The next lesson in online video futures trading course which covers futures trading price limits.
In this video presentation I am discussing a Non Traditional method of trading the Ichimoku system and also looking at a few trading opportunities on the horizon.
Forum on trading, automated trading systems and testing trading strategies
newdigital, 2013.11.22 19:06
Breakout with Ichimoku (based on Take Advantage of False Breakouts at Great Prices with Ichimoku article)
A false breakout takes place when price appears to be making a renewed
move in the direction of the trend only to be retraced. A trend trader
who is looking for prices to eventually move higher but wants
confirmation of a price thrust in the direction of the trend is
especially prey to false breakouts. This is because a break of
resistance like a trendline that is pierced by price without follow
through is ground zero to a false breakout.
How Ichimoku Helps You Recognize a False Breakout
Like many pains of trading such as stops getting hit at an unfortunate
price, false breakouts cannot be avoided. However, they can be minimized
as well as become a nice trading signal upon their failure. The reason I
like looking to false breakouts as a trading opportunities is that they
can often have a sharp reversal in the direction of the prior move with
a good risk to reward ratio.
Ichimoku is a technical trading system that helps you catch moves in
the direction of the trend on the time frame that you’re trading.
Ichimoku is often seen as a difficult system to learn due to the 5
components that are displayed on the chart to explain a trading
opportunity but each line serves a purpose and when you understand each
purpose, you begin to get a feel for the value that Ichimoku can bring
to your technical trading strategy.
If this is your first reading of the Ichimoku report, here is a recap of the traditional rules for a sell trade:
If the breakout turns out to be legitimate and 1.3550 is taken out, then
the next target would be in the neighborhood of 1.3630 /3650 range.
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
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.
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
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:
1.Where is Price in Relation to the Cloud?
2. Is price consistently on one side of the cloud or is price whipping around on both sides consistently?
3. Which level of the Ichimoku would like to use to place your stop?
The 10 period exponential moving average bounce is one of favourite Forex trading strategies. In this lesson you are looking for a candle to reach the 10 EMA and bounce back in the original trend direction. You first target is the prior high or low (depending on which direction you are trading) and your second target is the opposite Bollinger Band.
Indicators: Bollinger Bands ®
newdigital, 2013.08.06 13:49
Bollinger Bands Forex Trading Indicator
Developed by John Bollinger.
The Bollinger Bands indicator acts as a measure of
volatility. This indicator is a price overlay indicator. The indicator
consists of three lines; the middle line (moving average), an upper line
and a lower line. These three bands will enclose the price and the
price will move within these three bands.
This indicator forms upper and lower bands around a
moving average. The default moving average is the 20-SMA. This
indicator use the concept of standard deviations to form their upper
and lower Bands.
The example is shown below.
Bollinger Bands Indicator
Because standard deviation is a measure of
volatility and volatility of the market is dynamic, the bands keep
adjust their width. higher volatility means higher standard deviation
and the bands widen. Low volatility means the standard deviation is
lower and the bands contract.
Bollinger Bands use price action to give a large amount of information. The information given by the this indicator includes:
newdigital, 2013.08.06 13:51
How Bollinger Bands Indicator Works
Bollinger Bands calculations uses standard deviation to plot the bands, the default value used is 2.
Bollinger considered the best default for his
indicator to be 20 periods moving average and the the bands are then
overlaid on the price action.
Standard Deviation is a statistics concept. It
originates from the notion of normal distribution. One standard
deviation away from the mean either plus or minus, will enclose 67.5 %
of all price action movement. Two standard deviations away from the mean either plus or minus, will enclose 95 % of all price action movement.
This is why the Bollinger Bands indicator uses the standard deviation of 2 which will enclose 95 % of all price action.
Only 5 % of price action will be outside the bands, this is why
traders open or close trades when price hits one of the outer Bands.
The Bollinger Bands indicator main function is to
measure volatility. What the Bollinger Bands upper and lower limits try
to do is to confine price action of up to 95 percent of the possible
This indicator compares the current closing
price with the moving average of the closing price. The difference
between them is the volatility of the current price compared to the
moving average. The volatility will increase or decrease the standard
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
The example is shown below when the bands narrowed.
newdigital, 2013.08.06 13:57
Bollinger Bands Indicator Bulge and Squeeze Technical Analysis
The Bollinger Bands are self adjusting which means the bands widen and narrow depending on volatility.
Standard Deviation is the statistical measure of the
volatility used to calculate the widening or narrowing of the bands.
Standard deviation will be higher when prices are changing
significantly and lower when markets are calmer.
The Bollinger Squeeze
Narrowing of Bands is a sign of consolidation and is known as the Bollinger band squeeze.
When the Bollinger Bands display narrow standard
deviation it is usually a time of consolidation, and it is a signal that
there will be a price breakout and it shows people are adjusting their
positions for a new move. Also, the longer the prices stay within the
narrow bands the greater the chance of a breakou
The Bollinger Bulge
The widening of Bands is a sign of a breakout and is known as the Bulge.
Bollinger Bands that are far apart can serve as a
signal that a trend reversal is approaching. In the example below, the
bands get very wide as a result of high volatility on the down swing.
The trend reverses as prices reach an extreme level according to
statistics and the theory of normal distribution. The "bulge" predicts
the change to downtrend.
newdigital, 2013.08.06 14:00
Bollinger Bands Price Action in Trending Forex Markets
Bollinger Bands indicator is used to identify and
analyze trending markets. In a trending market this indicator clearly
shows up or down direction.
This indicator can be used to determine the direction
of the forex trend. In an uptrend this indicator will clearly show the
direction of the trend, it will be heading upwards and price will be
above middle bollinger.
In a downtrend the price will be below the middle band and the bands will be heading downwards.
By observing the patterns formed by bollinger bands a trader can determine the direction in which the price is likely to move.
Patterns and Continuation Signals
Price hugs the upper band in a forex upward.
newdigital, 2013.08.06 14:02
Bollinger Bands Price Action in Ranging Forex Markets
Bollinger Bands Indicator is also used to identify
periods when a currency price is overextended. The guidelines below are
considered when applying this indicator to a sideways trend.
It is very important because it is used to give
indications that a break out may be upcoming. During a trending market
these techniques do not hold, this only holds as long as Bollinger Bands
are pointing sideways.
One of the uses of Bollinger Bands is to use the
above overbought and oversold guidelines to establish price targets
during a ranging market.
In the above ranging market the instances when the
price level hits the upper or lower bands can be used as profit targets
for long/short positions.
Trades can be opened when price hits the upper
resistance level or lower support level. A stop loss should be placed a
few pips above or below depending on the trade opened, just in case
price action breaks out of the range.
Here is a strategy using the 100 SMA and 200 SMA.
Indicators: Custom Moving Average
newdigital, 2013.07.31 07:48
newdigital, 2013.07.31 07:58
A buy trade can also be opened when price touches the 100 Simple moving
average, provided it’s not very far from the 200 SMA. Normally the 100
SMA will be within the 20 pips range of the 200 SMA.
Sell Signal – Forex Downtrend/Bearish Market
To generate Forex sell (short signals) using the 20 pips moving average
Forex trading strategy, we shall also use the 1hour and 15 minute chart
On the 1 hour chart time-frame, the price should be below both the 100
and 200 simple moving average. We then move to the 15 minute chart
time-frame to generate a Trading Signal.
On 15 minute chart, when price reaches the 20 pips range below the 200
SMA, we open a sell trade and place a stop loss 30 pips above the 200
simple moving average.
With this method price will generally bounce of these levels because
many traders watch these levels, and open similar trades at around the
These levels act as short term resistance or support levels within the currency price charts.
Profit Taking level For This Trading Strategy
With this trading strategy the price will bounce and make a move in the
direction of the original Forex trend. This move will range from 70 -
The best profit taking level would therefore be considered to be 80 pips from the 200 simple moving average.
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