Tag Archive | "Technical"

Advanced Technical Indicators And Tools For The Modern Day Trader

Advanced Technical Indicators And Tools For The Modern Day Trader

Technical Analysis uses historical prices to identify trends and support and resistance levels. Technical indicators are derived from mathematical algorithms that use historical data to provide a current value. Most are therefore by definition lagging.

Some of the popular lagging indicators include moving averages and MACD. If you are a short term trader, these types of indicators will most likely be useless to you as their signals tend to be very late. By the time a moving average crossover occurs for example, a significant portion of the price move has already occurred.

On the other hand we have the so called “leading” indicators. Leading indicators as implied in the name are designed to lead price movements. Most of the popular ones that we know of at the moment represent some form of price momentum over a fixed look-back period. This is the number of periods used to calculate the indicator. For example, a 20-day Stochastic Oscillator would use the past 20 days of price action in its calculation and all prior price action should be ignored.

Some of the more popular leading indicators include Commodity Channel Index (CCI), Momentum, Relative Strength Index (RSI), Stochastic Oscillator and Williams %R.

One of the biggest problems short-term day traders face when using these “standard” leading indicators is that their predictive power in non-trending market conditions is largely negated. For example, when looking at the Relative Strength Index (RSI) would it be safe to buy when the indicator is oversold or sell when it is overbought? Or would a Momentum indicator tell us where price is going next? Most likely it wouldn’t.

For currency traders it gets even worse. The predictive power of these standard leading indicators is even further negated because of the persistent external news events that cause radical price moves in relation to the most recent moves. Furthermore, most of these indicators were developed for use in stock market trading decades ago. They were developed in a context where real time information didn’t exist. For currency traders, real time information is the norm.

If you’re a day trader, you might be asking what technical indicators should I be using then?

A small software company from the United States has developed a day trading software for traders called Wave 59. Wave 59 is built exclusively by traders, for traders. It contains many unique trading tools and advanced technical indicators designed for the modern day trader willing to look at markets in a slightly different way. The software is free to try for a 30 day evaluation period on the Wave 59 website.

Some of the more interesting tools and advanced technical indicators on offer to day traders are:

Geometric Patterns – Geometric patterns are supposed to exploit the relationship between the price and time axis. Unless you have been working with Gann techniques, chances are you don’t realize the potential of geometric patterns. They are real and are appear often in any market. If you find a good one, it could give you a bigger trading edge than any RSI or moving average calculation.

The Fibonacci Vortex – a very unique support and resistance tool. It is the geometric pattern behind the majority of price swings found in all traded markets. You simply place it on your chart, line it up against recent price action and watch as the market bounces off predetermined turning points in both time and price.

Time and Price Patterns – Generally, with similar types of trading software that try to identify repeating patterns in a chart, the user has no influence on the type of patterns the applications recognize as they are usually pre programmed. By contrast, Wave59 provides you with a simple to use pattern builder allowing the creation and definition of customized patterns which can be inserted in the chart or the program can search for a similar pattern in prices.

The Wave59 software also contains many improved versions of popular trading techniques.

For example, their “Fractal Trend Index” resembles the behavior of the better known ADX indicator. The “Ultra Smooth Momentum” curve is like many of the more widely used momentum curves but without the noise. These two tools are examples of improved algorithms and should in theory outperform the popular versions of these standard indicators as they are calculated using an enhanced mathematical formula.

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Better Understand Technical Analysis and Some Indicators

Better Understand Technical Analysis and Some Indicators

We’re focusing on technical analysis in this article with a description of some of the important indicators.

We could say, all wealthy traders use technical analysis but not all technical analysis traders are wealthy although T.A. is the most precise way of trading the Forex market. It’s also useful note that fundamentals play their part in indicating whether a price will move up or down. It gives you the edge over other traders.

Technical Analysis is so powerful because of a few reasons

1) it represents numbers. All information and its impact on the market and traders is represented in a currency’s price.
2) It helps to predict trends and the foreign exchange market is very ‘trendy’.
3) Certain chart patterns are consistent, reliable and repeat themselves. T.A. helps us to see them.

Here’s one way of putting technical analsysis into perspective (wish I had a dollar each time I said ‘technical analysis’). We all know that prices move in trends. Research has shown that those that trade ‘with the trend’ greatly improve their chances of making a profitable trade.

Trends help you become aware of the overall market direction and often rescue us from less then profitable entry points. I attended a 2 day course costing me over 00 AUD and the biggest thing I learned from it was the need for discipline and emotional control. The content was so basic that within the next 3 or 4 articles, I would have covered all of it. So learning the ‘tools of the trade’ the technical indicators and their applications will help you to diagnose what the market is doing but even then you need to expect ups and down and trade with emotional control.

Stay with the trend, follow the price.

Find the price of the currency pair. If EUR/USD is 1.4224 and moves to 1.4180 then 1.4090 then the market is in a down trend. Concern yourself only with what the market IS doing not what it might do. Listen to the markets and the indicators will backup what they are telling you.

Moving Averages.
Tell you the price at a given point of time over a defined period of intervals. They are called moving because they give you the latest price while calculating the average based on the selected time measure.

They lag the market so to give you an indication of a change in trend, use a shorter average such as a 5 or 10 day moving average. By combining a shorter term and longer term M.A. you can detect a buy signal when the shorter term crosses the longer term moving average in the upward direction. Or a sell signal if it crosses in a downward direction. For example, you could use a 5 day versus a 20 day moving average or a 40 day versus a 200 day moving average.
There are simple moving averages, linearly weighted which gives more importance to the recent prices or exponentially weighted. The latter is a favourite because it considers all prices in a time period but emphasizes the importance of the most recent price changes.

Based on moving averages, a MACD plots the difference between a 26 exponential moving average and a 12 day exponential moving average, with a 9 day used as a trigger line. If a MACD turns positive when the market is still plummeting it could be a strong buy signal. The converse also works.

Bollinger Bands (sounds like an elastic band)
Prices tend to stay between the upper and lower bands. They widen and become more narrow depending on the volatility of the market at the time. A sell signal would be when the moving average is above the Bollinger bands and vice versa for a buy signal. Some traders use it in conjunction with RSI, MACD, CCI and Rate of Change.

Fibonacci Retracement
Describe cycles found throughout nature and when applied to technical analysis can find shifts in the market trends. After a climb prices often retrace a large portion sometimes all of the original move. Support and resitance levels often occur near the Fibonacci retracement levels.

Relative Strength Index measures the market activity to see whether it’s overbought or oversold. This is a leading indicator so helps to indicate what the market is going to do (awesome!). Ahigher RSI number indicates overbought (so expect a bearish shift) and a lower number indicates oversold.

Successful traders will generally use 3 or 4 signals to provide a more conculsive signal before entering a trade.

Always remember, “If in doubt, stay out!” . Technical analysis doesn’t factor in political news, a country’s economic profile or fundamental supply and demand.

Technical Analysis helps us figure out how much money to risk on a trade. How and when to enter the market and how to exit the trade for profit or to minimize loss.

I sincerely hope you found this article useful.

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Forex Technical Indicators Revealed

Forex Technical Indicators Revealed

The forex market is said to be one of the largest places known to the business people. Trading has become a part of man’s life since time immemorial. Needless to say, it is an opportunity that provides better earnings in relation to the released investment. Hence, it is an endeavor which requires you to gain an in-depth knowledge regarding the types of technical indicators that basically prove to be really useful. By combining two or more of them, you increase the probability of obtaining a full knowledge of the steps which you need to take on as you continue with the opportunity of earning a generous profit.

Technical Indicators and their Advantage

Many of the traders are encouraged to make use of the technical indicators. Even more, the pros still trust them. How much more for a beginner like you? They are the mathematical formulas that govern the respective indicators. Studies reveal that they are very accurate too only that they don’t really come up with a complete analysis. What these tools can do is to show you the tendencies in the market.

Your mere presence in the stock market suggests that you have a perfect goal and that is to earn money and generate a great deal of profit. You should not forget though that the market is volatile. Meaning, its instability paves way to a number of changes that may occur at any time. Thus, these indicators are the perfect tools that can tell you as to whether it is good enough to buy or sell commodities or securities.

As you opt to utilize the indicators, it is likewise very pertinent to remember that many of the formulas include jotting down the derivatives. This goes to show that the data is not obviously direct. That is why it is often helpful to consult more than one indicator to be able to draw a clearer picture. After all, it will never hurt to check out the accuracy of your conclusion.

Four Basic Classifications of Technical Indicators

Whether you prefer to trade forex, stocks, or other commodities, it pays off to think about obtaining a solid foundation that may serve as your guide. Again, it is very significant to pick out those which you know are already proven to work and those that you can comfortably use.

The trend indicators. Moving averages, Parabolic SAR, and MACD are just some of those that make up this group. By looking into the movement of the trends, you can decide on the level at which you can start trading.

The momentum indicators. These are considered to be the oscillating indicators and are most clear-cut in pinpointing the overbought as well as the oversold positions. Similarly, they show the signals for any new trend. Stochastics, RSI, and CCI are just some of those momentum trend indicators.

The volume indicators. The name itself tells you that the price movement is very much dependent on the volumes of the trades. Generally, the price movement which is rooted from a high volume gathers a fairly stronger signal compared to one which is inspired by the low volume. Examples of which include the force index, money flow index, ease of movement, Chaikin money flow, and many others.

The volatility indicators. They normally look into the ranges that define the volume that lies beneath the movements and the price behavior. The common examples include the average true range, Bollinger bands, and the envelopes.

There you go with the four groups of technical indicators that will steer you as you work on achieving the best of the profits from the forex market.

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Technical Analysis – Reading FOREX Charts

Technical Analysis – Reading FOREX Charts

Price charts can be simple line graphs, bar graphs or even candlestick graphs. These are graphs that show prices during specified time frames. These time frames can be anywhere from minutes to years or any time interval in between.
Line charts are the easiest to read, they will show you the broad overview of price movement. They only show the closing price for the specified interval, they make it very easy to pick out patterns and trends but do not provide the fine detail of a bar or candlestick chart.

With a bar chart the length of a line displays the price spread during that time interval. The larger the bar is the greater the price difference between the high and low price during the interval. It is easy to tell at a glance if the price rose or fell because the left tab shows the opening price and the right tab the closing price. Then the bar will give you the price variation. When printed bar charts can be difficult to read but most software charts have a zoom function so you can easily read even closely spaced bars.

Originally developed in Japan for analyzing candlestick contracts candlestick charts are very useful for analyzing FOREX prices. Candlestick charts are very similar to bar charts they both show the high, the low, open and close price for the indicated time. However the color coding makes it much easier to read a candlestick chart, normally a green candlestick indicates a rising price and a red one indicates a falling price.

The actual candlestick shape in reference to the candlesticks around it will tell you a lot about the price movement and will greatly aid your analysis. Depending on the price spread various patterns will be formed by the candlesticks. Many of the shapes have some rather exotic names, but once you learn the patterns they are easy to pick out and analyze.

Price charts are not usually used by themselves to get the full affect you need to supplement them with some technical indicators. Technical indicators are normally grouped into some pretty broad categories. Some of the more common ones used to monitor and track the market movement are: trend indicators, strength indicators, volatility indicators, and cycle indicators.

Here is a list of some of the more commonly used indicators as well as a brief description.

Average Directional Movement Index (ADX) – This index will help indicate if the market is moving in a trend in either direction and how strong the trend is. If a trend has readings in excess of 25 then this is considered a stronger trend.

Moving Average Convergence/Divergence (MACD) – This shows the relationship between the moving averages which allows you to determine the momentum of the market. Any time that the signal line is crossed by the MACD it is considered to be a strong market.

Stochastic Oscillator – This compares the closing price to the price range over a specific time frame to determine the strength or weakness of the market. If a currency has a stochastic of greater than 80 it is considered overbought. However if the stochastic is under 20 then the currency is considered undersold.

Relative Strength Indicator (RSI) – This is a scale from 1 to 100 to compare the high and low prices over time. If the RSI rises above 70 it is considered overbought where as anything below 30 is considered oversold.

Moving Average – This is created by comparing the average price for a time period to the average price of other time periods.

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Understanding Forex – #2 – Technical Analysis

Understanding Forex – #2 – Technical Analysis

This is a series of articles about The Foreign Exchange Market. You will learn here what Forex is , how it works and how profitable it can be. The whole series contain the following articles . . .

1. What is Forex

2. Technical analysis

3. Fundamental analysis

4. Money management

5. Compound interest

Technical Analysis.

Unless you are new to trading you probably know already that technical analysis is a method of forecasting future price movement of commodities, securities, etc (in this case currencies) based on chart analysis, pattern formations, technical indicators, etc. Forex can be traded technically and in my opinion it is quiet predictable.

No trading strategy will work 100% of the time. That’s why you need proper money management techniques. Anyway, technical analysis is important to determine where the price of the currencies is going, also when to enter and exit positions.

There are different technical analysis techniques that you can implement to your trading strategies. I show here how to use technical indicators which is a very common technique among most technical traders.

There are many technical indicators. Some of them are more common and useful than others. In my opinion you won’t need dozens of them to know when to enter or exit a trade. It is about quality, not quantity. I think though that it is better to relay on a few indicators than in only one.

If you trade based on the signals of only one indicator, you may miss some important information about the market that other technical indicators would reveal to you. By using a few technical indicators instead of only one, you can make more educated and accurate choices.

So, I will show you here some very common technical indicators and how they are used to forecast market prices. Remember that technical indicators are the basis of technical analysis systems.

You can implement three different aspects to your trading systems. One is technical analysis as I explain here. The other is fundamental analysis. The third one is money management as I explain in my other articles on this series.

Common technical indicators and their definitions:

1. Average Directional Index – ADX

An indicator used in technical analysis to determine the strength of a prevailing trend.

2. Exponential Moving Average – EMA

A type of moving average that is similar to a simple moving average, except that more weight is given to the latest data.

3. Moving Average Convergence Divergence – MACD

A trend-following momentum indicator that shows the relationship between two moving averages of prices.

4. Bollinger Band

A band plotted two standard deviations away from a simple moving average.

5. Fibonacci – There are many Fibonacci indicators like the following . . .

a. Fibonacci Time Zones

b. Fibonacci Fan

c. Fibonacci Channel

d. Fibonacci Arc

c. Fibonacci Clusters

d. Fibonacci Numbers/Lines

e. Fibonacci Retracement

f. Fibonacci Extensions

6. Relative Strength Index – RSI

A technical momentum indicator that compares the magnitude of recent gains to recent losses in an attempt to determine overbought and oversold conditions of an asset.

7. Stochastic Oscillator

A technical momentum indicator that compares a security’s closing price to its price range over a given time period.

8. Williams %R

In technical analysis, this is a momentum indicator measuring overbought and oversold levels, similar to a stochastic oscillator.

You can learn more about these technical indicators and how they are used if you visit www.investopedia.com. Most technical analysis systems combine at least a few technical indicators to forecast the market. I think that proper technical analysis skills are an important aspect of most successful trading systems.

You can learn more about Forex and trading systems from my other articles on this series. I covered here important aspects of technical analysis, but most successful trading systems need some fundamental analysis and/or money management too.

EasyWebRiches.com © 2006

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Forex Technical Analysis: The Art of Predicting the Future by Studying the Past

Forex Technical Analysis: The Art of Predicting the Future by Studying the Past

Technical Analysis is the simplest plus many precise means of trading the FOREX marketplace recognized by the forex traders community. All accessible info about any specific currency, as well as its impact about traders, as well as the marketplace, are absolutely reflected inside a currency’s cost. The foreign exchange marketplace is largely composed of styles plus is, consequently, a area where technical analysis is employed surprisingly effectively. Experience inside trading has shown which history repeats itself – over time, certain chart patterns become consistent, predictable plus pretty reliable. The condition has been capable of spoting them. There’s usually over meets the eye at initial glance.

Prices move inside trends; as well as the traders whom don’t recognize this truth clearly do not have have to apply the trading methodology about technical analysis, they haven’t even realized yet. But, over 100 years of analysis has shown which those whom trade “with all the trend”, more usually than not, greatly boost their possibilities of winning inside the forex markets (i.e., generating a successful trade).

Many instances acquiring the prevailing trend usually enable we become aware of the total marketplace way plus provide we better visibility–especially whenever shorter-term movements tend to clutter the pic. And various occasions after the trend may bail we from an initially lower than desirable entry point.

The main query you are asking oneself at this point is; how does technical analysis aid we to determine what the trend of the marketplace is and just how does it aid the efforts to trade with all the trend plus not from the trend?

It is important to mention which nobody is declaring technical analysis because the “magic bullet” of trading . And in the event you ask, that indicators are better inside Forex trading? The answer is none – technical indicators could merely be components of the total customized / personal trading program plus not systems inside plus of themselves. These are typically like tools inside a tool kit, not the kit itself!)/

As a Forex Technical Trader, the objectives are:

#1) To figure out the cost action of the currency pair. Price is the principal concern. If the EUR/USD is at 1.3226 plus goes to 1.3219, 1.3112, 1.3008 – the marketplace is within a down trend. Despite what each technical signal may predict, when the trend is down, remain with all the trend. Indicators showing where cost usually go upcoming or exactly what it ought to be doing are useless. A trader need just be worried with what the marketplace is doing, not what the marketplace would do. The cost informs we what the marketplace is doing.

#2) To constantly remember which technical indicators are just providing we confirmations based about what the marketplace is telling we. So hear plus pay close attention to the marketplace plus allow it dictate that system you’ll employ plus that tool you’ll pull from your bag of techniques plus techniques. For only by hearing to the markets might we ever be capable to overcome it effectively plus become a successful trader.

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Why Technical Analysis Works So In The Forex Market

Why Technical Analysis Works So In The Forex Market

Should you are considering currency trading inside the Forex marketplace, or you’re absolutely included inside Forex currency trading, here’s a money-making lesson which you may borrow from investors that utilize technical analysis to aid them create investment decisions inside the stock marketplace.

The goal of operating technical analysis whenever currency trading is to predict successful currency pair movements by examining cost styles. The principles of technical analysis inside the equity markets are the same because those inside the Forex currency trading markets. In truth, truly the only real difference involving the 2 is the fact that the Forex marketplace is open 24 hours a day when the equity markets are not.

This means which certain analytics which take time periods inside consideration should be modified for Forex currency trading. Other than which, any of these popular types of equity technical analysis methodologies is employed whenever currency trading:

Elliott Waves — Developed by Ralph Nelson Elliott, this methodology is based on the theory which marketplace performance is forecasted by studying wave patterns which develop over a time period.

Fibonacci Studies — Developed by 12th century mathematician Leonardo Fibonacci, this methodology is based on the theory which changes inside styles is forecasted based on costs interacting with lines based on certain sequences of numbers.

Parabolic SAR — Developed by J. Wells Wilder, this methodology is based on the examination of costs compared to “stop plus reversal” (SAR) numbers which indicate entry plus leave points for a trade.

Pivot Points — A mathematical formula selected to determine whenever to leave a trade based on the numerical average of the significant, low plus closing costs.

As I stated earlier inside this short article, the key difference between technical analysis inside the equities marketplace, plus technical analysis inside the Forex currency trading marketplace, is that it happens to be potential to engage inside Forex trading 24 hours a day, 7 days a week. That key difference is moreover the main cause which technical analysis functions thus effectively inside currency trading.

In purchase for technical analysis techniques to deliver maximum results, there should be extended periods of time accessible for patterns to develop plus repeat. Because the Forex marketplace not closes, plus currency pairs are traded about the clock, definable patterns develop more immediately as well as the technical analyst has a plethora of Forex currency trading information accessible to function with.

Because more information signifies more exact forecasting results, technical analysts will see greater results, inside faster time, whenever combining technical analysis plus Forex currency trading.

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I wish To become a day trader plus need access to charts stocks. Where do I receive all technical info?

Question by Cherberg S: I like to become a day trader plus desire access to charts stocks. Where do I receive all technical info?
I am considering becoming a day trader plus wish To slow with small initial capital. I have been trading stocks plus choices for a while yet I wish To become a day trader that has live information regarding the the technical stuff including the styles, all charts, bearish/bullish patterns, plus deep analysis about stocks. Where do I start? I looked at several websites like bigcharts, MarketWatch, CapitalIQ etc. but nothing because comprehensive because I need. Any suggestions?

Best answer:

Answer by Huntsman
Who is a broker – they must have all bells plus whistles we need
If not, discover another discount broker
Charles Schwab, plus Fidelity were rated amidst the number one for this

Give the answer to the query below!

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Forex Trading

www.etoro.com – (min deposit : $50) Sign up with link and use the practice account before using real money if you like.

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Weekly Gold and Silver Report for Aug 17, 2012; What If Bond Prices Collapse!

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Forex Strategies

Trade:Forex, Oil and Gold

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