Tag Archives: Indicators

(Video) Top 3 Technical Tools Part 3: MACD

(Video) Top 3 Technical Tools Part 3: MACD
Enhance your trading confidence with a 2-minute lesson on how to combine Moving Average Convergence Divergence with other technical tools.

By Elliott Wave International

“Guessing or going by gut instinct won’t work over the long run. If you don’t have a defined trading methodology, then you don’t have a way to know what constitutes a buy or sell signal. Moreover, you can’t even consistently correctly identify the trend.”

-Jeffrey Kennedy

Jeffrey Kennedy is an accomplished teacher and a Senior Analyst here at EWI. Yet he often says that the Wave Principle alone is not a trading methodology. It does not tell you how much trading capital you can afford to risk, or specific guidance about which entry or exit levels are best suited for your trading style or where to set your protective stop.

Kennedy also says that along with risk management and emotional discipline, the right technical tools are a vitally important part of supporting your wave count.

To enhance trading confidence, Jeffrey’s 3 favorite technical
tools are Japanese candlesticks, RSI, and MACD. (read Part
1 on Japanese Candlesticks
and Part 2 on RSI ). Today’s lesson shows you how MACD can help identify trading opportunities with an example from USDCAD.

This 2-minute video and overview of MACD are adapted from Jeffrey’s Elliott Wave Junctures educational service (which empowers subscribers with information on nearly every aspect of trading. Try it risk-free for 30-days >> ).


Moving average convergence divergence (MACD) is a momentum indicator developed by Gerald Appel. It consists of two exponential moving averages, the MACD line and Signal line. The difference between these two lines yields an additional indicator, MACD Histogram.

Since these studies evaluate momentum, they work optimally in trending markets. When combined with reversal candlestick patterns, MACD and MACD Histogram can increase confidence in these patterns as well as continuation of the larger trend.

MACD divergence occurs when prices move one way and MACD moves the other. Bearish divergence forms when prices make new highs and MACD does not. Conversely, new price lows without lower MACD readings is bullish divergence. These conditions aid traders in identifying potential changes in momentum and trend.

MACD is constructed using two lines referred to as the MACD line and the Signal line.

When the MACD line appears to penetrate the Signal line, but fails to do so, a hook forms. The significance of a hook is that it coincides with countertrend price moves.

MACD is excellent technical tool provided you know how to use it and what to look for.


Learn the Best Technical Indicators for Successful Trading

This free report from Elliott Wave International will teach you how to incorporate technical indicators into your analysis to improve your trading decisions.

You’ll learn which technical indicators are best for analyzing chart patterns, which are best for anticipating price action, and which are best for spotting high-confidence trade setups. You’ll also learn how technical indicators can be used to complement Elliott wave and other technical methods.

Get your technical indicators report now >>

This article was syndicated by Elliott Wave International and was originally published under the headline (Video) Top 3 Technical Tools Part 3: MACD. 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.

(Video) Top 3 Technical Tools Part 2: Relative Strength Index (RSI)

(Video) Top 3 Technical Tools Part 2: Relative Strength Index (RSI)
EWI senior analyst Jeffrey Kennedy shows you how to identify quality trade setups with supporting technical indicators.

By Elliott Wave International

“There are many different forms of technical analysis. A completed Elliott wave pattern supported by additional evidence allows for more confident forecasts and higher probability trades.”

-Jeffrey Kennedy

Trader and technical analyst Jeffrey Kennedy has more than 25 years of experience using with the Elliott Wave Principle. To support his Elliott wave analysis, Jeffrey says that his 3 favorite technical tools are Relative Strength Index (RSI), MACD, and Japanese candlesticks.

This 3-part series includes Jeffrey’s practical lessons and proven techniques to support his wave counts (read Part 1 here >>). Today’s video clip shows you how RSI and range rules can help identify trading opportunities: Part 3 will cover MACD.

Jeffrey’s second lesson, excerpted from his Elliott Wave Junctures educational service, gives an overview of RSI followed by a video example.


Buying pullbacks in uptrends and selling bounces in downtrends are great ways to trade trending markets.

Developed by J. Welles Wilder, Jr. and presented in his 1978 book, “New Concepts in Technical Trading Systems,” RSI measures the strength of a trading vehicle by monitoring changes in closing prices and is considered a leading or coincident indicator. Andrew Cardwell popularized RSI as a trading tool by introducing the concept of range rules.

The theory behind range rules is that countertrend price action in trending markets has specific momentum signatures. RSI, for example will find support within roughly the 50-40 region when pullbacks in uptrends occur. Conversely, when bounces develop in downtrends, RSI will meet resistance in the 50-60 area.

Taking the path of least resistance is a benefit of trading in the direction of the trend. Moreover, the use of RSI and application of Andrew Cardwell’s range rules help identify when a trader can rejoin the trend.


Learn the Best Technical Indicators for Successful Trading

This free report from Elliott Wave International will teach you how to incorporate technical indicators into your analysis to improve your trading decisions.

You’ll learn which technical indicators are best for analyzing chart patterns, which are best for anticipating price action, and which are best for spotting high-confidence trade setups. You’ll also learn how technical indicators can be used to complement Elliott wave and other technical methods.

Get your technical indicators report now >>

This article was syndicated by Elliott Wave International and was originally published under the headline (Video) Top 3 Technical Tools Part 2: Relative Strength Index (RSI). 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.

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.

What Are the BEST Technical Indicators for Successful Trading?

8 technical analysis tools that give any trader an edge

By Elliott Wave International

You may have seen a TV ad where “traders” describe their strategies, and one says, “I trade on fundamentals.” That sounds very reassuring — except that, on any given day, “fundamentals” are a mixed bag:

  • You might have a good U.S. employment report…but bad news from Europe
  • A positive Fed statement…but a negative housing number
  • Strong earnings…but slowing consumer spending

And so on. Which “fundamental” factor trumps the other? Which one carries more weight in your forecast? Your guess is as good (or bad) as anybody’s.

Your alternative is technical analysis, which forecasts the markets’ short- and long-term moves based on objective metrics, not guesses.

Here at EWI, we’ve always strived to help our readers learn to think for themselves. So we’ve put together for you a free 8-lesson report, “Best Technical Indicators for Successful Trading” that teaches you how to use these technical tools:

  1. The Personality of Elliott Waves
  2. Head and Shoulders Pattern
  3. Fibonacci Retracements
  4. Advance-Decline Line
  5. Sentiment
  6. Volume
  7. Trendlines
  8. Momentum Analysis Using MACD

Here’s a small preview of this free 8-lesson report.

Trendlines

A trendline represents the psychology of the market; specifically, the psychology between the bulls and the bears. If the trendline slopes upward, the bulls are in control. If the trendline slopes downward, the bears are in control.

Moreover, the actual angle or slope of a trendline can determine whether or not the market is extremely optimistic, as it was in the upwards sloping line in Figure 1-1 or extremely pessimistic, as it was in the downwards sloping line in the same figure.

Now we’re on to the fun part — drawing trendlines. You can do this several different ways…


Finish Reading This 8-Lesson Report Today, FREE

In this free report, you will learn some of the most effective tools of the trade from analysts at Elliott Wave International, the world’s largest technical analysis firm.

Find out which technical indicators are best for analyzing chart patterns, which are best for anticipating price action, even which are best for spotting high-confidence trade setups — plus how they all complement Elliott wave analysis.

Download your “Best Technical Indicators” report now >>

This article was syndicated by Elliott Wave International and was originally published under the headline What Are the BEST Technical Indicators for Successful Trading?. 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.