Something Interesting in Financial Video November 2013 - page 6

Sergey Golubev
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Video 10 - How to trade the MACD indicator in Forex


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Indicators: MACD

newdigital, 2013.08.01 13:12

MACD Technical Analysis Buy and Sell Signals

Since the MACD uses 26 and 12 EMA to plot, we shall compare these two EMAs with the MACD indicator to determine how these signals are generated.



The MACD is a leading indicator meaning it generates signals that are leading compared to price action as opposed to lagging indicators that lag behind the price.

MACD Buy

A buy signal is generated when there is a MACD fast line crosses above the signal line. However, as with any leading indicator these signals are prone to whipsaws/ fake out signals. 

To eliminate the whipsaws it's good to wait for confirmation. The signal is confirmed when the two lines cross above the zero mark, when this happens the buy generated is a reliable trading signal.

In the example below, the Moving average generated a buy, before price started to move up. But it wasn't until the MACD moved above the zero line that the signal was confirmed, and the Moving Averages also gave a crossover signal. From experience its always good to buy after both the MACD lines move above zero.


MACD Sell

A sell signal is generated when there is a MACD fast line crosses below the signal line. However, just like the buy signal, these are also prone to whipsaws/ fake outs.

To eliminate the whipsaws its good to wait for confirmation of the signal. The signal is confirmed when the two lines cross below the zero mark, when this happens the sell generated is a reliable trading signal.

In the example below, the Moving average generated a sell confirmed after MACD moved below the zero line at the same time that the Moving Averages gave a crossover signal.



Sergey Golubev
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Video 11 - How to trade Moving Averages in Forex Part 1

In this first video of two part series we discuss moving averages, how they are calculated and the factors you need to consider if you will use them as part of your trading strategy. In Forex trading, moving averages are a really successful indicator to use but firstly, you need to know what they do. This is what we discuss in this Forex training video.

Forum

Indicators: Custom Moving Average

newdigital, 2013.07.30 20:10

Moving Average Strategy Forex Trading

Moving average is one of the most widely used Indicator because it is simple and easy to use.

This Indicator is a trend following indicator that is used by forex traders for three things:

  • Identify the beginning of a new trend
  • Measure the sustainability of the new trend
  • Identify the end of a trend and signal a reversal
The MA is used to smooth out the volatility of price action. The MA is an overlay indicator and it is placed on top or superimposed on the price chart.

On the example below the blue line represents a 15 period MA, which acts to smooth out the volatility of the price action.






Sergey Golubev
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Video 12 - How to trade Moving Averages in Forex Part 2

Following our last Forex training video, we will now show you how to trade using moving averages. They are a very good indicator of trend direction and support/resistance levels. They can also be used in conjunction with each other to show you good entries and exits.

Forum

Indicators: Custom Moving Average

newdigital, 2013.07.30 20:12

Trading Short-term and Long-term Price Period of Moving Average

A trader can choose to adjust the periods used to calculate the moving average.

If a trader uses short periods then the MA will react faster to the changes in price.

For example if a trader uses the 7 day MA then, it will react to price change much faster than a 14 day or 21 day MA would. However, using short time periods to calculate the MA might result in the indicator giving false signals (whipsaws).


If another trader uses longer time periods then the MA will react to price changes much slower.

For example, if a trader uses the 14 day MA then the average will be less prone to whipsaws but it will react much slower.





Sergey Golubev
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Sergey Golubev  

Video 13 - How to trade the Momentum indicator in Forex

In this Forex training video we discuss the Momentum indicator and how it can be used in your Forex trading. The Momentum indicator detects strength in a trend which is great if you are a trend trader but it also detects weakness in trends thus providing us good exit signals.


Forum

Indicators: Momentum

newdigital, 2013.08.24 17:14

Momentum Technical Indicator

The momentum indicator uses equations to calculate the line of plotting. Momentum measures the velocity with which price changes. This is calculated as the difference between the current price candlestick and the average price of a selected number of price bars ago.

Momentum indicator represents the rate of change of the currency’s price over those specified time periods. The faster that prices rise, the bigger the increase in momentum. The faster that prices decline, the bigger the decrease in momentum.

As the price movement starts to slow down the momentum will also slow down and return to a median level.


Technical Analysis of Momentum Technical Indicator

The Momentum indicator is used to generate technical buy and sell signals. The three most common methods of generating trading signals used in Forex trading are: 

Zero-Centerline Crossovers Signals:

  • A buy signal is generated when Momentum indicator crosses above zero
  • A sell signal is generated when Momentum indicator crosses below zero

Overbought/Oversold Levels:

Momentum is used as an overbought/oversold indicator, to identify potential overbought and oversold levels based on previous indicator readings; The previous high or low of the momentum indicator is used to determine the overbought and oversold levels.

  • Readings above the overbought level mean the currency pair is overbought and a price correction is pending
  • While readings below the oversold level the currency is oversold and a price rally is pending. 

Trend Line Breakouts:

Trend lines can be drawn on the Momentum indicator connecting the peaks and troughs. Momentum is a leading indicator and it begins to turn before price thereby making it a leading indicator.

  • Bullish reversal- Momentum indicator readings breaking above a downward trend line warns of a possible bullish reversal signal while
  • Bearish reversal- momentum readings breaking below an upward trend line warns of a possible bearish reversal signal.




Sergey Golubev
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Candlesticks - Vol 11 - Dark Cloud Cover

Forum

Libraries: MQL5 Wizard - Candlestick Patterns Class

newdigital, 2013.09.13 12:10

Dark Cloud Cover

Dark Cloud Cover is a bearish candlestick reversal pattern, similar to the Bearish Engulfing Pattern (see: Bearish Engulfing Pattern). There are two components of a Dark Cloud Cover formation:

  • Bullish Candle (Day 1)
  • Bearish Candle (Day 2)



A Dark Cloud Cover Pattern occurs when a bearish candle on Day 2 closes below the middle of Day 1's candle.

In addition, price gaps up on Day 2 only to fill the gap and close significantly into the gains made by Day 1's bullish candlestick.

The rejection of the gap up is a bearish sign in and of itself, but the retracement into the gains of the previous day's gains adds even more bearish sentiment. Bulls are unable to hold prices higher, demand is unable to keep up with the building supply.

Dark Cloud Cover Candlestick Chart Example

The chart below of Boeing (BA) stock illustrates an example of the Dark Cloud Cover Pattern:


Dark Cloud Cover Sell Signal

Traders usually suggest not selling exactly when one sees the Dark Cloud Cover Pattern (Day 1 & Day 2) until other confirming signals are given such as a break of an upward trendline or other technical indicators. One reason for waiting for confirmation is that the Dark Cloud Cover Pattern is a bearish pattern, but not as bearish as it could be: part of the gains from Day 1 have still been preserved.

A more bearish reversal pattern is the Bearish Engulfing Pattern that completely rejects the gains of Day 1 and usually closes below the lows of Day 1.



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Episode 63: Ichimoku Clouds -- The One-Look Equilibrium Chart

Forum

Indicators: Ichimoku Cloud

newdigital, 2013.11.25 12:23

Ichimoku Cloud (based on The Definitive Guide to Trading Trends with Ichimoku Cloud article)

Many traders are asked what indicator they would wish to never do without. The answer has never wavered as there is one indicator that clearly illustrates the current trend, helps you time entries, displays support and resistance, clarifies momentum, and shows you when a trend has likely reversed. That indicator is Ichimoku Kinko Hyo or more casually known as Ichimoku.

Ichimoku is a technical or chart indicator that is also a trend trading system in and of itself. The creator of the indicator, Goichi Hosada, introduced Ichimoku as a “one glance” indicator so that in a few seconds you are able to determine whether a tradable trend is present or if you should wait for a better set-up on a specific pair.

Before we break down the components of the indicator in a clear and relatable manner, there are a few helpful things to understand. Ichimoku can be used in both rising and falling markets and can be used in all time frames for any liquid trading instrument. The only time to not use Ichimoku is when no clear trend is present.

Always Start With the Cloud

The cloud is composed of two dynamic lines that are meant to serve multiple functions. However, the primary purpose of the cloud is to help you identify the trend of current price in relation to past price action. Given that protecting your capital is the main battle every trader must face, the cloud helps you to place stops and recognize when you should be bullish or bearish. Many traders will focus on candlesticks or price action analysis around the cloud to see if a decisive reversal or continuation pattern is taking shape.


In the simplest terms, traders who utilize Ichimoku should look for buying entries when price is above the cloud. When price is below the cloud, traders should be looking for temporary corrections higher to enter a sell order in the direction of the trend. The cloud is the cornerstone of all Ichimoku analysis and as such it is the most vital aspect to the indicator. 

Time Entries with the Trigger & Base Line

Once you have built a bias of whether to look for buy or sell signals with the cloud, you can then turn to the two unique moving averages provided by Ichimoku. The fast moving average is a 9 period moving average and the slow moving average is a 26 period moving average by default. What is unique about these moving averages is that unlike their western counterparts, the calculation is built on mid-prices as opposed to closing prices. I often refer to the fast moving average as the trigger line and the slow moving average as the base line.


The Ichimoku components are introduced in a specific order because that is how you should analyze or trade the market. Once you’ve confirmed the trend by recognizing price as being below or above the cloud, you can move to the moving averages. If price is above the cloud and the trigger crosses above the base line you have the makings of a buy signal. If price is below the cloud and the trigger crosses below the base line you have the makings of a sell signal.

Confirm Entries with the Mysterious Lagging Line

In addition to the mystery of the cloud, the lagging line often confuses traders. This shouldn’t be the case as it’s a very simple line that is the close of the current candle pushed back 26 periods. When studying Ichimoku, I found that this line was considered by most traditional Japanese traders who utilize mainly Ichimoku as one of the most important components of the indicator. 

Once price has broken above or below the cloud and the trigger line is crossing the base line with the trend, you can look to the lagging line as confirmation. The lagging line can best confirm the trade by breaking either above the cloud in a new uptrend or below the cloud in a developing downtrend. Looking above, you can see that the trend often gathers steam nicely after the lagging line breaks through the cloud. Another benefit of using the lagging line as a confirmation indicator is that the lagging line can build patience and discipline in your trading because you won’t be chasing the initial thrust but rather waiting for the correction to play out before entering in the direction of the overall trend.

Trading With Ichimoku Checklist

Now that you know the components of Ichimoku here is a checklist that you can print off or use to keep the main components of this dynamic trend following system:

Ichimoku Checklist:

1.Where is Price in Relation to the Cloud?

  • Above the cloud -filtered for buy only signals
  • In the Cloud - be cautious but ready to jump in on the prior trend or finesse a current position. what the candle stick formations heavily
  • Below the cloud - filtered for short only trades

2. Is price consistently on one side of the cloud or is price whipping around on both sides consistently?

  • Ichimoku is best used with clear trends and should be set aside during ranging markets.

3. Which level of the Ichimoku would like to use to place your stop?

  • If you use Ichimoku to place stops as well, you can either use the cloud or the base line.






Sergey Golubev
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194. How Trading On Margin in Futures Works 

Trading on margin very simply means the ability to control a certain size position without having to put up the full value of that position in cash. Margin allows a trader to magnify both the potential gains, and the potential losses on an account. In this lesson we are going to cover margin as it relates to futures trading, so if you need a basic overview of how trading on margin works, see the links below this video for more information.

There are two primary advantages of trading futures over trading stocks which relate specifically to margin. The first, is that futures traders generally have access to much lower margin requirements than most stock traders. Generally the maximum leverage available in the stock market is 4 to 1, meaning that you have to put up at least 25% of the value of the position in order to remain in the trade, which would magnify your gain or loss by 4 times, compared to a position without margin. In the futures market, intraday margin levels can go to 100 to 1 or greater. This means that a trader only needs to maintain as little as 1% of the position value, in order to remain in the trade, potentially magnifying gains and losses on a trade by up to 100 times. While the ability to magnify potential gains is generally seen as an advantage to futures traders, it also comes with an added level of responsibility, as loss potential is also magnified by the same amount.

The second advantage of trading futures over stocks as it relates to margin, is that you do not have to pay for the use of margin as you would in the stock market. While you only have to put up a portion of the trade value when trading on margin in the stock market, ultimately the full position value is needed to place the trade. Because of this stock traders must borrow the rest of the trade value from their broker, and as this is a loan, they pay interest on the money they borrow. In the futures market, margin is seen as more of a "performance bond" or as money that you have to put up to make sure that you can make good on any losses incurred on a trade. Because of this you are not required to have the full position amount in order to place a trade in the futures market, which means there is no interest paid when trading on margin.

There are several other nuances as it relates to margin that it is important to understand when trading futures. Firstly, unlike in the stock market where margin requirements are generally the same for most actively traded stocks, in the futures market margin requirements differ depending on what futures contract you are trading. The reason why is because in the futures market, margin requirements are set based on volatility and position size, meaning that the more volatile a futures contract is, the higher the margin requirement is generally going to be.

Just as in the stock market there is an initial and a maintenance margin requirement for futures contracts, meaning that you must have a certain amount of money in your account to initiate a new position, and then a certain amount of money in your account to continue to hold or "maintain" the position once it is initiated. These levels are set by the exchange and while a broker can require a higher margin level than the minimums set by the exchange most do not. Lastly, it is important to understand here that these initial and maintenance margin requirements apply only to positions which are held overnight, and most futures brokers offer a lower margin requirement to traders who open and close positions within the same trading day.

As an example, the current initial margin for holding an E Mini S&P contract overnight as set by the futures exchange is $6,188, and the current maintenance level is $4,950. The daytrading margin as set by the Apex Futures is $500 for both the initial and the maintenance margin.

So as most traders open and close their positions within the same trading day when trading the E Mini S&P, they need to have at least $500 in their account when trading with Apex in order to initiate and maintain a position, per contract traded. If a trader is planning to hold an Emini S&P contract overnight, as of this lesson they will need to have at least $6,188 in their account in order to initiate the position, and at least $4,950 in their account in order to maintain the position. If the trader drops below these levels then the broker has the right to liquidate their positions, and/or they will get a telephone call from the firms margin desk, to arrange to have additional funds to be deposited into the account.

While overnight margins are set by the exchange and generally the same from broker to broker, daytrading margins are set by the broker and therefore vary widely. One of the reasons why I have chosen to recommend Apex Futures, is because they offer $500 daytrading margins, which are among the lowest in the industry. Keep in mind however that leverage is a sword that cuts both ways, so while increased leverage amplifies the potential gain on a position, it also amplifies the potential losses.

Lastly it is important to keep in mind that although it is not a super common occurrence, margin requirements can be changed by the broker or the exchange at any time due to increased volatility in the markets. It is important to understand here that if requirements are raised, then traders will be required to have the set maintenance margin amount for existing positions, as well as any new positions which are initiated.



Documentation on MQL5: Standard Constants, Enumerations and Structures / Environment State / Symbol Properties
Documentation on MQL5: Standard Constants, Enumerations and Structures / Environment State / Symbol Properties
  • www.mql5.com
Standard Constants, Enumerations and Structures / Environment State / Symbol Properties - Documentation on MQL5
Sergey Golubev
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Sergey Golubev  

Video 14 - How to trade RSI indicator in Forex

Forum

Indicators: Relative Strength Index (RSI)

newdigital, 2013.08.07 14:49

RSI Swing Failure Forex Trading Setup

RSI swing failure can be a very accurate method for trading short term currency moves. It can also be used for trading long term trends but it is best suited for short term trading especially for those traders that trade reversals.

The RSI failure swing is a confirmation of a pending market reversal. This setups a leading breakout signal, it warn that a support or resistance level in the market is going to be penetrated. This setup should occur at values above 70 for an upward trend and values below 30 in a downward trend.

RSI Failure Swing in an upward trend

If the RSI hits 79 then pulls back to 72, then rises to 76 and finally drops to below 72 this is considered a failure swing. Since the 72 level is an RSI support level and it has been penetrated it means that price will and follow and it will penetrate its support level.

In the example below, the RSI hits 73 then pulls back to 56, this is a support level. The RSI then rises to 68 and then drops to below 56, thus breaking the support level. The price then follows afterwards breaking it support level. The RSI swing failure is a leading signal and it is confirmed when price also breaks it support level. Some forex traders open trades once the swing failure is complete while others wait for price confirmation, either way it is for a trader to decide what work best for them.


RSI  Failure Swing in a downward trend

If the RSI hits 20 then pulls back to 28, then falls to 24 and finally penetrates above 28, this is considered a failure swing. Since the 28 level is an RSI resistance level and it has been penetrated it means that price will and follow and it will penetrate its resistance level.




Sergey Golubev
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Sergey Golubev  

Candlesticks - Vol 12 - Piercing Pattern

Forum

Libraries: MQL5 Wizard - Candlestick Patterns Class

newdigital, 2013.09.18 14:53

Piercing Line Pattern

The Piercing Pattern is a bullish candlestick reversal pattern, similar to the Bullish Engulfing Pattern (see: Bullish Engulfing Pattern). There are two components of a Piercing Pattern formation:

  • Bearish Candle (Day 1)
  • Bullish Candle (Day 2)


A Piercing Pattern occurs when a bullish candle on Day 2 closes above the middle of Day 1's bearish candle.

Moreover, price gaps down on Day 2 only for the gap to be filled (see: Gaps) and closes significantly into the losses made previously in Day 1's bearish candlestick.

The rejection of the gap up by the bulls is a major bullish sign, and the fact that bulls were able to press further up into the losses of the previous day adds even more bullish sentiment. Bulls were successful in holding prices higher, absorbing excess supply and increasing the level of demand.

Piercing Pattern Candlestick Chart Example

The chart below of Intel (INTC) stock illustrates an example of the Piercing Pattern:


Piercing Pattern Candlestick Buy Signal

Generally other technical indicators are used to confirm a buy signal given by the Piercing Pattern (i.e. downward trendline break). Since the Piercing Pattern means that bulls were unable to completely reverse the losses of Day 1, more bullish movement should be expected before an outright buy signal is given. Also, more volume than usual on the bullish advance on Day 2 is a stronger indicator that bulls have taken charge and that the prior downtrend is likely ending.

A more bullish reversal pattern is the Bullish Engulfing Pattern that completely reverses the losses of Day 1 and adds new gains.

For further study, the bearish equivalent of the Piercing Pattern is the Dark Cloud Cover Pattern



Sergey Golubev
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Sergey Golubev  
15. How to trade Bollinger Bands in Forex

In this Forex training video we discuss hot to trade Bollinger Bands like a pro. There are two main ways in which you can make a lot of money by using Bollinger bands in a trending or a range bound market. Simply follow the instructions on the video to start making profits through Forex trading.

Forum

Indicators: Bollinger Bands ®

newdigital, 2013.08.06 13:54

Bollinger Bands and Volatility

When volatility is high; prices close far away from the moving average, the Bands width increases to accommodate more possible price action movement that can fall within 95% of the mean.

Bollinger bands will widen as volatility widens. This will show as bulges around the price. When bollinger bands widen like this it is a continuation pattern and price will continue moving in this direction. This is normally a continuation signal.

The example below illustrates the Bollinger bulge.



High Volatility and Low Volatility

When volatility is low; prices close closer towards the moving average, the width decreases to reduce the possible price action movement that can fall within 95% of the mean.

When volatility is low price will start to consolidate waiting for price to breakout. When the bollinger bands is moving sideways it is best to stay on the sidelines and not to place any trades.

The example is shown below when the bands narrowed.



Forum

Indicators: Bollinger Bands ®

newdigital, 2013.08.06 14:04

Bollinger Bands Trend Reversals- Double Tops and Double Bottoms

A Forex trader should wait for the price to turn in the opposite direction after touching one of the bands before considering that a reversal is happening.

Even better one should see the price cross over the moving average.

Double Bottoms Trend Reversals

A double bottom is a buy setup/signal. It occurs when price action penetrates the lower bollinger band then rebounds forming the first low. then after a while another low is formed, and this time it is above the lower band. 

The second low must not be lower than the first one and it important is that the second low does not touch or penetrate the lower band. This bullish Forex trading setup is confirmed when the price action moves and closes above the middle band (simple moving average).



Double Tops Trend Reversals

A double top is a sell setup/signal. It occurs when price action penetrates the upper bollinger band then rebounds down forming the first high. then after a while another high is formed, and this time it is below the upper band.

The second high must not be higher than the first one and it important is that the second high does not touch or penetrate the upper band. This bearish Forex trading setup is confirmed when the price action moves and closes below the middle band (simple moving average).