecast with the best accuracy what the market will do next. One of the techniques used to predict the Forex market behavior is that based on Bollinger Bands.

These Bollinger Bands are what is called a technical trading tool and they are widely used in the capital markets (including Forex) and were created by John Bollinger in the early 1980s. These bands technique was formulated based on the need for adaptive trading bands and the discovery that the volatility of the markets was a dynamic phenomena, not a static one as was widely believed at the time.

Bollinger Bands consist of a chart of three curves drawn in relation to currency pairs prices. The band situated in the middle is a measure of the intermediate-term trend and is usually a simple moving average, that serves as the base for the upper and lower bands. The interval between the upper, lower and the middle bands is determined by the volatility of the market, typically the standard deviation of the same data that were used for the moving average. The default parameter is 20 periods and two standard deviations above and below the middle band; of course this may be adjusted to suit your needs.

In short, the purpose of Bollinger Bands is to provide a relative definition of high and low price. By definition prices are considered high when touching the upper band and low when they touch the lower band. This relative definition can be used by the Forex trader to compare price actions and as a very useful indicator when the purpose of the trader is to arrive at rigorous buy and sell decisions.

Sources https://en.wikipedia.org/
https://vladimirribakov.com/

ADX Indicator Explained

Introduction TO ADX INDICATOR EXPLAINED IN DEPTH:

The Average Directional Index (ADX), Minus Directional Indicator (-DI) and Plus Directional Indicator (+DI) represent a group of directional movement indicators that form a trading system developed by Welles Wilder. Wilder designed ADX with commodities and daily prices in mind, but these indicators can also be applied to stocks. The Average Directional Index (ADX) measures trend strength without regard to trend direction. The other two indicators, Plus Directional Indicator (+DI) and Minus Directional Indicator (-DI), complement ADX by defining trend direction. Used together, chartists can determine both the direction and strength of the trend.

Wilder features the Directional Movement indicators in his 1978 book, New Concepts in Technical Trading Systems. This book also includes details on Average True Range (ATR), the Parabolic SAR system and RSI. Despite being developed before the computer age, Wilder’s indicators are incredible detailed in their calculation and have stood the test of time.

Directional Movement

Plus Directional Movement (+DM) and Minus Directional Movement (-DM) form the backbone of the Average Directional Index (ADX). Wilder determined directional movement by comparing the difference between two consecutive lows with the difference between the highs.

Plus Directional Movement (+DM) and Minus Directional Movement (-DM) form the backbone of the Average Directional Index (ADX). Wilder determined directional movement by comparing the difference between two consecutive lows with the difference between the highs.

Directional movement is positive (plus) when the current high minus the prior high is greater than the prior low minus the current low. This so-called Plus Directional Movement (+DM) then equals the current high minus the prior high, provided it is positive. A negative value would simply be entered as zero.

Directional movement is negative (minus) when the prior low minus the current low is greater than the current high minus the prior high. This so-called Minus Directional Movement (-DM) equals the prior low minus the current low, provided it is positive. A negative value would simply be entered as zero.

The chart above shows four calculation examples for directional movement. The first pairing shows a big positive difference between the highs for a strong Plus Directional Movement (+DM). The second pairing shows an outside day with Minus Directional Movement (-DM) getting the edge. The third pairing shows a big difference between the lows for a strong Minus Directional Movement (-DM). The final pairing shows an inside day, which amounts to no directional movement (zero). Both Plus Directional Movement (+DM) and Minus Directional Movement (-DM) are negative and cancel out each other. Negative values revert to zero. All inside days will have zero directional movement.

Calculation

The calculation steps for the Average Directional Index (ADX) are detailed in each step. Average True Range (ATR) is not detailed because there is an entire ChartSchool article for this. Basically, ATR is Wilder’s version of the two period trading range. Smoothed versions of Plus Directional Movement (+DM) and Minus Directional Movement (-DM) are divided by a smoothed version Average True Range (ATR) to reflect the true magnitude of a move. The example below is based on a 14-day ADX calculation.

1. Calculate the True Range (TR), Plus Directional Movement (+DM) and Minus Directional Movement (-DM) for each period.

2. Smooth these periodic values using the Wilder’s smoothing techniques. These are explained in detail in the next section.

3. Divide the 14-day smoothed Plus Directional Movement (+DM) by the 14-day smoothed True Range to find the 14-day Plus Directional Indicator (+DI14). Multiply by 100 to move the decimal point two places. This +DI14 is the Plus Directional Indicator (green line) that is plotted along with ADX.

4. Divide the 14-day smoothed Minus Directional Movement (-DM) by the 14-day smoothed True Range to find the 14-day Minus Directional Indicator (-DI14). Multiply by 100 to move the decimal point two places. This -DI14 is the Minus Directional Indicator (red line) that is plotted along with ADX.

5. The Directional Movement Index (DX) equals the absolute value of +DI14 less – DI14 divided by the sum of +DI14 and – DI14. Multiply the result by 100 to move the decimal point over two places.

6. After all these steps, it is time to calculate the Average Directional Index (ADX). The first ADX value is simply a 14-day average of DX. Subsequent ADX values are smoothed by multiplying the previous 14-day ADX value by 13, adding the most recent DX value and dividing this total by 14.

Above is a spreadsheet example with all steps involved. There is a 119 day calculation gap because around 150 periods are required to absorb the smoothing techniques. ADX enthusiasts can click here to download this spreadsheet and see the gory details. The chart below shows an example of ADX using the Nasdaq 100 ETF (QQQQ).

Wilder’s Smoothing

As seen in the ADX calculation, there is a lot of smoothing involved and it is important to understand the effects. Because of Wilder’s smoothing techniques, it can take around 150 periods of data to get true ADX values. Wilder uses similar smoothing techniques with his RSI and Average True Range calculations. ADX values using only 30 periods of historical data will not match ADX values using 150 periods of historical data. ADX values with 150 days or more of data will remain consistent.

The first technique is used to smooth each period’s +DM1, -DM1 and TR1 values over 14 periods. As with an exponential moving average, the calculation has to start somewhere so the first value is simply the sum of the first 14 periods. As shown below, smoothing starts with the second 14-period calculation and continues throughout.

First TR14 = Sum of first 14 periods of TR1 Second TR14 = First TR14 – (First TR14/14) + Current TR1 Subsequent Values = Prior TR14 – (Prior TR14/14) + Current TR1

The second technique is used to smooth each period’s DX value to finish with the Average Directional Index (ADX). First, calculate an average for the first 14 days as a starting point. The second and subsequent calculations use the smoothing technique below:

First ADX14 = 14 period Average of DX Second ADX14 = ((First ADX14 x 13) + Current DX Value)/14 Subsequent ADX14 = ((Prior ADX14 x 13) + Current DX Value)/14

Interpretation

The Average Directional Index (ADX) is used to measure the strength or weakness of a trend, not the actual direction. Directional movement is defined by +DI and -DI. In general, the bulls have the edge when +DI is greater than – DI, while the bears have the edge when – DI is greater. Crosses of these directional indicators can be combined with ADX for a complete trading system.

Before looking at some signals with examples, keep in mind that Wilder was a commodity and currency trader. The examples in his books are based on these instruments, not stocks. This does not mean his indicators cannot be used with stocks. Some stocks have price characteristics similar to commodities, which tend to be more volatile with short and strong trends. Stocks with low volatility may not generate signals based on Wilder’s parameters. Chartists will likely need to adjust the indicator settings or the signal parameters according to the characteristics of the security.

Trend Strength

At its most basic the Average Directional Index (ADX) can be used to determine if a security is trending or not. This determination helps traders choose between a trend following system or a non-trend following system. Wilder suggests that a strong trend is present when ADX is above 25 and no trend is present when below 20. There appears to be a gray zone between 20 and 25. As noted above, chartists may need to adjust the settings to increase sensitivity and signals. ADX also has a fair amount of lag because of all the smoothing techniques. Many technical analysts use 20 as the key level for ADX.

The chart above shows Nordstrom (JWN) with the 50-day SMA and 14-day Average Directional Index (ADX). The stock moved from a strong uptrend to a strong downtrend in April-May, but ADX remained above 20 because the strong uptrend quickly changed into a strong downtrend. There were two non-trending periods as the stock formed a bottom in February and August. A strong trend emerged after the August bottom as ADX moved above 20 and remained above 20.

DI Crossover System

Wilder put forth a simple system for trading with these directional movement indicators. The first requirement is for ADX to be trading above 25. This ensures that prices are trending. Many traders, however, use 20 as the key level. A buy signal occurs when +DI crosses above – DI. Wilder based the initial stop on the low of the signal day. The signal remains in force as long as this low holds, even if +DI crosses back below – DI. Wait for this low to be penetrated before abandoning the signal. This bullish signal is reinforced if/when ADX turns up and the trend strengthens. Once the trend develops and becomes profitable, traders will have to incorporate a stop-loss and trailing stop should the trend continue. A sell signal triggers when – DI crosses above +DI. The high on the day of the sell signal becomes the initial stop-loss.

The chart above shows Medco Health Solutions with the three directional movement indicators. Note that 20 is used instead of 25 to qualify ADX signals. A lower setting means more possible signals. The green dotted lines show the buy signals and the red dotted lines show the sell signals. Wilders initial stops were not incorporated in order to focus on the indicator signals. As the chart clearly shows, there are plenty of +DI and – DI crosses. Some occur with ADX above 20 validate signals. Others occur to invalidate signals. As with most such systems, there will be whipsaws, great signals and bad signals. The key, as always, is to incorporate other aspects of technical analysis. For example, the first group of whipsaws in September 2009 occurred during a consolidation. Moreover, this consolidation looked like a flag, which is a bullish consolidation that forms after an advance. It would have been prudent to ignore bearish signals with a bullish continuation pattern taking shape. The June 2010 buy signal occurred near a resistance zone marked by broken support and the 50-62% retracement zone. It would have been prudent to ignore a buy signal so close to this resistance zone.

The chart above shows AT&T (T) with three signals over a 12 month period. These three signals were pretty good, provided profits were taken and trailing stops were used. Wilders Parabolic SAR could have been used to set a trailing stop-loss. Notice that there was no sell signal between the March and July buy signals. This is because ADX was not above 20 when -DI crossed above +DI in late April.

Conclusions

The directional movement indicator calculations are complex, interpretation is straight-forward and successful implementation takes practice. +DI and – DI crossovers are quite frequent and chartists need to filter these signals with complementary analysis. Setting an ADX requirement will reduce signals, but this uber-smoothed indicator tends to filter as many good signals as bad. In other words, chartists might consider moving ADX to the back burner and focusing on the Directional Indicators to generate signals. These crossover signals will be similar to those generated using momentum oscillators. Therefore, chartists need to look elsewhere for confirmation help. Volume-based indicators, basic trend analysis and chart patterns can help distinguish strong crossover signals from weak crossover signals. For example, chartists can focus on +DI buy signals when the bigger trend is up and – DI sell signals when the bigger trend is down.

Using with SharpCharts

SharpCharts users can plot the directional movement indicators by selecting Average Directional Index (ADX) from the indicator drop-down list. By default, ADX will be in black, the Plus Directional Indicator (+DI) in green and the Minus Directional Indicator (-DI) in red. This makes it easy to identify directional indicator crosses. While ADX can be plotted above, below or behind the main price plot, it is recommended to plot above or below because there are three lines involved. A horizontal line can be added to help identify ADX moves. The chart example below also shows the 50-day SMA and Parabolic SAR plotted behind the price plot. The moving average is used to filter signals. Only buy signals are used when trading above the 50-day moving average. Once initiated, the Parabolic SAR can be used to set stops. Click here for a live example of ADX.

Suggested Scans

Overall Uptrend with +DI Crossing above -DI
This scan starts with stocks that average 100,000 shares daily volume and have an average closing price above 10. An uptrend is present when trading above the 50-day SMA. A buy signal is possible when ADX is above 20. This signal materializes when +DI moves above – DI.

[type = stock] AND [country = US]
AND [Daily SMA(20,Daily Volume) > 100000]
AND [Daily SMA(60,Daily Close) > 10]

AND [Daily ADX Line(14) > 20]
AND [Daily Plus DI(14) crosses Daily Minus DI(14)]
AND [Daily Close > Daily SMA(50,Daily Close)]
Overall Downtrend with – DI Crossing above +DI
This scan starts with stocks that average 100,000 shares daily volume and have an average closing price above 10. An downtrend is present when trading below the 50-day SMA. A sell signal is possible when ADX is above 20. This signal materializes when -DI moves above +DI.

[type = stock] AND [country = US]
AND [Daily SMA(20,Daily Volume) > 100000]
AND [Daily SMA(60,Daily Close) > 10]

AND [Daily ADX Line(14) > 20]
AND [Daily Minus DI(14) crosses Daily Plus DI(14)]
AND [Daily Close < Daily SMA(50,Daily Close)] Source: stockcharts.com

Indicators For Forex Trading

Indicators For Forex Trading

Some people find Forex trading very difficult. The reason behind this is because they did not spend adequate time in studying the market trends and they did not conduct thorough technical analysis. Forex charts are very important and you need to know how these charts are developed. As you probably know by now, the Forex market is a fast-paced environment and you need to keep up with it if you want to earn good profits. Technical analysis can definitely help you and so can market indicators.

Indicators are quite helpful especially when youre about to make a transaction in the Forex market. Most of the time, these indicators provide you with markets probability behavior but it cant exactly tell the certainty of currency prices.

Technical indicators are very important in Forex trading. You can combine the indicators to create your very own trading strategy in order to recognize the market trends. As an effective trader, you must be able to identify the current or major trends, the short-trends, and intermediate trends; if you can do this, you will be able to hold a good position in the Forex market where you can earn great profits.

Since the Forex market is changing constantly, you need set a criterion for using the technical indicators. If you want to get the highest probability and accurate predictions, you must be able to combine required indicators. By doing so, you can determine the price behaviors of the currencies you would like to invest on.

Supposing that your judgment is correct, you should still consider other factors in order to gain maximum profits from your trades. If youre having a bad day in the Forex market, take your profits and stop trading for the moment. This is a smart decision because if you stay longer (hoping to regain your lost money), you might lose more of your investment. When the prices of the currencies are moving within a so-called narrow range and isnt going anywhere, there is no need to anticipate for a big movement. Find another currency to trade with better profit potentials.

With so many technical indicators to use, you will surely find combinations that will work best for you. Dont be discouraged if ever you encounter some downfalls in Forex trading because thats natural. When using technical indicators, you must give yourself enough time in doing the analysis and studies. There are so many things to consider and you cant just do it in minutes. However, make sure that you dont take too long in making your trading decisions because the Forex market will not slow down just to work for you. Youre the one who needs to adjust to its fast-paced environment. Keep in mind that there are also lots of traders out there who want to earn profits. You need to keep up with the competition.

Technical analysis is not very easy to do and so you will need all the help you can get. You can consult a broker or some online Forex trading tools if you want to learn more about this kind of trade. The internet is widely available and you can use it to your advantage. Educate yourself about these various technical indicators so that you can use them in identifying the market trends. For successful Forex trading, you must learn about these technical indicators.

Indicators For Forex Trading

Some people find Forex trading very difficult. The reason behind this is because they did not spend adequate time in studying the market trends and they did not conduct thorough technical analysis. Forex charts are very important and you need to know how these charts are developed. As you probably know by now, the Forex market is a fast-paced environment and you need to keep up with it if you want to earn good profits. Technical analysis can definitely help you and so can market indicators.

Indicators are quite helpful especially when youre about to make a transaction in the Forex market. Most of the time, these indicators provide you with markets probability behavior but it cant exactly tell the certainty of currency prices.

Technical indicators are very important in Forex trading. You can combine the indicators to create your very own trading strategy in order to recognize the market trends. As an effective trader, you must be able to identify the current or major trends, the short-trends, and intermediate trends; if you can do this, you will be able to hold a good position in the Forex market where you can earn great profits.

Since the Forex market is changing constantly, you need set a criterion for using the technical indicators. If you want to get the highest probability and accurate predictions, you must be able to combine required indicators. By doing so, you can determine the price behaviors of the currencies you would like to invest on.

Supposing that your judgment is correct, you should still consider other factors in order to gain maximum profits from your trades. If youre having a bad day in the Forex market, take your profits and stop trading for the moment. This is a smart decision because if you stay longer (hoping to regain your lost money), you might lose more of your investment. When the prices of the currencies are moving within a so-called narrow range and isnt going anywhere, there is no need to anticipate for a big movement. Find another currency to trade with better profit potentials.

With so many technical indicators to use, you will surely find combinations that will work best for you. Dont be discouraged if ever you encounter some downfalls in Forex trading because thats natural. When using technical indicators, you must give yourself enough time in doing the analysis and studies. There are so many things to consider and you cant just do it in minutes. However, make sure that you dont take too long in making your trading decisions because the Forex market will not slow down just to work for you. Youre the one who needs to adjust to its fast-paced environment. Keep in mind that there are also lots of traders out there who want to earn profits. You need to keep up with the competition.

Technical analysis is not very easy to do and so you will need all the help you can get. You can consult a broker or some online Forex trading tools if you want to learn more about this kind of trade. The internet is widely available and you can use it to your advantage. Educate yourself about these various technical indicators so that you can use them in identifying the market trends. For successful Forex trading, you must learn about these technical indicators.

Forex Indicators Guide

What Is a Forex Indicator and What It Does

Before deciding which forex indicator may work most effectively for you, find out about the various kinds of forex indicator tools and how they are employed. To start with there are pattern indicators, which display three behaviors in price changes; down, up, and sideways. In the same way pattern indicators can help you to apply your currency trading technique by displaying to you the cost pattern with time.

Then you will find volume indicators that a currency trader employs to find out the interest of shareholders in the foreign exchange market. High volume normally suggests the start of a new pattern, while lower volumes might suggest that dealers are unsure or do not have interest in the prevailing market.

The true secret to understanding your forex indicators is figuring out when to take action on what the information is telling you. Employing volume indicator to implement your forex trading program is okay, provided that you understand that an instant decrease or increase in volume might indicate a reversal, whilst steady decrease might simply be countered by the rapid fluctuations in the forex market.

Momentum indicators record the rate of foreign exchange rates with time, while at the same time tracking the weakness or strength of a pattern as it moves with time. When utilizing this type of currency indicator, it is important that you understand that the greatest momentum is recorded at the start of a pattern and the minimum point is recorded at the final point.

While interpreting information from currency trading momentum indicators, an investor will search for variances between forex rates and indicator recommendations, which can tell you many things;

Lastly, you’ll find volatility indicators that inform foreign exchange dealers the magnitude and size of foreign exchange rate variances. There will often be intervals of low and high unpredictability in the foreign currency market, these types of indicators can assist you to utilize the best mix of foreign exchange indicators to make money.

The best FOREX software review for you and it is easy & fast to install although you don’t have too much internet knowledge.

Four Important Types Of Forex Indicators

If you are beginner who has just entered into forex trading business with the hope of making lot of money, you must first know about different type of forex technical indicators and their usage. If you are an experienced trader, you must know the right combination of forex indicators which can help you make consistent gains in forex business. There are four types of indicators which are used commonly by traders including Momentum, trend, volume and volatility indicators.

Momentum indicators

Momentum are also called strength indicators and record the the speed of variation of price over a time period. They are like oscillators that are capable on indicating whether forex market is under over sold or over bought situations. If they reach the over bought region, then it means there are great probabilities for the price to go down and if they reach the over sold region, it means there is more probability for prices to rise up. Some of famous oscillating indicators are Commodity Channel Index (CCI), Relative strength Index (RSI), Momentum and Stochastic indicators.

Trend Indicators:

The trend indicators are also called directional indicators. You must remember the fact that trend is your best friend and you should trade in trend direction. Forex trend can depend on view of traders and has different meanings. Trend helps the forex traders to identify the start and end of a market trend. There are various trend indicators such as parabolic SAR, Moving Average Indicator, Moving Average Convergence Divergence indicator etc. They help you to know when the trend begins or stops.

Volume indicators:

The volume indicators are used for depicting the volume of trading which takes place and helpful in confirming the trend direction, a breakout or reversal. The price movement will rise when the trade volume increases and low volume could indicate the reversal in forex trading. If currency pair is traded in narrow range and reaches a high volume, it indicates a breakout. Some of common volume indicators are Money Flow index, On balance volume, Ease of movement, money flow, demand index.

Volatility indicators

They are also called Bands indicators. The change in volatility will cause a price change. Hence we find out how active forex market is by seeing the price ranges. You shall enter into trade if there is good variation in price movements that suggest forex market is active. Some of common volatility indicators are Envelopes indicators, Average Truth Indicator, Bollinger bands etc.

3 Best Forex Indicators All Traders Must Use

The only way you can succeed in doing trading on the foreign exchange market is to do some forex technical analysis. Technical analysis involves reading particular forex indicators to project certain market movements and to time your trades properly. Any forex trader that does not do forex technical analysis is set for big losses. Forex technical analysis allows you to look at the market fundamentals and cross check it with the human component of the forex equation. That is, how other traders will react to the movements in the market. Looking at forex charts and forex indicators will give you a graphical representation of these market movements and then given your understanding of human behaviour, project whether your trades are likely to go in one direction or another.

There are a number of forex indicators as you will learn from your basic forex trading education. Some of these are the Bollinger Bands, the Stochastics, the Relative Strength Indices, and the MACDs. Chances are, you will be using a combination of these forex indicators. The following details three of these forex market indicators to help you choose which one to use in your forex trading.

1. Bollinger Bands – These forex indicators are used to measure how volatile the market is. Two common strategies are executed using this indicator: the Bollinger Bounce and the Bollinger Squeeze. In the bounce, the basic premise is that the price usually tends to go back to the middle of the bands. Logically, you execute a buying order when the price reaches the lower Bollinger Band and a selling order when the price reaches the upper Bollinger Band. The Squeeze, on the other hand, is usually used to ride on breakouts as they appear.

2. Stochastics – These forex indicators is used to show whether the market is overbought or oversold. In any one of these scenarios, there are opportunities for major trades. In a market that is overbought and moving average lines are upwards of 70, it is a good time to sell. Inversely, in a market that is oversold and the moving average lines are downwards of 30, it is time to buy.

3. Relative Strength Index – Otherwise called as the RSI, this indicator also indicates a market that is overbought or oversold. Its upper and lower limits are 80 and 20 respectively. The RSI is usually used to look for trends in the market. When a trend is forming, it would be good to enter a trade at a time when the RSI is either below or above 50.

Which ones of these forex technical analysis tools you use will depend on the kind of trader you are and what your trading strategy is. There is no way you get into a long term profitable forex trading business without getting into forex technical analysis. It could be quite tricky to do forex technical analysis especially to new traders and it could take some amount of practice before you get comfortable. Persistency and quick thinking would be to your favor when trying to master forex technical analysis.

Truths About Forex Indicators

Currency trading is a lucrative money making business but there are lot of risks involved and you must have very good education about the trading indicators and system if you want to be successful. There are some myths about Forex indicators which you must understand. Not even a powerful and advanced automated Forex robot can turn you into a millionaire overnight. Trading always involves some risk either big or small and with robots you can reduce your risks. And there are possibilities for losses as 95 percent of traders lose their money with currency trading and only remaining 5 percent are successful.

In spite of these warnings, lots of individuals are tempted to take the risks with hope to become rich overnight. You must know the basics of the program and its working before you decide whether to use it or not. There are two types of Forex indicators which are used more in trading.

1. Continuation indicators

The continuation indicators follow trends like moving averages. These indicators are very easy to use in currency trading for predicting the ups and downs in markets. They are more suitable for markets which experience trends and are very flexible. It helps your in taking trading decisions outside the completely technical factors on which other Forex indicators are based on.

2. Momentum/ Velocity Indicators

The momentum indicators are used for analyzing the rate of price movement or velocity of currency movement. Both these indicator categories define the pattern of changes into a understandable format which you can use as easy reference for placing your trades. They can signal the weak and strong points are in various markets and ultimately indicate the potential opportunities for placing your trades. They are usually applied on sideways or non-trending markets and usually use an oscillator for displaying the incessant fall and rise in market prices for showing patterns and chances for trading. They usually help in exposing the triggers in which market was flat without any variations.

With help of both type of indicators you can find out the potential opportunities to place your trade and obtain best results.

Though there are complications with Forex trading, you can simple trading software with these two types of indicators and it can place the winning trades automatically for you. Though there are many trading robots which are unreliable, some of them are very effective which you can choose for doing your trading.

5 Powerful Forex Indicators For Determining The Support And Resistance

Support and Resistance is one of the most important concept that a trader needs to master. Support is the level where the prices bounce back up. It’s like the floor of a room. When you hit it with a ball, it bounces up. This happens because buyers step into the market at this level thinking that prices have gone too low and are a good buy.

In the same manner, resistance is the level where prices bounce back down. It’s like the ceiling of a room. When you hit it with a ball, it comes down. This happens because sellers think that prices have gone too high and they need to sell and get out. As a trader, you must master these two pivotal concepts.

Trading all boils down to first determining the trend in the market and then determining the support and resistance on your charts. When the prices reach the support level in an uptrend, enter into a long position with stop loss just below the support level. And when the prices reach the resistance, exit the trade.

Similarly, in a downtrend, enter into a short position at the resistance with the stop loss just above the resistance level. When price action reaches the support level, exit the position. It is as simple as that conceptually. But the devil is in the details. How to determine the support and resistance levels accurately.

These 5 powerful Forex Indicators can help you determine the support and resistance level accurately. They are not available for FREE. But you can download them FREE for a limited as I found them on a website that is allowing you to claim these 5 powerful Forex Indicators for FREE by just leaving a comment. These 5 indicators are the:

1. Donchian Channels Indicator,

2. “Sweet Spots” Indicator,

3. Fractal Support And Resistance Indicator,

4. Pivot Points Indicator,

5. Zig-Zag Fib Support and Resistance Indicator

Plus you will be able to download a course that shows how you can improve your trading results by using these 5 indicators. Now, this giveaway is just meant to sell you the Forex Hybrid DS System that is a dual system that combines the power of manual trading with automated trading.

Using this Forex Hybrid DS System you will be able to decide when to enter the market, the robot will do the rest for you. But the good point is this that you can download these 5 Powerful Forex Indicators plus the course FREE just by leaving a comment on the website. There is no compulsion on you to buy the system. You will have to pay hundreds of dollars to get these powerful indicators but here you can do it FREE by just leaving a comment.

As a trader, I think these 5 indicators are worth more than hundreds of dollars of junk systems and robots that are being sold in the market. You can practice with these indicators on your demo account and see how they improve your trading results.

How To Use Forex Trading Indicators

Before considering trading the foreign exchange market, you need to do your homework to see which forex indicators will work best for your currency trading strategy. Choosing the right forex technical indicators will make it easier for you to interpret data and make the best decisions for buying or selling currencies. Choosing technical indicators isn’t as simple as clicking a few buttons, but you also won’t need to spend all day managing your trades.

Before choosing which forex indicators will work best for you, understand the different types of indicators and how they are used. First there are trend indicators, which show three tendencies in price fluctuations; up, down, and sideways. Just as it sounds, trend indicators will help you implement your forex trading system by showing you the price trend over time.

Next there are volume indicators, which a forex trader uses to determine the interest of investors in the forex market. High volume generally suggests the beginning of a new trend, while low volumes may indicate that traders are uncertain or have no interest in the current market. The key to understanding your volume indicators is knowing when to act on what the data is telling you. Using volume indicator to execute your forex trading system is ok, as long as you remember that a rapid increase or decrease in volume could indicate a reversal, while gradual decreasing may just be held up by the rapid moves within the currency market.

Momentum indicators document the speed of currency exchange rates over time, while also tracking the strength (or weakness) of a trend as it moves over time. When using this forex indicator, it is crucial that you know that the highest momentum is registered at the beginning of a trend and the lowest point is registered at the end point. Interpreting data from forex momentum indicators, a forex trader will look for disagreements between currency exchange rates and indicator suggestions, which will tell you several things;

1. A directional divergence between currency rate and momentum tells you that a trend is weakening.

2. Currency exchange rates increase during weak momentum signals the final warning of a trend change.

3. Trend changes should be anticipated during sideways exchange rates and strong momentum.

Finally, we have volatility indicators that tell forex traders the size and magnitude of currency exchange rate fluctuations. There will always be periods of high and low volatility in the foreign exchange market, and these indicators will help you employ the right combination of forex indicators to turn a profit. Low volatility suggests that there is very little interest in the currency rate and lets you know that market is preparing for a big move. Markets with low volatility pave the way for breakout trades, which have the possibility of big profits.

Choosing the correct forex indicators that may be best for you is about finding the right combination of indicators that provide you with the information you’ll need to find success on the forex market. Avoid using too many indicators within the came category because they often provide forex traders with repeat information, rather than confirmation.

Understanding 3 Of The Most Common Forex Indicators

Indicators are technical analysis tools that help you in understanding the movement of Forex prices. The indicators are usually created using a given formula thus they are accurate in their working. There are many types of indicators in the market. Some of the notable ones are:

Bollinger Bands

These bands are created by calculating the average volatility of a given Forex. They are plotted on the Forex price chart as an upper and lower price band which represents the highs and lows of the average volatility range. You should use the indicators to buy Forex when the price has fallen to the lower band. You should also use them to sell your Forex when the price rises to the upper band.

Oscillator

These are usually a group of indicators and they include: stochastic, relative strength indicators (RSI) and commodity channel index (CCI). Stochastic indicators are based on systematic higher and lower price closing, RSI are formulated based on relative price strength while CCI gets its results after comparing its price to that of the previous price fluctuations.

You can use any indicator that you want and all you need to do is to choose the one that pleases you the most.

Of the three oscillator indicators, stochastic indicator is the most popular. A stochastic is a line that is plotted on a graph and measures between 0 and 100. The line aids in revealing whether a given stock is overbought or oversold.

If you are a short-term trader you should use the indicator to buy a given Forex when the stochastic line moves below 20 thus indicating that the stock is oversold. You should also use the indicator to sell your stock when the stochastic moves above 80 indicating that the price is overbought.

MACD

The moving average convergence-divergence (MACD) indicator is an indicator that is usually plotted on the bottom of a price chart. The indicator is usually drawn as two separate moving average lines. Just like other indicators, this indicator provides you with buy and sell signals.

When the 12-day average converges and moves over the 26-day average, a buy signal is created and you should buy the Forex that you are interested in. On the other hand if the 12-day average moves over the top of the 26-day average, a sell signal is created and you should sell your Forex.

Conclusion

These are some of the indicators that you can use in Forex trade. To be on the safe side always try to understand everything about the indicators before putting them into work.

What Are Things You Must Consider Before Choosing A Forex Indicator

There are various types of forex indicators and you might be fed up with them not knowing which one to use for making your decisions since you are not sure about which is best for you. Not only you, but many forex traders are frustrated by the availability of various types of forex indicators in the market and they are not sure about which product to use which can help them succeed in trading and get rich. The forex indicator system can help you to manage your forex trading account effectively from anywhere and monitor the changes in the market. The points which identify a good indicator system are as below,

Simple and Easy To Use

The technical indicator must be very simple and easy to use. Only if it is easy to learn and use, you can make use of the indicator for your trading decisions. Any person without special training or specialized knowledge must be capable of using the technical indicators. Also, it should be easy to manage the trading accounts easily without any issues. The users must be happy in using the technical indicators and make good profits. You must know how to interpret them easily and make the right trading decisions.

Good Profits

Lots of traders have suffered losses due to use of bad technical indicators which predicted the market wrongly leading them to bad decisions causing losses. A good forex indicator must help you generate good profits and not lead you into financial risks. There are some people who have made more than 2000 dollars in profits very quickly with help of good technical indicators. By making use of efficient forex indicators, the business risks can be avoided and you can manage your accounts effectively without suffering unnecessary losses. Such indicators are very popular and used by majority of forex traders.

Immediate Trading Alerts

A good forex trading system must be capable of providing very quick trading alerts and financial updates for you take make right trading decisions at right time. It should spot the fluctuations in exchange rates and indicate the right time for purchasing or selling a currency. You can use combination of two or three different technical indicators for more accuracy and better results.

Importance Of Forex Indicators In Trading Market

Forex traders of long ago can do business by depending on their instincts alone. This is one of the main reasons why thousands of them failed in forex trading. But nowadays, traders already have an aid which helps them succeed and gain big profit from the market. With the help of the forex trading indicators, they can easily predict the currency movements even without years of expertise in forex trading.

There is a vast range of forex indicators that you can download online today. But most of it has the same components include the number theory, Elliot wave theory, gaps, Moving Average Convergence Divergence, trends, chart formations so many others. Each component has its own benefits that could make trading easier especially to those who are considered to be amateur traders.

If you really want to have an accurate trading all the time, you should take advantage of the numerous forex trading indicators so you can easily gain more profit. However, the outcome would still depend on the technique of the trader and how he can create the best strategy for that efficient trade. The information that will be relayed to you by the forex indicators must complement so that you can confirm whether you will be investing your money and gain profit or the other way around.

There are also a couple of tips given by the experts in trading and use the indicators as well. You might want to take note of these since they’ve been utilizing the tool longer than you probably do.

• Always use the indicators so you can immediately identify the market trend.

• Take advantage of the forex trading indicators to see the market reversals at the same time.

• When formulating your entry in the currency trading market, let the indicators be your guide. Make sure that the details in every indicator that you will use will you confirm whether there is really a strong trend or just a temporary spike.

Why You Need To Take Full Advantage Of Forex Indicators Today

Below we provide a composite of forex indicators explained. An indicator, in general, is one that signals a change. In forex world, it means currency fluctuations. Currency fluctuations are affected by several factors. To monitor or predict these changes, two broad categories of indicators are used: technical and economic. A technical approach is one that uses price history changes and chart patterns. Some examples would be stochastic oscillator, moving average convergence divergence or MACD, and RSI or relative strength index. Economic indicators are, just that, based on economic data. The common economic measurements are GDP growth, unemployment, CPI, retail sales, and industrial production.

Let us dive more closer into the world of technical indicators. A measurement of the strength of the underlying currency movement trend can be defined by its RSI or relative strength index. This normalized index is a ratio of the positive moves relative to negative ones to determine which direction is more prevalent. The index is based on a zero to one hundred point value. A number below thirty indicates oversold and over seventy as overbought.

Another indicator, the MACD, can signal a change in direction over a specific window of time measured. This moving average convergence divergence calculates the difference between two exponential moving averages like a two hundred day versus a fifty day. Graphing this difference versus the moving average of the difference will provide cross over points that signal a change in direction.

The stochastic oscillator is a very good gauge for the sustainability of a trend whether it is positive or negative. This methodology calculates percentage values based on closing prices. In the case of an uptrend, the closing prices are focused on the upper end of a trading range, and in a downtrend they are near the bottom end. The concluding result is a band of lines which delineates an uptrend or downtrend. Any variation away from these bands would result in a trend change signal.

For forex indicators explained, one needs to include economic factors. GDP growth is the most prevalent economic indicator. It reflects the change in the gross domestic product, or an economy’s total value of its output which is the goods and services it produces. GDP is measured on an annual, quarterly, and sometimes monthly basis. Although GDP growth shows the change in economic output, it should not be viewed in isolation.

Industrial production helps measure productivity, as well. This calculation measures the manufacturing prowess of a nation. Another offshoot of this measurement is capacity utilization. The greater the amount or increase in unused capacity could well signal a decrease in economic activity and, hence, a lower currency value.

Unemployment is by far among the top most important economic factors. It is a gauge of the population’s production health, meaning the number of people it takes to produce the goods and services. The greater the number of people engaged in a productive endeavor, the stronger the economic engine. As more people are employed, there is more consumption and more growth. This also is reflective in the housing statistics, as homeownership rates increase.

As stated earlier, unemployment affects consumption. However, it is not a direct correlation. A country can have a relatively healthy unemployment rate with lower consumption. The population can opt to save versus spend. Hence, retail sales are a good indicator of economic sentiment. The more optimistic one is about the future the more likely one is to spend.

Lastly, GDP and retail prices are affected by inflation. The value of goods and services can vary depending on input costs. To gauge inflation, the consumer price index or CPI is used. This index measures the change in value of a set group of goods and services. This index, along with the PPI or producer price index, can help determine the profit or surplus of an economy. A composite understanding of these indicators along with the technical signal previously discussed, provides a good forex indicators explained overview.

Free Unique Forex Indicators Download

FREE Professional Forex Power Indicators for MetaTrader.Optimize Your Forex Trades To Capture Maximum Profits, While Massively Reducing Risk.

 

Download FREE  Forex Indicators That Works For MT4:

 

London Open Price Breakout Indicator draws entry sell, entry buy, sell targets, buy targets price boxes for London breakout trading.
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London Price Breakout Indicator

BreakOut Box Asian Session Indicator draws a high price and low price box of Asia forex trading session. BreakOut Box Asian Session Indicator can be used for breakout trading in London and Newyork session.
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BreakOut Box Asian Session Indicator

Open Close Session Time indicator will plot vertical lines in the time you set. Such as Open Close Session Time indicator can set Newyork market open and close.
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Open Close Session Time indicator

Auto Forex Trading Session indicator will draw rectangle for Asis, US and London sessions. The begin hours, end hours and session rectangle can be set to fit for different forex brokers.
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Auto Forex Trading Session indicator

Ichimoku Cloud Breakout Email Alert indicator send an email alert when such as price breaks out above and below the Ichimoku cloud, tenkan above kijun, price above kijun, price crosses above/below tenkan etc.
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Ichimoku Cloud Breakout Email Alert indicator

Daily High Low Close indicator draws lines for previous day’s high, low and close.
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Daily High Low Close indicator

SDX TzPivots Pivots Indicator draws pivots according to your timezone. SDX TzPivots Indicator shows yesterday’s price range, price high, price low and price close.
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Auto Pivot Plotter Weekly indicator
MT4 Number indicator draws horizontal lines at certain number price levels. You can set 3 different price space in the indicator setting.
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MT4 Number indicator
H4 High Low Middle indicator will draw horizontal line at the high, low and middle of the previous H4 candle bar in the MT4 currency pair chart.
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H4 High Low Middle indicator

Market Open H1 High Low Candle Lines indicator will draw high and low lines of a specific H1 candle for the day.
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Market Open H1 High Low Candle Lines indicator

Daily open line(DOL) indicator puts a horizontal line at the open price in your MT4 chart. You can set the open time.
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Daily open line(DOL) indicator

Daily Open Levels indicator sets pips above and below the daily open in MT4 chart. You can set how many pips as a level.
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Daily Open Levels indicator

Daily Open Levels Historical indicator sets pips above and below the daily open for the past trading days. You can set how many trading days back.
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Daily Open Levels Historical indicator

SDX TzPivots Pivots Indicator draws pivots according to your timezone. SDX TzPivots Indicator shows yesterday’s price range, price high, price low and price close.
Download Auto Pivot Plotter Weekly indicator:
Auto Pivot Plotter Weekly indicator

London NewYork Open Hour Indicator draws dots for London and NewYork Forex open hours and minutes. Setting: GMTOffSet, DST, LondonOpenHour, LondonOpenMin, NewYorkOpenHour, NewYorkOpenMin etc.
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London NewYork Open Hour Indicator

Fractal Breakout Indicator Alert Indicator alerts when Fractal breaks out recenlty formed fractal. Alerts have message alert, sound alert, emal alert.
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Fractal Breakout Indicator Alert Indicator

Forex Daily Boxes Indicator draws colorful Forex daily candles boxes.
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Forex Daily Boxes Indicator

Price Trendlines Alert Indicator draws two trendlines on the chart which act as upper & lower alert price levels. When current price reaches either level, audio and popup alert is triggered.
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Price Trendlines Alert Indicator

Price Above Below Audio Alert Indicator plays an audio alert when current price reaches the price level set.
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Price Above Below Audio Alert Indicator

Horizontal Trendline Audio Alert Indicator will alert when price reaches the set price level. Horizontal Trendline Audio Alert Indicator is useful to see price action or place orders.

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Horizontal Trendline Audio Alert Indicator

Angled Trendline Audio Alert Indicator will alert when pair price hits the set price level.
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Angled Trendline Audio Alert Indicator

RSI Levels Alert Indicator alerts when Relative Strength Index reaches overbought or oversold levels. Alerts include popup alerts, email alerts, pushnotification alerts and sound alerts.
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RSI Levels Alert Indicator 

Stochastic Levels Alert Indicator alerts when Stochastic reaches overbought or oversold levels. Alerts include popup alerts, email alerts, pushnotification alerts and sound alerts.
Download Stochastic Levels Alert Indicator:
Stochastic Levels Alert Indicator

Price Cross Tenkan Sen Line Alert Indicator alerts when Price is close above or below Tenkan Sen line. The alerts option includes popup alert, email alert and push notification alert.
Download Price Cross Tenkan Sen Line Alert Indicator:
Price Cross Tenkan Sen Line Alert Indicator

ADX Popup Alert indicator will popup alert when DI+ cross DI-.
Download ADX Popup Alert indicator:
ADX Popup Alert

MACD Crossover Alert Indicator will popup an alert when MACD Cross.
Download MACD Crossover Alert Indicator:
MACD Crossover Alert Indicator

Pips To MA Alert Indicators have 2 indicators that will trigger popup alert and email alert when current price is x pips away from set moving average.
Download Pips To MA Alert Indicators:
Pips To MA Alert Indicators

Engulfing Bars Alert Indicator alerts when engulfing candle happens. Engulfing Bars Alert Indicator has popup alert, email alert, push notification alerts and sound alerts.
Download Engulfing Bars Alert Indicator:
Engulfing Bars Alert Indicator

Stochastic Oscillator Bar Alert indicator will alert when different time frames stochastics cross and move the same direction.
Download Stochastic Oscillator Bar Alert indicator:
Stochastic Oscillator Bar Alert indicator

EMA Crossover Signal Indicator plots a arrow when the 2 EMA cross and give a sound alert.
Download EMA Crossover Signal Indicator:
EMA Crossover Signal Indicator

30 50 100 SMA indicator shows a up arrow when 30 and 50 SMA that are both above SMA 100 are cross. 30 50 100 SMA indicator shows a down arrow when 30 and 50 SMA that are both below SMA 100 are cross.
Download 30 50 100 SMA indicator:
30 50 100 SMA indicator

It is Bollinger Band alert indicator for MT4. The Bollinger Band alert indicator will alert when currency price opens outside the bands. Bollinger Band alert indicator has sound files itself.

Download Bollinger Band alert indicator here:
Bollinger Band alert indicator

Fractals Sound eMail indicator is Fractals indicator with a sound and email alert.
Download Fractals Sound eMail indicator:
Fractals Sound eMail indicator

MT4 Candle Pips Size indicator is a indicator to show candle pips size. The MT4 Candle Pips Size indicator shows the bull pips number on top and shows the bear bull pips number at the bottom.
Download MT4 Candle Pips Size indicator here:

MT4 Candle Pips Size indicator high to low:
MT4 Candle Pips Size indicator high to low

Contribution By liveforexsignal.com

Please Visit The Source For More Useful Indicators.

 

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WHAT TYPE OF TRADER ARE YOU?

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PSYCHOLOGICAL TRADING & MONEY MANAGEMENT SYSTEM

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CONVERTING KNOWLEDGE INTO PRACTICE

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CLASSIC BOUNDARY BREAKOUT STRATEGY

One of the most simple and profitable systems. So many traders are already enjoying it. You need just a line chart, and RSI indicator. Read it and enjoy this strategy.
THE SECRET MEANING OF JAPANESE CANDLESTICKS (PART 1)

There are some well kept secret candles patterns. I decided that everyone should know them, as they can take trader’s level much higher. Discover the best of the best candle patterns.
THE SECRET MEANING OF JAPANESE CANDLESTICKS (PART 2)

There are some well kept secret candles patterns. I decided that everyone should know them, as they can take trader’s level much higher. Discover the best of the best candle patterns.
THE SECRET MEANING OF HIDDEN STOCHASTIC

The Stochastic was always known as one of the best indicators to determine the extreme levels on the markets. But there are much much more in this great indicator. All here, in this free e-book for you.
THE SECRET OF THE DOUBLE DOJI

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Ichimoku Kinko Hyo Trading System

Ichimoku Kinko Hyo indicator is a very useful and informative technical indicator. It shows the direction of the dominant trend; its lines may serve you as solid supports and resistances, and its clouds will allow you to visualize momentum and trend strength. At first glance, Ichimoku Kinko Hyo might look very intimidating and mind-boggling, but once you understand how to read it, you will see that the information and the signals it provides are very helpful. In the following tutorial, we will tell you about the Ichimoku lines generating different trading signals, the so-called Kumo-clouds and lags. Then, we will explain how to analyze the market with this wonderful technical tool. So, let us cast a “glance at a chart in equilibrium” (literal translation of the phrase Ichimoku Kinko Hyo).
Ichimoku components
Kijun Sen (blue line, base line): it is a major indicator component of the Ichimoku Kinko Hyo indicator, it is used to measure medium-term momentum. It is calculated by averaging the highest high and the lowest low for the previous 26 periods. In lay terms, it marks the middle of the range of the past 26 candles.
Tenkan Sen (red line, conversion line): It is another turning line which is derived by averaging the highest high and the lowest low for the past nine periods. It shows the middle of the range of the previous 9 candles.
Chikou Span (green line): It is a lagging, delayed line. Its closing price can be found by shifting to the left for 26 periods. Think of it as of a reflection back to what’s already happen, as of a repaint.
Senkou Span (orange lines): The first Senkou line is the average of Tenkan Sen and the Kijun Sen shifted 26 periods ahead. The second Senkou line is the average of the highest high and the lowest low for the previous 52 periods and it is plotted 26 periods ahead.
Kumo (cloud): it is the shaded area between the two Senkou Span lines. The cloud is perceived as a price attractor. The price tends to retrace to its borders which are the price’s formal levels. In other words, the price very often revisit the levels it tested earlier.
How to trade with Ichimoku components
Now, let us see what these components might tell us
Equilibrium lines (Kijun-Sen and Tenkan-Sen)
The equilibrium lines can show us the direction of the trend at the present moment. The cloud is a predictor of the future direction of a trend. Its crossovers are the signals for the identification of market reversals.
Kijun-Sen trading signals
A bearish trading signal occurs when the price crosses the Kijun-Sen line from up to down.
A bullish trading signal occurs when the price crosses the Kijun-Sen from the bottom upwards

A weak bullish signal occurs when the cross is below the cloud

A neutral bullish signal is in place when the cross is inside the Kumo

A strong bullish signal occurs when the cross is above the cloud.
Tenkan Sen trading signals
A bearish signal is present when the Tenkan Sen crosses from up to down the Kijum Sen line.

A weak bearish signal occurs when the cross is above the cloud

A neutral signal occurs when the cross is inside the cloud

A strong signal occurs when the cross is below the cloud
Kumo (Cloud)
The borders of the cloud (Senkou spans) are good resistance and support lines.
The cloud’s bandwidth is a proven measure of market volatility. The wider the cloud the more volatility and less certainty on the future price direction is present. Narrow, flat clouds are the signs that the marker is stable.
You may also use Kumos to identify the direction of the dominant trend. If the price is above the cloud, it means that un uptrend is in place and that there are lots of buying opportunities. If the price is below the cloud, it is better to look for shorts instead of longs. For more detail look at the table below

A weak bullish signal is present when the price is below the Kumo

A strong bullish signal is present when the price is above the Kumo

A bullish signal occurs when the price moves up and breaks the upper border of the Kumo

A bearish signal occurs when the price falls and breaks the lower border of Kumo
The twists (crossovers) of Senkou spans (the lines that form the Kumo) are generally used for identification of the reversal points. A bullish trading signal occurs when the Senkou Span A cross from the bottom upwards the Senkou Span B. A bearish signal occurs when the Senkou Span A crosses from up to down the Senkou Span B.

Resource :

https://fxbazooka.com/analytics/strategies

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