Young Ho Seo / Profil

Tutorial Using Excessive Momentum and Fibonacci Ratio Analysis

With Excessive Momentum Indicator, you can access to the automatic Fibonacci Ratio Analysis. Combining these two powerful trading system are the excellent ways to trade in Forex market. In this article, we will show you how to combine both with step by step guide.

When there is an unexpectedly long bearish and bullish price movement, the indicator will detect these excessive momentum area for your trading. This excessive momentum zone are often the true accumulation and distribution area in the Volume Spread Analysis. What does this mean for your trading ?This means that entry around this excessive momentum area can provide you the great advantage that favors your Reward and Risk for your trading whether they are breakout trading or reversal trading. The indicator provides such a great opportunity automatically.

In addition, Fibonacci retracement level can provide further idea about when the price can move according to our expectation. To call the Fibonacci retracement level automatically, simply click on the circle at the Excessive Momentum Zone. Then it will place the Fibonacci retracement level automatically in your chart. The thing is that the placed Fibonacci Retracement level might be too short in its width. Sometime, you want to project the Fibonacci Retracement level far right to see the price action around the retracement level. It is doable too.

To do so, double click on the Fibonacci retracement object in your chart. Then you will see the three anchor points in the retracement object. Drag the right anchor point to the right. You can drag them as far as you want to cover the chart area at your interest. Please check the screenshot attached to complete this tutorial.

This Excessive Momentum Zone can be considered as either Accumulation or Distribution area in the Volume Spread Analysis. You can further find the symptoms of accumulation and distribution area using our Volume Spread Pattern Indicator (Paid and Advanced version) or Volume Spread Pattern Detector (Free and Light version). You can watch the YouTube videos to find more about the Excessive Momentum Indicator.

YouTube Video 1: https://youtu.be/oztARcXsAVA

YouTube Video 2: https://youtu.be/A4JcTcakOKw

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Here is link to Excessive Momentum Indicator.

https://algotrading-investment.com/portfolio-item/excessive-momentum-indicator/

https://www.mql5.com/en/market/product/30641

https://www.mql5.com/en/market/product/30621

With Excessive Momentum indicator, you can use our Free Volume Spread Pattern Detector. Volume Spread Pattern Detector is a great free tool to complete your Volume Spread Analysis to detect Accumulation and Distribution. Or even you can use them to detect important support and resistance for your trading too. Here is the link to the free Volume Spread Pattern Detector.

https://www.mql5.com/en/market/product/28438

https://www.mql5.com/en/market/product/28439

https://algotrading-investment.com/portfolio-item/volume-spread-pattern-detector/

In addition, Volume Spread Pattern Indicator is the more advanced version of Volume Spread Pattern Detector. If you want to improve your trading performance even more, then we recommend using Volume Spread Pattern Indicator. This is not free indicator but it is affordable. Here is the link to the Advanced Volume Spread Analysis indicator.

https://www.mql5.com/en/market/product/32961

https://www.mql5.com/en/market/product/32960

https://algotrading-investment.com/portfolio-item/volume-spread-pattern-indicator/

Turning Point in Pairs Trading
Pairs trading is a market-neutral strategy that involves buying one asset and shorting another. Pairs trading or the similar trading principle is often employed by the hedge funds and institutional investors. Like value investing and the economic data, the pairs trading explains the occurrence of the turning point well. Therefore, if you have the working knowledge of the pairs trading, it could help you to use price pattern better. At the same time, with pairs trading, we can still apply the margin of safety and spread we have learnt from the value investing strategy. Hence, it is the good trading strategy to be covered in this book.

Pairs trading starts with identifying a pair of assets that are believed to have some long-run equilibrium relationship. When the spread has diverged sufficiently, the strategy will buy the undervalued asset and sell the overvalued asset. The strategy achieves a hedging or risk neutral state by taking two assets at the same time in different direction. Pairs trading strategy is applicable to both Forex and Stock market. The process of the pairs trading can be summarized into the following four steps.

Identify two assets whose prices have moved together historically in long term.
Calculate the correlation, co-integration, historical spread between two assets.
When the spread between two assets are diverged excessively high, then buy the undervalued asset and sell the overvalued asset.
When the spread is reverting back to normal range, close the positions of the two assets to take the profit.


Figure 2-3: Normalized AUDUSD vs EURUSD on the top and spread chart on the bottom (Chart: www.algotrading-investment.com, Optimum Chart)

Except the spread is measured between two assets, the trading principle of the pairs trading is similar to the value investing. For example, the pairs trading involves to recognize the unusual high spread between the two highly correlated assets whereas the value investing involves to recognize the unusual high spread between the intrinsic value and the stock price. Hence, the unusual high spread provides the margin of safety in the pairs trading. In another words, if the spread is higher, then it favours our positions more but with less risk. Typically, the trader applies the statistical knowledge in picking the spread limit to trigger the entry. For example, as in the standard deviation, the spread 3 might be the bottom line to consider the entry. However, the choice of the spread limit to trigger trading could be varying for different assets. Sometimes the historical spread of some assets shows that the spread 4 is the appropriate choice for the spread limit. Sometimes, the historical spread of some assets shows that the spread 3 is the appropriate choice for the spread limit. To choose the right spread limit, it is best to inspect the historical spread first in the chart. However, to provide you some rule of thumb guideline, for the stock market, spread 4 or over might be considered to trigger the entry. For the Forex market, the spread 3.5 or over might be considered to trigger the entry. As the pairs trading shares common ground with statistics, some people call the pairs trading as the statistical arbitrage. As in the margin of safety in the value investing, the higher spread between two assets, the absolute spread in fact, can be considered as the higher margin of safety.

Since the pairs trading involves to take the positions for two assets, this provides some of its own properties, which is different from other strategy. For example, we could provide two illustrative examples when the positions are closed with profits. These two illustrative examples are not necessarily the exhaust list of scenarios for the movements of two assets. However, we have selected them as they can visualize the process of the formation of the turning point better than other scenarios.

For the first example, consider that we bought the one asset with low price and sold another asset with high price when the spread was diverged sufficiently high. In this example, the asset with low price (=Symbol B) could make the bullish turning point to reach the price level of another asset because they are supposed to move together in long run. We are in profit due to the sharp rise in the asset with low price (=Symbol B) after the bullish turning point.



Figure 2-4: Normalized EURUSD vs GBPUSD on the top and spread chart on the bottom (Chart: www.algotrading-investment.com, Optimum Chart)

In the second example, the asset with high price (=Symbol B) could make the bearish turning point to reach the price level of another asset because they are supposed to move together in long run. We are in profit due to the sharp fall in the asset with high price (=Symbol B) after the bearish turning point.



Figure 2-5: Normalized CADJPY vs EURJPY on the top and spread chart on the bottom (Chart: www.algotrading-investment.com, Optimum Chart)

From the two illustrative examples, we could draw two useful trading principle. Firstly, when the spread is sufficiently high, it is possible to have a turning point between two assets. The bullish turning point could happen to the asset with low price or the bearish turning point could happen to the asset with high price. As in value investing, the pairs trading provides an explanation to the formation of the turning point in the financial market. Secondly, taking the opposite positions on two assets reduce the risk of the market volatility. This is considered as the hedging or the risk neural strategy. Since we are holding one position in opposite direction to other position, we are exposed less on the market volatility. Although hedging is an optional practice only, you never know if you like or dislike such a trading principle. If you do not understand the hedging effect, you might open a Forex demo or simulation account for an educational purpose. Search two highly correlated assets. Then buy one and sell the other. Monitor the profits and loss of the two assets for some time.

In the Forex market, since you can enter the sell position as well as the buy position, the pairs trading can be applicable. The pairs trading can be applicable to the stock trading too. If the pairs trading strategy provides the high spread between two stocks in your portfolio, then you can sell the stock in your portfolio and buy more on the other stock in your portfolio. If the pairs trading strategy provides the high spread between one stock in your portfolio and the other stock outside your portfolio, then you can sell the stock in your portfolio and buy the new stock for your portfolio. Since the spread in the pairs trading is calculated in real time, it can be considered as the quantitative trading strategy. This helps us to trade with less emotion. In addition, the price pattern can be combined with the pairs trading strategy to improve their performance. In that case, the margin of safety in the pairs trading could be applied to confirm the direction of the price pattern. However, there are some disadvantages for the pairs trading too. For example, this technique might be more complicated than other trading strategy. Firstly, they could be more complicated because the technique involves dealing with two assets at the same time. Secondly, they could be more complicated because the technique requires some knowledge of statistics and statistical trading.

About this Article

This article is the part taken from the draft version of the Book: Science Of Support, Resistance, Fibonacci Analysis, Harmonic Pattern, Elliott Wave and X3 Chart Pattern. Full version of the book can be found from the link below:

https://algotrading-investment.com/portfolio-item/science-of-support-resistance-fibonacci-analysis-harmonic-pattern/

You can also use Pairs Trading or Spread Analysis in MetaTrader to accomplish your technical analysis. Here is the landing page for Pairs Trading Station in MetaTrader 4 and MetaTrader5.

https://algotrading-investment.com/portfolio-item/pair-trading-station/

https://www.mql5.com/en/market/product/3303

https://www.mql5.com/en/market/product/3304

Below is the landing page for Optimum Chart, which is the standalone tool to scan the trading opportunities for all symbols and all timeframe in one button click.

https://algotrading-investment.com/2019/07/23/optimum-chart/

Harmonic Pattern Indicator Explained

Trading Indicator is an effort of developer to create trading tools comply with particular theory or trading strategy or trading ideas. There is always gap between theory (i.e. ideas or strategy) and practice.

Not all the harmonic pattern indicators are the same. In the past the main variations of Harmonic pattern indicators can be categorized as following four types.

Type 1: Non lagging (fast signal) but repainting – option to enter from turning point. Indicator does not show the failed pattern in chart and last pattern can repaint.

Type 2: Lagging (slow signal) but non repainting – no option to enter at turning point (i.e. early signal). Indicator does not show the failed pattern but last pattern does not repaint.

Type 3: Detecting pattern at point C but repainting – option to enter at turning point. Indicator detect pattern too early and you have to wait quite bit of time until price move near the point D. In fact, price may not move near point D. You might just waste your time waiting for the pattern. Indicator does not show the failed pattern and last pattern can repaint.

Type 4: Non lagging (fast signal) and non repainting – option to enter from turning point. At the same time, the pattern is not repainting. This is hybrid of all above three system and can be considered as the most powerful harmonic pattern indicator.

To accomplish this post, you can read the full blog article about the types of Harmonic Pattern Indicator from the link below.

https://algotrading-investment.com/2019/03/03/harmonic-pattern-indicator-explained/

In addition, you can watch the YouTube Video to feel what is the automated harmonic pattern indicator like. For your information, we provides two YouTube videos with title and links below.

YouTube “Harmonic Pattern Indicator”: https://youtu.be/CzYUwk5qeCk

YouTube “Non Repainting Non Lagging Harmonic Pattern Indicator”: https://youtu.be/uMlmMquefGQ

Here is the list of Harmonic Pattern Indicators for MetaTrader 4 and MetaTrader 5.

1. Harmonic Pattern Plus (Type 1 = good)

Harmonic pattern plus is extremely good product for the price. With dozens of powerful features including Pattern Completion Interval, Potential Reversal Zone, Potential Continuation Zone, Automatic Stop loss and take profit sizing.

Below are the Links to Harmonic Pattern Plus

https://www.mql5.com/en/market/product/4488

https://www.mql5.com/en/market/product/4475

https://algotrading-investment.com/portfolio-item/harmonic-pattern-plus/

2. Harmonic Pattern Scenario Planner (Type 1 + Predictive feature = good)

With additional features of predicting future harmonic patterns, this is very tactical harmonic pattern indicator with advanced simulation capability on top of the powerful features of harmonic pattern plus.

Below are the Links to Harmonic Pattern Scenario Planner

https://www.mql5.com/en/market/product/6101

https://www.mql5.com/en/market/product/6240

https://algotrading-investment.com/portfolio-item/harmonic-pattern-scenario-planner/

3. X3 Chart Pattern Scanner (Type 4 = best)

This is our next generation Chart Pattern Scanner. This is non-repainting and non-lagging Harmonic Pattern Indicator. On top of that, this tool can detect Elliott Wave Pattern and X3 Patterns. As a bonus, this scanner can detect around 52 Japanese candlestick patterns for your trading. This is the most advanced Harmonic and Elliott wave pattern detector in the market. You must try.

https://algotrading-investment.com/portfolio-item/profitable-pattern-scanner/

https://www.mql5.com/en/market/product/41992

https://www.mql5.com/en/market/product/41993

Intro Video for Advanced Price Pattern Scanner

Advanced Price Pattern Scanner is the non repainting pattern scanner designed for both MetaTrader 4 and MetaTrader 5. It can detects many important price patterns for your trading like rising wedge, falling wedge, head and shoulder patterns, Cup and Handle, etc. Here is an intro video for Advanced Price Pattern Scanner from YouTube. Please check the YouTube Video titled as “Intro Video to Advanced Price Pattern Scanner”. This video covers some basic operation with Advanced Price Pattern Scanner in MetaTrader.

Advanced Price Pattern Scanner YouTube Video: https://www.youtube.com/watch?v=A1-IUr6u5Tg

In addition, you can watch the following YouTube Video to understand why price pattern is so important for your technical analysis.

Fractal to Advanced Technical Analysis YouTube Video: https://www.youtube.com/watch?v=RiTsWthvxfA

Below is the direct link to Advanced Price Pattern Scanner. As usual, we provide it for both MetaTrader 4 and MetaTrader 5 platforms.

https://algotrading-investment.com/portfolio-item/advanced-price-pattern-scanner/

https://www.mql5.com/en/market/product/24679

https://www.mql5.com/en/market/product/24678

New Article Released – Support and Resistance Trading with Turning Point Probability

We have released one of the important article for your practical trading in Forex and Stock market. Please make sure to read this article to enhance your trading performance. This article explains how to use Support and Resistance (i.e. geometric regularity) with Turning Point Probability (i.e. statistical regularity).

More articles will be followed shortly. Then enjoy this free articles for your trading education.

https://algotrading-investment.com/2020/04/07/support-and-resistance-trading-with-turning-point-probability/

https://algotrading-investment.com/2019/07/23/trading-education/

The turning point probability is a powerful tool that you can use it as both reversal trading or breakout trading within your technical analysis. You can watch this YouTube video titled as “Breakout Trading vs Reversal Trading (Turn Support & Resistance to Killer Strategy)” in this link below to get some hands on practice with breakout and reversal trading opportunity with Support and Resistance Technical Analysis.

YouTube Video Link: https://youtu.be/UbORmOacKIQ

Below is the landing page for Fractal Pattern Indicator for MetaTrader 4 and MetaTrader 5.

https://www.mql5.com/en/market/product/44539

https://www.mql5.com/en/market/product/44538

https://algotrading-investment.com/portfolio-item/fractal-pattern-indicator/

Below is the landing page for Optimum Chart. Optimum Chart can scan the turning point probability across all timeframes + all symbols.

https://algotrading-investment.com/2019/07/23/optimum-chart/

Elliott Wave Indicator MT5

Elliott wave theory is nearly 100 years old trading strategy. However, it is still actively used by many professional traders from all over the world. We provide several Elliott Wave indicator for MetaTrader 5, the most popular platform in the world.

1. Elliott Wave Trend MT5

Elliott Wave Trend is the professional Elliott wave indicator which was released around 2016. This one allow you to perform Elliott wave counting as well as Elliott wave pattern detection. On top of them, it provides built in accurate support and resistance system to improve your trading performance. There are many other powerful features added to give you winning strategy. Please find out from the provided link page.

Here is the links to Elliott Wave Trend MT5:

https://www.mql5.com/en/market/product/16472

https://algotrading-investment.com/portfolio-item/elliott-wave-trend/

2. X3 Chart Pattern Scanner MT5

X3 Chart Pattern Scanner is our next generation profitable Pattern Scanner. This is non-repainting and non-lagging Pattern Scanner. In fact, X3 Chart Pattern Scanner is not exclusively Elliott wave pattern scanner. However, it can detect Harmonic patterns, Elliott Waves and X3 Chart patterns. As a bonus, this scanner can detect around 52 Japanese Candlestick Patterns for your trading. It also provide the built in automatic channels to help you to win in the market. This is the most advanced Harmonic and Elliott wave pattern scanner in the market. You must try.

Here is link to X3 Chart Pattern Scanner MT5

https://www.mql5.com/en/market/product/41992

https://algotrading-investment.com/portfolio-item/profitable-pattern-scanner/

3. Peak Trough Analysis MT5 (Free for every one)

Understanding how peak trough analysis works for your trading is the most basic but essential skill for Elliott Wave trading. Good Elliott wave trader should never miss on a training around peak trough analysis. Do not skip this is free tool. You can use this free tool with any of our products listed above.

Here is the download link for Peak Trough Analysis MT5 (Free)

www.mql5.com/en/market/product/22420

www.algotrading-investment.com/portfolio-item/peak-trough-analysis-tool

Take Profit and Stop Loss in X3 Chart Pattern Scanner

X3 Chart Pattern Scanner is also using the risk management concept with Pattern Completion Interval for your trading. Must remember that trading without having good reward/Risk ratio is useless. They can blow your account pretty quickly. Please make sure that you understand the role of Pattern Completion Interval and how it can help for your trading.

In X3 Chart Pattern Scanner, your stop loss and take profit is controlled for individual patterns. This is the main difference from Harmonic Pattern Plus and Harmonic Pattern Scenario Planner. Since X3 Chart Pattern Scanner have different categories of patterns like Elliott Wave patterns, Harmonic patterns and X3 patterns, you can apply different money management scheme if you wish.

To change your stop loss and take profit, scroll down in your input. Stop Loss = 1 means that it is size of 1 x Pattern Completion Interval Box. Take Profit = 2.5 means that it is size of 2.5 x Pattern Completion Interval.

X3 Chart Pattern Scanner provide all the historical patterns, helping you to tune your strategy. Hence, please test your strategy and change your stop loss and take profit according to your observation from your chart. We have already shown you how to test your strategy with X3 Chart Pattern Scanner in another article here.

https://algotrading-investment.com/2019/09/18/showing-historical-patterns-in-profitable-pattern-scanner/

In addition, you can watch the YouTube Video to feel what is the automated harmonic pattern indicator like.

YouTube “Non Repainting Non Lagging Harmonic Pattern Indicator”: https://youtu.be/uMlmMquefGQ

Also check the screenshot for better understanding of this basic risk management concept.

https://algotrading-investment.com/portfolio-item/profitable-pattern-scanner/

https://www.mql5.com/en/market/product/41992

https://www.mql5.com/en/market/product/41993

Mean Reversion Supply Demand

We provide many sophisticated trading system in our website to construct the sound portfolio in your investment and to increase your capitals in your trading. Mean Reversion Supply Demand is the powerful Supply and Demand Zone indicator you can use in your collection in Forex and Stock market trading.

With the built in Market Profile indicator, the tool provide flexible and accurate control of your entry and risk management especially around the significant trading zone in your chart.

Highly automated feature can help you to readily set your profit target and even more sophisticated analysis in your chart. For your winning trading, this is the must have tool.

https://www.mql5.com/en/market/product/16851

https://www.mql5.com/en/market/product/16823

https://algotrading-investment.com/portfolio-item/mean-reversion-supply-demand/

Harmonic Pattern – Turning Point and Trend

This article “Turning Point and Trend” tries to answer you on when to use Harmonic Pattern Trading in terms of the four market cycle including Birth, Growth, Maturity and Death. If you want to become profitable trader, then you need to decide when your capital to dive into the market. The best way is doing it with the market rhythm, i.e. the market cycle. This article will provide you the clear answer on how to tune your entry with the market. This is the first step for any trader in choosing their strategy in fact. You would also revise the pros and cons of the turning point strategy, semi turning point strategy and trend strategy.

https://algotrading-investment.com/2019/07/06/turning-point-and-trend/

Below are the list of automated Harmonic pattern Indicator developed for MetaTrader 4 and MetaTrader 5 platform.

Harmonic Pattern Plus

One of the first automated Harmonic Pattern detection tool released in 2014. It can detect 11 most popular harmonic patterns with well-defined trading entries and stops. Pattern Completion Interval, Potential Reversal Zone and Potential Continuation Zone are supported. In addition, other dozens of powerful features are added like Japanese candlestick detection, etc. Because of affordable price, this harmonic pattern detection indicator is loved by many traders. Please note that this is repainting and non lagging harmonic pattern trading system.

https://www.mql5.com/en/market/product/4488

https://www.mql5.com/en/market/product/4475

https://algotrading-investment.com/portfolio-item/harmonic-pattern-plus/

Harmonic Pattern Scenario planner

It is an advanced Harmonic Pattern indicator. On top of the features of Harmonic Pattern Plus, you can also predict future harmonic patterns through simulation. This is the tactical harmonic pattern tool designed for Professional harmonic pattern trader. Because of affordable price, this harmonic pattern detection indicator is loved by many traders. Please note that this is repainting and non lagging harmonic pattern trading system.

https://www.mql5.com/en/market/product/6240

https://www.mql5.com/en/market/product/6101

https://algotrading-investment.com/portfolio-item/harmonic-pattern-scenario-planner/

Both Harmonic pattern plus and Harmonic Pattern Scenario planner are the excellent trading system at affordable cost. However, if you do not like repainting Harmonic pattern indicator, then we also provide the non repainting and non lagging harmonic pattern trading. Just check the X3 Chart Pattern Scanner below.

Link to X3 Chart Pattern Scanner

https://www.mql5.com/en/market/product/41993

https://www.mql5.com/en/market/product/41992

https://algotrading-investment.com/portfolio-item/profitable-pattern-scanner/