Category Archives: Indicators

Trading Forex with Bollinger Bands

The Bollinger Bands are very popular trading indicator that give powerful volatility analysis for traders, and have been used for decades for Stocks, Commodities and Forex. In this article we will discuss the most accurate and predictive trading mechanisms for the Bollinger Bands.

The formula of the Bollinger Bands is very simple: the middle bollinger bands is a simple moving average of the last 0 bars, and the upper and lower bands are calculated by adding and subtracting the standard deviation of price to the middle band. The difference between the upper and lower band is twice the standard deviation. This means that a big distance between the upper and lower bands means that price is volatility, and a small distance indicates low volatility and a period of a squeeze.

The first method to use the Bollinger Bands is to gauge trend\range. If the Bollinger middle band is flat it means that price is ranging and that the trend is weak, and if the middle band is trending in a direction, it means that price is in strong range. This can help you filter your trades: in ranging markets you should only trade reversal chart patterns and signals, and in trending markets you should look for places to catch the trend in tactical places (retracements) and with MT4 indicators.

Once you’ve determined the market condition, you can also use the bands to actually signal trading signals: when price is in range, the lower and upper bands often serve as support and resistance levels, respectively. Therefore we enter a short trade if price hits the upper band and reverses, and will enter a long trade if price hits the lower band and reverses upwards. It is recommended to confirm these signals using an existing support\resistance level that is confirmed by price-action, to make the signals more accurate.

Another trading mechanism that incorporates the Bollinger Bands is the Squeeze.

A squeeze occurs when the volatility is low and price is a very tight range, ‘squeezed’ between the two Bollinger bands. Usually this squeeze results in a very big breakout of the range, and a beginning of a strong trend. Traders can take advantage of this by setting orders right outside the range, to catch the price at the beginning of the trend and harvest the profits. However, this trading method is not so reliable as in many cases price breaks to one side just to reverse and eventually create a trend to the opposite direction.

The Bollinger Bands are very powerful trading tools that you can use to improve your trading and your win rate.

Technical Indicators: A Love-Hate Relationship

Part I: How One Technical Indicator Can Identify Three Trade Setups

By Elliott Wave International

Trading using technical indicators — such as the MACD, for example — can do one of two things: help you or hurt you.

Elliott Wave International’s Jeffrey Kennedy explains what he loves and hates about technical indicators and shows you how he uses them to his advantage in this excerpt from his FREE eBook, The Commodity Trader’s Classroom.


I love a good love-hate relationship, and that’s what I’ve got with technical indicators. Technical indicators are those fancy computerized studies that you frequently see at the bottom of price charts that are supposed to tell you what the market is going to do next (as if they really could). The most common studies include MACD, Stochastics, RSI, and ADX, just to name a few.

The No. 1 (and Only) Reason to Hate Technical Indicators
I often hate technical studies because they divert my attention from what’s most important – PRICE.

Have you ever been to a magic show? Isn’t amazing how magicians pull rabbits out of hats and make all those things disappear? Of course, the “amazing” is only possible because you’re looking at one hand when you should be watching the other. Magicians succeed at performing their tricks to the extent that they succeed at diverting your attention.

That’s why I hate technical indicators; they divert my attention the same way magicians do. Nevertheless, I have found a way to live with them, and I do use them. Here’s how: Rather than using technical indicators as a means to gauge momentum or pick tops and bottoms, I use them to identify potential trade setups.

Three Reasons to Learn to Love Technical Indicators
Out of the hundreds of technical indicators I have worked with over the years, my favorite study is MACD (an acronym for Moving Average Convergence-Divergence). MACD, which was developed by Gerald Appel, uses two exponential moving averages (12-period and 26-period). The difference between these two moving averages is the MACD line. The trigger or Signal line is a 9-period exponential moving average of the MACD line (usually seen as 12/26/9�so don’t misinterpret it as a date). Even though the standard settings for MACD are 12/26/9, I like to use 12/25/9 (it’s just me being different). An example for MACD is shown in Figure 10-1 (Coffee).

The simplest trading rule for MACD is to buy when the MACD line (the thin line) crosses above the Signal line (the thick line), and sell when the MACD line crosses below the Signal line. Some charting systems (like Genesis or CQG) may refer to the MACD line as MACD and the Signal line as MACDA. Figure 10-2 (Coffee) highlights the buy-and-sell signals generated from this very basic interpretation.

Although many people use MACD this way, I choose not to, primarily because MACD is a trend-following or momentum indicator. An indicator that follows trends in a sideways market (which some say is the state of markets 80% of the time) will get you killed. For that reason, I like to focus on different information that I’ve observed and named: Hooks, Slingshots and Zero-Line Reversals. Once I explain these, you’ll understand why I’ve learned to love technical indicators.


Keep reading about Hooks, Slingshots, and Zero Line Reversals in The Commodity Trader’s Classroom. This free eBook is filled with 32 pages of actionable trading lessons, such as:

  • How to Make Yourself a Better Trader
  • How the Wave Principle Can Improve Your Trading
  • When to Place a Trade
  • How to Identify and Use Support and Resistance Levels
  • How to Apply Fibonacci Math to Real-World Trading
  • How to Integrate Technical Analysis into an Elliott Wave Forecast

Download your FREE Commodity Trader’s Classroom eBook today!

This article was syndicated by Elliott Wave International and was originally published under the headline Technical Indicators: A Love-Hate Relationship. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

Metatrader Spread Recorder Indicator

forex spread recorder

Hi everyone. I just came across a neat metatrader 4 indicator that records the spread history of any currency pair you choose. Basically the way it works is you attach it to the chart of any given currency pair you prefer and it will record to a file every change in that currency pair’s spread (difference between bid and ask) until you tell it to stop recording.

This can be a really useful tool to keep an eye on your broker if you suspect that they’re doing something fishy like artificially raising the spread at key times during specific trading sessions, or it can of course be used as a mere curiosity and research tool.

For me this indicator is most useful in finding whether a particular broker is well suited for the Asian session scalper EAs that I use.

You can get this indicator by visiting the thread I created on the Forex Nirvana forum. You have to register to download the indicator, but worry not, the registration process is really quick and easy. Here is the link you need:

http://www.forexnirvana.com/f16/metatrader-spread-recorder-indicator-2159/

Hope you find this post useful!

Cheers,

Alan

Forex News Calendar MT4 Indicators

Hi everyone. I’d like to share with you two very useful indicators that show you the upcoming forex news releases. One is called FFCal and the other Plot News (version 3.0 – last and final release).

Install instructions for Plot News:

1. Download and unzip the News v303.ZIP file into your MT4 folder, unzipping the files within to the relevant sub-folders, and overwriting any existing files of the same name.
2. Restart MT4.
3. Run the Calc Timeshifts.EX4 script if you wish to have the time offsets calculated automatically for you.

For further instructions, additional information, screenshots, release history, etc, please read the ‘Operating instructions’ document (it’s in the ZIP file).

OR you can run the automated install program located in the NewsSetupv310.zip file.

Install instructions for FFCal:

Copy the FFCal.mq4 file into your MetaTrader 4 “indicators” directory, restart MT4, attach it to the chart.

In order to use it, you need to turn on DLL Imports in your Metatrader platform options, because it calls a DLL to get your timezone, as well as another to read the ForexFactory web page to get news information. (Be aware it will write out .XML files to your expert/files folder).

This is how one of these forex news calendar indicators looks like when attached to your MT4 chart:

forex factory calendar

You can find them both over at the Forex Nirvana forum:

http://www.forexnirvana.com/f16/forex-news-calendar-indicators-2109/

Enjoy!

P.S. You have to register for the forum in order to download the files attached to that forum post.

New version of the free Forex Rebellion indicator is out

Hi everyone.  I have a bit of news for you. In a previous post of mine I announced that a member of the Forex Nirvana forum – jmw1970 – has created a “mod” or enhancement for the Forex Rebellion manual trading system. Well, it turns out that JMW1970 has released a new version of his free Forex Rebellion mod package, and you can easily get your hands on it!

You can get your copy right here:

http://www.forexnirvana.com/f60/forex-rebellion-1078/index57.html#post19516

Please note that this DOES NOT mean you’ll get the Forex Rebellion system for free. JMW1970’s mod requires that you have the original Forex Rebellion indicators. This is just to clear up any ideas that JMW1970 is distributing a pirated version of the Forex Rebellion system.

Enjoy!

Cheers,

Alan

MT4 Indicators Encyclopedia

mt4.jpg

Hello dear readers. I’ve come across a useful website that I’d like to share with you. This website contains a massive collection of MT4 (MetaTrader 4) indicators along with a picture showing each indicator in action. There are a total of 84 pages filled with indicators. I hope you find the site useful. Here is the link:

http://www.cnwh.com/mt4/indicator_image.html

Cheers!

Alan
http://alansforexblog.com

UPDATE: Looks like the link is no longer active. I’m not sure what is happening but I will try to find a substitute website or maybe even open one up myself.

Forex Trend System Indicator

forextrend.jpg

Hello there. I thought you may be interested is knowing about this great commercial MT4 indicator based trading system that I came across. It is called “The Forex Trend System.” Not a very creative name, but hey, it’s the results that count.

The Forex Trend System is a manual indicator that identifies changes in trend and allows you to capture the major market moves. It has been designed for MetaTrader 4, a freely available trading platform which you can download for free.

How It Works

The system is made up of three trigger lines which tell you when to buy and when to sell. Simplicity itself – one color to buy and one color to sell. It will alert you to the beginning of a trend, and will also signal when the trend is coming to an end.

It has proven to be highly accurate, especially when allied to the best time frame, currency and time of day. Experience has show the system to work best on the daily chart. While it is accurate for just about any of these three variables, for optimal efficiency it is best to follow the system designer’s instructions closely. Not every trade is a winner, but historically losses have been much smaller than wins. However, as always, past results are not necessarily indicative of future results.

Features & Benefits

  • Easy Setup – No complicated manuals or confusing strategies to learn
  • Easy to Learn – Buy on blue, sell on red!
  • Customizable – Adjust the system for longer or shorter trades
  • Versatile – Works with any currency pair
  • Flexible – Choose from aggressive & safe-trading options
  • Convenient – Receive audible and email alerts of potential trade setups

Admittedly it is a bit pricey at $597 for an unlimited-use personal license, but when you think about it if you trade using standard lots the system will pay for itself in not even a month in most cases. Check out the trading results proof on the product’s promo page and you’ll see what I mean.

Click here to find out more details about this neat trend following system.