Something Interesting in Financial Video February 2014 - page 2

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The 50% Rule

Follow former professional floor trader, Adam Hewison as he walks you through the 50% rule.

More from Adam Hewison :



 

MT4 New Build 600 (how to upgrade to build 600) - suggestion of Christina Li



 

Ichimoku - Kumo Cloud Studies II

More video on this subject:

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Ichimoku threads/posts on mql5.com forum

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Ichimoku indicator description

  1. Tenkan Sen - moving average of the highest high and lowest low over the last 9 trading days. (Highest high + Lowest low) / 2 over the last 9 trading days
  2. Kijun Sen - moving average of the highest high and lowest low over the last 26 trading days. (Highest high + Lowest low) / 2 over the last 26 trading days.
  3. Senkou Span A - the average of the Tenkan Sen and Kijun Sen, plotted 26 days ahead. (Tenkan Sen + Kijun Sen) / 2 plotted 26 days ahead
  4. Senkou Span B - the average of the highest high and lowest low over the last 52 days, plotted 26 days ahead. (Highest high + Lowest low) / 2 over the last 52 trading days plotted 26 days ahead.
  5. Chikou Span - the closing price plotted 26 days behind.

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Perfecting Trade Exit Strategies

Trade exit strategies form the part of your trading plan that help your profit management. Buying the correct stock and the correct number of stocks is all to no avail if you do not know when to exit a position. In fact, having a definitive exit strategy is as important as defining your entry.

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The threads on the forum :

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Videos :

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Articles :

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Forum on trading, automated trading systems and testing trading strategies

Indicators: AutoTrendLines

newdigital, 2013.10.09 18:20

How to Exit While Trading with Trendlines

Talking Points:

  • Traders should focus on their exit plan just as much as their trade entries.
  • Trendline traders could set their stop losses beyond the nearest support or resistance level and set their limits within the nearest support or resistance level.
  • Setting exit prices according to support and resistance levels could tip the odds in your favor.
How Important Is Your Exit Strategy?

Many traders have a strong set of rules that they follow to enter trades, but have difficulty in selecting their exits. This is troubling because how we exit a trade should be just as important, if not more important than how a trade is entered. After all, our exits ultimately determine if our trades are profitable for us or not. So we need to make sure our exit strategy is just as logical as our entry strategy.

When we place our trades based on trendlines, we are placing them based on support and resistance levels. We are thinking the price will bounce off a trendline like it did in the past. I propose we use the same logic when setting our stops and limits.


In the example above, it’s easy to see the sell entry that was given to us based on the bearish trendline. We entered right at the trendline looking for a bounce back down, but where do we want to exit? When do we call it quits if the trade goes against us? Where do we place our profit target? Let’s take a look.

Setting Stops Beyond Support/Resistance

We need to look at placing our stop somewhere above this trendline. If the resistance is broken through, we were wrong on the trade and should accept the loss quickly. It’s possible that price could return back to profitable territory after breaking this resistance, but we cannot rely on being lucky. We can only trade based on what we see.



I like to set my stop 5-25 pips from the closest support/resistance level depending on the time frame I am trading. The smaller the time frame of the chart, the tighter I will place my stops. On this trade, I set my stop 5-6 pips away from my entry since that was beyond the resistance line as well as the previous swing high (Bounce #2).

Remember that when we set our Stop loss, this is also setting our monetary risk on the trade. So we also need to consider our trade side in respect to our Stop loss distance.

Setting Limits Within Support/Resistance

Now that our stop is set, we need to focus on our profit target. For our limit placement, we have two objectives:

  • Our limit’s distance needs to be further than our stop’s distance.
  • Our limit needs to be placed within the closest support/resistance (by at least 5 pips).
The reason we want our limit further than our stop is because we always want to try to make more money than what we are risking on each individual trade. This is something we discuss heavily at DailyFX so I will say it again here. We want a positive risk/reward ratio.

And the reason we want our limit to be placed within the closest support/resistance level (by at least 5 pips) is for the exact same rationale we used to open this trade to begin with. We know prices have a tendency to bounce off price levels they have bounced off of before, so we want to make sure that no support/resistance is in between our entry and our limit level. In the example below you can see I placed my limit 5 pips above the swing low (potential support). This gives price a clear path to a profitable trade.


Trendline Strategy Complete

This trendline strategy is one that can be used universally across all currency pairs and time frames so it is definitely a worthwhile style of trading to learn. The logic behind the entry and exit rules is also something that can be tailored to other types of strategies as well. Good trading!





 

06: DURABLE GOODS

This is the 6th video in a series on economic reports created for all markets, or for those who simply have an interest in economics. In this lesson we cover the Durable Goods report.

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Previous parts:

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Durable Goods Orders

Durable Goods Orders (DGO) is an indicator of orders placed for relatively long lasting goods. Durable goods are expected to last more than three years, e.g.: cars, furniture, appliances, etc.

This indicator is important for the market because it gives an idea of the consumers' confidence in the current economic situation. Since durable goods are expensive, the increase in the number of orders for them shows the willingness of consumers to spend their money on them. Thus, the growth of this indicator is a positive factor for economic development and leads to growth of the national currency.

  • Release Frequency: monthly.
  • Release Schedule: 08:30 EST, the fourth week.
  • Source: U.S. Census Bureau of the Department of Commerce.

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USDJPY M5 : 47 pips price movement by USD - Durable Goods Orders news event

EURUSD M5 : 32 pips price movement by USD - Durable Goods Orders news event :



 

Kevin 'Huddy' Hudson - The Basics of Market Profile

Kevin “Huddy” Hudson is a full-time trader and coach to fellow traders specializing in the S&P E-mini futures contract. He has spent many years perfecting his entry and exit techniques using channels and trend lines along with critical Market Profile levels to find and trade both minor and major support areas. He has made a living trading the markets for more than a decade. As the founder of Channel-Trading.com, Huddy loves to pass along his thoughts about the market and trade ideas to subscribers and students. Nothing makes him happier than seeing a student actually “get it”.

In this webinar we will cover the basics of market profile

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MT5 CodeBase :

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External articles :

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Introduction to Market Profile

Learn from the professionals how to apply Market Profile charting techniques to the intraday futures markets in this webinar.

Christopher Morris has been involved with Futex for a decade, having joined in July 2002 after graduating from the University of Manchester with a BA in Economics and Finance. Having cut his teeth trading European fixed income and global FX futures markets, Christopher now owns, manages and develops a portfolio consisting of two systematic trading strategies applied to twenty four different futures markets.

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MT5 CodeBase :

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External articles :

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Flag breakout with ADX, Momentum and 10EMA

This is a very simple usage of the ADX and Momentum indicator along with the 10EMA to trade a flag pattern. Remember to check the next biggest time frame to confirm direction and then trade the flag in the original time frame.

Forum on trading, automated trading systems and testing trading strategies

Indicators: Custom Moving Average

newdigital, 2013.07.31 07:48

How to choose a moving average to trade with

A trader can choose a moving average based on the time frame that he is trading; the trader might choose the moving average to measure minute chart, hourly charts, day charts or even weekly.

The trader can also choose to average the closing price, opening price or median price.

Moving average is commonly used devices to measure strength of trends. The data is precise and its output as a line can be customized to ones preferences.

Using the moving average is one of the basic ways to generate buy and sell signals which are used to trade in the direction of the trend, since the moving average is a lagging and a trend following indicator. The Moving average indicator as a lagging indicator means that it will tend to give late signals as opposed to leading indicators. However, the Moving average as a lagging indicator gives more accurate signals and is less prone to whipsaws compared to leading indicators.

Traders choose the moving average period to use depending on the type of trading they do; short-term, medium-term and long-term.
  • Short-term: 10 -50 Period Moving Average
  • Medium-term: 50 - 100 Period Moving Average
  • Long-term: 100 - 200 Period Moving Average
The period in this case can be measured in minute chart, hourly charts, day charts or even weekly. For our example we will use 1 hour period.

Short term moving averages are sensitive to price action and can spot trends signals faster than the long term moving averages. line more closely than a long term (200 period) average. Shorter term moving averages are also more prone to whipsaws compared to long term ones.

Long term averages help avoid whipsaws, but are slower in spotting new trends and reversals.

Because long term moving averages calculate the average using more price data, it does not reverse as fast as a short term moving average and it is slow to catch the changes in the trend. However the longer term moving average is better when the trend stays in force for a longer time.

The work of a trader is to find a moving average that will identify trends as early as possible while at the same time avoiding fake-out signals (whipsaws).

Forum on trading, automated trading systems and testing trading strategies

Indicators: Average Directional Movement Index (ADX)

newdigital, 2013.09.26 13:06

Average Directional Movement Index (ADX)

Developed by J. Welles Wilder
 

The ADX is a momentum indicator used to determine the strength of a price trend; it is derived from the DMI –Directional Movement Index which has two indicators 

+DI- Positive Directional indicator

–DI - Negative Directional Indicator

ADX is calculated by subtracting these two values and applying a smoothing function, example a function of ten to come up with a 10 period ADX.

ADX
 

The ADX is not a directional indicator but a measure of the strength of the trend. The ADX has a scale of Zero -100. 

The higher the ADX value the stronger the trend.

ADX value below 20 indicates that the market is not trending but moving in a range. 

ADX value above 20 confirms a buy or sell signal and indicates a new trend is emerging.

ADX value above 30 signifies a strong trending market. 

When ADX value turns down from above 30, it signifies that the current trend is losing momentum.

ADX indicator combined with DMI- Directional Movement Index 

Since the ADX alone is a directionless indicator it is combined with the DMI index to determine the direction of the currency pair.

When the ADX is combined with DMI index a trader can determine the direction of the trend and then use the ADX to determine the momentum of the forex trend.



Technical Analysis of ADX indicator

Buy Signal

A buy signal is generated when the +DI is above –DI, and the ADX is above 20 

The Exit signal is generated when the ADX turns down from above 30.

Sell Signal

A short signal is generated when the –DI is above +DI, and the ADX is above 20 

The Exit signal is generated when the ADX turns down from above 30.


Forum on trading, automated trading systems and testing trading strategies

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.




 
3 in One

Here's a little secret... the most important element in the market is not the news, it is the market action itself. Everything else is secondary. In my new video I explain exactly how we look at the market and how you can benefit from looking at the market the same way.

The new video is only four minutes long and I think you'll find it fresh, timeless and interesting.

The simplicity speaks for itself.



 

How NOT to Trade Bollinger Bands

Forum on trading, automated trading systems and testing trading strategies

Indicators: Bollinger Bands ®

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.

  • When volatility is high the Bands widen.
  • When volatility is low the Bands narrows.

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.






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