Here it is shown how to incorporate pivot points with the Ichimoku system for a more reliable stop loss or profit target.
Forum on trading, automated trading systems and testing trading strategies
Indicators: Pivot Lines TimeZone
newdigital, 2013.10.30 12:57
Pivot Points Technical Indicator
Pivot points indicator consists of a central pivot which is surrounded by 3 resistance levels below and 3 support levels above.
Pivot points initially were used by floor traders to analyze and
trade the equities and futures exchange markets. This indicator is
considered to be a leading indicator rather than a lagging indicator.
Pivots provide a quick way for currency traders to analyze the
general trend of how the market is going to be moving during the course
of the day. This indicator uses only a few simple calculations to plot
the resistance and support levels.
To calculate the pivot points for the coming trading day is the previous day's
The Forex trading day closes at 5:00PM EST this daily closing time is when the pivots are updated.
The 24-hour cycle pivots for this indicator are calculated using a
complex formula, which the indicator will calculate automatically for
you. The central pivot is then used to calculate the support and
resistance levels as follows:
Pivots can be used in different ways to generate Forex trading
signals. The following methods are the most common technical analysis
for Pivot points.
Trend Identification Signals
The central pivot is used by traders to determine the general market
trend direction. The trades taken will only be in the direction of the
Price Breakout Signals
Price breakout signals are generated as follows
Price Reversal Signal
Price reversals are generated as follows
Setting Stop loss and Limit Profit Values using Support & Resistance Levels
The central pivotand the other support and resistance levels are used
by traders to determine suitable stop loss and limit profit levels.
If a buy is placed above the central pivot point the Resistance 1 or
Resistance 2 can be used to set the take profit level, and the Support 1
can be set as the Stop Loss Level for the trade.
Moving Average Cloud Trading
Here I touch on support and resistance, moving averages, trend lines and
fractals which is all involved in trading this moving average cloud
Indicators: Custom Moving Average
newdigital, 2013.07.31 07:47
A stop loss should be set just below the MA. Ideally it should be set a few pips below the previous low.
If price is on a down trend and starts to retrace, then most traders
might wait to sell at a better price when the price hits a resistance
level. Traders will sometimes use the MA to determine the resistance
A sell signal is generated when price hits the MA, turns and starts
moving in the downward direction. The signal is confirmed when price
closes below the MA. Because many traders use the moving averages to
generate trading signals, price will normally react to these levels.
A stop loss should be set just above the MA. Ideally it should be set a few pips above the previous high.
Resistance turns support
When a resistance is broken it turns into support and vice versa.
This happens when the fundamentals of a currency change and consequently
the direction of a currency pair. The direction change is reflected by
the moving average, the direction is confirmed when the resistance turns
into support or vice versa (when support turns into resistance)
Here is a trading strategy using moving average clouds. This is the same as the previous moving average strategy that I showed using the 100 and 200 MA's but this is just more visual which helps people see things clearer.
In this Forex training video we discuss how to actually trade the triangle or wedge. The crucial part in trading these patterns is to analyse lower time frames so that you can get a clearer picture of what the market is doing and realise how high the chances of it breaking out are in order to place your trade.
Price Bar Reversals (3 of 9) - The Bullish Rejection Pattern
The Bullish Rejection Pattern - Part 3 of a video series discussing
short term price bar reversals such as the bearish rejection, the
bullish rejection, the open close reversal, the closing price reversal,
the hook reversal, the key reversal, the island reversal and the pivot
More info - read this article.
The next lesson in free futures trading course which covers the commitment of traders report.
In this video we will be discussing a few ways to set a target level for your trade. Before entering a trade you should always have the details mapped out and planned as far as your entry level, stop loss level and target level. This should all be in accordance with your money management.
28. How to trade Head and Shoulders in Forex
Trading head and shoulders is possibly one of the easiest Forex trading
strategies available. In this video we discuss the structure of head and
shoulders while also providing in-depth instructions on how to set your
profit target and where to insert your stop loss. We also look at its
counterpart - the inverse head and shoulders.
Trading With The Multiple Moving Average
The Multiple Moving Average provides us with a method of visualising the
dynamics of the market and the change from stability to instability and
back again. It reveals additional information about the dynamics of the
market that cannot be obtained from any individual moving average.
How to Start with Metatrader 5
newdigital, 2013.07.15 21:19
Just good indicator found in Metatrader 5 CodeBase : GUPPY MULTIPLE MOVING AVERAGES :
These are two groups of exponential moving averages. The short term
group is a 3, 5, 8, 10, 12 and 15 day moving averages. This is a proxy
for the behaviour of short term traders and speculators in the market.
The long term group is made up of 30, 35, 40, 45, 50 and 60 day moving
averages. This is a proxy for the long term investors in the market.
The relationship within each of these groups tells us when there is
agreement on value - when they are close together - and when there is
disagreement on value - when they are well spaced apart.
The relationship between the two groups tells the trader about the
strength of the market action. A change in price direction that is well
supported by both short and long term investors signals a strong trading
opportunity. The crossover of the two groups of moving averages is not
as important as the relationship between them.
When both groups compress at the same time it alerts the trader to
increased price volatility and the potential for good trading
The Guppy Multiple Moving Average (GMMA) is an indicator that tracks the
inferred activity of the two major groups in the market. These are
investors and traders. Traders are always probing for a change in the
trend. In a downtrend they will take a trade in anticipation of a new up
trend developing. If it does not develop, then they get out of the
trade quickly. If the trend does change, then they stay with the trade,
but continue to use a short term management approach. No matter how long
the up trend remains in place, the trader is always alert for a
potential trend change. Often they use a volatility based indicator like
the count back line, or a short term 10 day moving average, to help
identify the exit conditions. The traders focus is on not losing money.
This means he avoids losing trading capital when the trade first starts,
and later he avoids losing too much of open profits as the trade moves
We track their inferred activity by using a group of short term moving
averages. These are 3, 5, 8, 10, 12 and 15 day exponentially calculated
moving averages. We select this combination because three days is about
half a trading week. Five days is one trading week. Eight days is about
a week and a half.
The traders always lead the change in trend. Their buying pushes prices
up in anticipation of a trend change. The only way the trend can
survive is if other buyers also come into the market. Strong trends are
supported by long term investors. These are the true gamblers in the
market because they tend to have a great deal of faith in their
analysis. They just know they are right, and it takes a lot to convince
them otherwise. When they buy a stock they invest money, their
emotions, their reputation and their ego. They simply do not like to
admit to a mistake. This may sound overstated, but think for a moment
about your investment in AMP or TLS. If purchased several years ago
these are both losing investments yet they remain in many portfolios and
perhaps in yours.
The investor takes more time to recognize the change in a trend. He
follows the lead set by traders. We track the investors inferred
activity by using a 30, 35, 40, 45, 50 and 60 day exponentially
calculated moving average. Each average is increased by one week. We
jump two weeks from 50 to 60 days in the final series because we
originally used the 60 day average as a check point.
This reflects the original development of this indicator where our focus
was on the way a moving average crossover delivered information about
agreement on value and price over multiple time frames. Over the years
we have moved beyond this interpretation and application of the
indicator. In the notes over the coming weeks we will show how this has
Our starting point was the lag that existed between the time of a
genuine trend break and the time that a moving average cross over entry
signal was generated. Our focus was on the change from a downtrend to
an up trend. Our preferred early warning tool was the straight edge
trend line which is simple to use and quite accurate. The problem with
using a single straight edge trend line was that some breakouts were
false. The straight edge trend line provided no way to separate the
false from the genuine.
On the other hand, the moving average crossover based on a 10 and 30 day
calculation, provided a higher level of certainty that the trend break
was genuine. However the disadvantage was that the crossover signal
might come many days after the initial trend break signal. This time lag
was further extended because the signal was based on end of day prices.
We see the exact cross over today, and if we were courageous, we could
enter tomorrow. Generally traders waited for another day to verify that
the crossover had actually taken place which delayed the entry until 2
days after the actual crossover. This time lag meant that price had
often moved up considerably by the time the trade was opened.
The standard solution called for a combination of short term moving
averages to move the crossover point further back in time so that it was
closer to the breakout signaled by a close above the straight edge
trend line. The drawback was that the shorter the moving average, the
less reliable it became. In plotting multiple moving averages on a
single chart display four significant features emerged.
These broad relationships, and the more advanced relationships used with
the GMMA are summarized in the chart. Over the following series of
articles we will examine the identification and application of each of
This is the most straightforward application of the GMMA and it worked
well with “V’ shaped trend changes. It was not about taking the lag out
of the moving average calculation. It is about validating a prior trend
break signal by examining the relationship between price and value. Once
the initial trend break signal is validated by the GMMA the trader is
able to enter a breakout trade with a higher level of confidence.
The CBA chart shows the classic application of the GMMA. We start with
the breakout above the straight edge trend line. The vertical line shows
the decision point on the day of the breakout. We need to be sure that
this breakout is for real and likely to continue upwards. After several
months in a downtrend the initial breakout sometimes fails and develops
as shown by the thick black line. This signals a change in the nature of
the trend line from a resistance function prior to the breakout to a
support function after the breakout.
The GMMA is used to assess the probability that the trend break shown by
the straight edge trend line is genuine. We start by observing the
activity of the short term group. This tells us how traders are
thinking. In area A we see a compression of the averages. This suggests
that traders have reached an agreement on price and value. The price of
CBA has been driven so low that many traders now believe it is worth
more than the current traded price. The only way they can take advantage
of this ‘cheap’ price is to buy stock. Unfortunately many other short
term traders have reached the same conclusion. They also want to buy at
this price. A bidding war erupts. Traders who believe they are missing
out on the opportunity outbid their competitors to ensure they get a
position in the stock at favorable prices.
The compression of these averages shows agreement about price and value.
The expansion of the group shows that traders are excited about the
future prospects of increased value even though prices are still rising.
These traders buy in anticipation of a trend change. They are probing
for a trend change.
We use the straight edge trend line to signal an increased probability
of a trend change. When this signal is generated we observe this change
in direction and separation in the short term group of averages. We know
traders believe this stock has a future. We want confirmation that the
long term investors are also buying this confidence.
The long term group of averages, at the decision point, is showing signs
of compression and the beginning of a change in direction. Notice how
quickly the compression starts and the decisive change in direction.
This is despite the longest average of 60 days which we would normally
expect to lag well behind any trend change. This compression in the long
term group is evidence of the synchronicity relationship that makes the
GMMA so useful.
This compression and change in direction tells us that there is an
increased probability that the change in trend direction is for real –
it is sustainable. This encourages us to buy the stock soon after the
decision point shown.
The GMMA picks up a seismic shift in the markets sentiment as it
happens, even though we are using a 60 day moving average.. Later we
will look at how this indicator is used to develop reliable advance
signals of this change. This compression and eventual crossover within
the long term group takes place in area B. The trend change is
confirmed. The agreement amongst investors about price and value cannot
last. Where there is agreement some people see opportunity. There are
many investors who will have missed out on joining the trend change
prior to area B. Now the change is confirmed they want to get part of
the action. Generally investors move larger funds than traders. Their
activity in the market has a larger impact.
The latecomers can only buy stock if they outbid their competitors. The
stronger the initial trend, the more pressure there is to get an early
position. This increased bidding supports the trend. This is shown by
the way the long term group continue to move up, and by the way the long
term group of averages separates. The wider the spread the more
powerful the underlying trend.
Even the traders retain faith in this tend change. The sell off that
takes place in area C is not very strong. The group of short term
averages dips towards the long term group and then bounces away quickly.
The long term group of averages show that investors take this
opportunity to buy stock at temporarily wakened prices. Although the
long term group falters out at this point, the degree of separation
remains relatively constant and this confirms the strength of the
The temporary collapse of the short term group comes after a 12%
appreciation in price. Short term traders exit the trade taking short
term profits at this level of return and this is reflected by the
compression and collapse of the short term group of averages. As long
term investors step into the market and buy CBA at these weakened
prices, traders sense that the trend is well supported. Their activity
takes off, and the short term group of averages rebounds, separates, and
then run parallel to the long term group as the trend continues.
The GMMA identifies a significant change in the markets opinion about
CBA. The compression of the short term and long term groups validates
the trend break signal generated by a close above the straight edge
trend line. Using this basic application of the GMMA, the trader has the
confidence necessary to buy CBA at, or just after the decision points
shown on the chart extract.
Using this straightforward application of the GMMA also kept traders out
of false breakouts. The straight edge trend line provides the first
indication that a downtrend may be turning to an up trend. The CSL chart
shows two examples of a false break from a straight edge trend line. We
start with decision point A. The steep downtrend is clearly broken by a
close above the trend line. If this is a genuine trend break then we
have the opportunity to get in early well before any moving average
This trend break collapses quickly. If we had first observed this chart
near decision point B then we may have chosen to plot the second trend
line as shown. This plot takes advantage of the information on the
chart. We know the first break was false, and by taking this into
account we set the second trend line plot. Can this trend break be
relied upon? If we are right we get to ride a new up trend. If we are
wrong we stand to lose money if we stay with a continuation of the
downtrend. The straight edge trend line by itself does not provide
enough information to make a good decision.
When we apply the GMMA we get a getter idea of the probability of the
trend line break actually being the start of a new up trend. The key
relationship is the level of separation in the long term group of
averages, and trend direction they are traveling. At both decision point
A and decision point B the long term group is well separated.
Investors do not like this stock. Every time there is a rise in prices
they take advantage of this to sell. Their selling overwhelms the market
and drives prices down so the downtrend continues.
The degree of separation between the two groups of moving averages also
makes it more difficult for either of the rallies to successfully change
the direction of the trend. The most likely outcome is a weak rally
followed by a collapse and continuation of the down trend. This
observation keeps the trader, and the investor, out of CSL.
Looking forward we do see a convergence between the short term group of
averages and the long term group of averages. Additionally the long term
group begins to narrow down, suggesting a developing level of
agreement about price and value amongst investors in April and May. In
late March the 10 day moving average closes above the 30 day moving
average, generating a classic moving average buy signal.
we can use GMMA indicator for Multiple MA : GMMA indicator from MT5 CodeBase is here :
The Open Close Reversal - Part 4 of a video series discussing short term price bar reversals such as the bearish rejection, the bullish rejection, the open close reversal, the closing price reversal, the hook reversal, the key reversal, the island reversal and the pivot point reversal.
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