First thing, this pattern is not suitable to day traders.

It is a trend following system,

but the most evolved you will come across. Only read on if you are willing to hold a trade
for anywhere from a week to a quarter.

So most trading teachers will show you a similar picture in their courses. It is all you
need to know about price movement. They would tell you price is either trending or
ranging. You can only trade profitably when its trending.

Then they show this picture to explain the trend; an up move (impulse move), which
retraces to a higher-low then creates a new, higher-high and so on. Every trading
system existed plays on a variation of this picture.

A support-resistance mentor would say the first high is resistance, so trade a break of
that resistance. Or trade a bounce of that support. So you try that but it doesn't nearly
work; you can never work out where the exact resistance or support are. Additionally,
sometimes support or resistance fail causing you massive losses. So you look for another
method.

So you meet another mentor and he tells you about RSI. He would tell you when price
makes a higher-higher but RSI doesn't, you should sell as this is a sign of reversal.
Besides the fact this is plain wrong and that divergences don't foreshadow a reversal
(they actually confirm the trend). RSI divergences don't tell you when to exit. Actually
most of the time the divergence is completely neglected and price continues to move in
the same direction. So you move on to try trendlines, fibonacci, bollinger bands,
harmonic pattern or moving averages. Nothing ever works consistently.

So they tell you trading is hard and its money management is all that matters. Well yes
money management is very, very important. But those mentors also know nothing and
they teach you bits and parts, a half-truth. That's why their systems don't work out.

I will show you a trend following system that works. And its not a breakout system, my
trend following is much more accurate. All you need is a 20 Exponential moving average,
50 exponential moving average and a stochastic oscillator.

Lets move on...

Last edited by PhilipPirrip; 02-15-2015 at 12:03 PM.
nppetkov, bioshock, fzqflash and 6 others like this.

Reply With Quote

02-15-2015, 12:07 PM#2

ImBatman
Newbie
Join Date
Jan 2015
Posts
11
Sounds good
Excited for more details
~ImBatman
Reply With Quote
02-15-2015, 12:27 PM#3
PhilipPirrip
Master Contributor and Member
Join Date
May 2014
Posts
699
In this post I will share the system's rules and then post an example in a following post.
I want to point out that the picture I shared in the opening post is an important one;
price does trend in that way. Its just that mentors have never helped us trade that
movement properly. This is what this system will do.

Entry

Step 1: Plot the 20 Exponential moving average (ema), the 50 ema and the stochastic
oscillator.

Step 2: Wait for the 20 ema to cross over or below the 50 ema. Now any moving
average system tells you when (the 20 crosses above 50 goes long. when 20 crosses
below 50 go short.) THIS IS WRONG! The 20 ema crossing above the 50 ema
indicates a very strong upward move that is about to correct soon.
The 20 ema crossing below the 50 ema indicats a strong bearish move that is about to
retrace. So how do we know when does the retracement end and when will it continue?
This is where the stochastic kicks in.

Step 3: If the 20 ema crossed above the 50, the stochastic will be OVERBOUGHT
(indicating that a fall in price is near. If 20 ema crosses below the 50 ema, the stochastic
will be oversold. This is the pattern I'm sharing with you; stochastic will be overbought
with an upward cross over and vice versa on all trading instruments on all higher
timeframes.

Step 4: Keep a close eye on stochastic, wait for it to go all the way to the other extreme.
Place your entry when stochastic crosses over in the other direction.
ex: 20 ema crosses above 50 ema. Stochastic will be overbought (80+). Wait for
stochastic to become oversold. When stochastic crosses up at oversold, by the next
candle open.

It may sound confusing, but bear with me and things will become clearer in the example.
All we did is traded the picture I shared in the first post. Price went from a low point to a
high point (so 20 ema crossed above 50 ema.) price then retraced (stochastic went from
overbought to oversold.) We entered when stochastic crossed over from oversold
because we anticipate that price will go on to make a higher now. This is the most
profitable trading pattern you will encounter.

Exit
I use trailing stops. Once we enter. I draw a fibonacci extension from the low point to
the high point if its a buy signal or from the high to the low if its a sell signal. I use the
following levels: 1, 1.272, 1.618, 2, 2.618, 3, 3.618, 4, 4.618, 5... and so on.

When price closes above 1, I move stops to break even. When it closes above 1.272, my
stop becomes a close below 1. Then when it closes above 1.618, my stop is a close
below 1.272. A close above 2, sees me moving my stop to a close below 1.618 and so
on.

In the next post I'll share a number of examples to clear it up.

Bucketman, nppetkov, bioshock and 4 others like this.

Reply With Quote

02-15-2015, 03:31 PM#4
PhilipPirrip
Master Contributor and Member
Join Date
May 2014
Posts
699
So here is an example. This is USDJPY in 2015 on the 4H chart. (Its important to note I
prefer that time frame. Trading on the daily could keep you in trades for years! On the
other hand using a shorter time frame is not advisable for many reasons.)

I doubt anyone tried shorting USDJPY this year. But the system clearly shows you a
short opportunity that yielded 250 pips in five days (fundamentally, this is a counter-
trend trade.) Most analysts told you it was ranging early on (by the way a buy signal in
USDJPY just flashed on Friday.)

In the picture, you notice the yellow line (20 ema) crossing the blue line (50 ema). We
now establish that the trend is bearish, USDJPY should make at least one lower low.

At that time, the first circle at the bottom, stochastic was indeed oversold. This
confirmed to us that we are about to see a retracement. We kept following the stochastic
until it got overbought, that told us that the retracement is almost over and now we will
go on to make our anticipated lower low. We entered as soon as the stochastic crossed
over to the downside (the second yellow circle). This happened to be at the closing of
the shooting star formation on the chart, marked with the green arrow and the red
horizontal line.

Once we entered. We now have our high point (that is the highest point immediately
before the crossing of the moving averages) and a low point (the lowest point before the
retracement.)

We plot a fibonacci extension from the high to the low. As soon as price closed below the
fibonacci 1 level, we moved the stop to break even. It proceeded to close below the
1.272. We moved our stop to a close above the 1 level and so on.
You see price moved below 1.618, then moved up to close above the 1.272 (the second
green arrow) this is where you would close the trade.

The risk on that trade was 99.7, the reward was 205 pips. So try the system out. Next I
will share a trade that I'm still in and a trade that didn't work out.
Last edited by PhilipPirrip; 02-16-2015 at 09:25 AM.
nppetkov, bioshock, Mike Wolski and 1 others like this.

Reply With Quote

02-15-2015, 04:00 PM#5
PhilipPirrip
Master Contributor and Member
Join Date
May 2014
Posts
699

See this is a long trade that I'm currently in. It is basically the same set up but this time
its a buy rather than a sell. Notice that the price has closed above fibonacci level 3, so
now my exit is a close below 2.618.
I risked a total of 288.3 pips on this trade, my return will be (so far) slightly less than
1060 pips.

Next I will show what to do when the pattern fails (hint, sometimes you still end up
making a profit!)
nppetkov likes this.

Reply With Quote

02-15-2015, 04:29 PM#6
Jalapenofan
Newbie
Join Date
Nov 2014
Posts
48
Interesting thread, I like your strategy
gforce1 likes this.

Reply With Quote

02-15-2015, 04:51 PM#7
zhangshuo
Junior Member
Join Date
Dec 2012
Posts
100
hi, Philip:
THX for sharing this strategy! Really an eye opener! Can you also share the setting for
your ema (applied to=? shift=)? Also you mentioned moving your stop, so where do you
put your initial stop-loss when you enter a trade? THX for your time and help!

Shuo
Last edited by zhangshuo; 02-15-2015 at 10:25 PM.
Reply With Quote
02-15-2015, 05:06 PM#8
odds on
Newbie
Join Date
Feb 2012
Posts
44
Yeah, the stochastic hook trigger is a pretty solid set up for sure. It's actually been
around for years & was first presented on Babypips a few years back by a poster named
Carll on the Technical Templates Continued thread in its rawest form, minus the moving
average & fibonacci add ons.

He & a couple others are still trading it very successfully across multiple timeframes,
including sub hourly. His entry trigger has been referred to on Captain Currency's 3
Ducks thread on a few occasions as a very reliable alternative entry trigger to
complement the trending structure of that approach.
Reply With Quote
02-15-2015, 06:48 PM#9
PhilipPirrip
Master Contributor and Member
Join Date
May 2014
Posts
699
@Shuo: There is no shift to the EMA. Its applied to the close. For stop-loss, I use mental
stops because its more comfortable that way. Those who like to place stops 10 pips
above the high if its a sell and 10 pips below the low if I'm buying. So in the USDJPY sell
signal I posted a picture of above, I'd place the initial stop loss 10 pips above the area I
labeled "high point." Something I wanted to stress to you; the distance between the
entry and the stop loss is always worth 1% of my equity on 4HR, daily and weekly
charts. If I'm in the mood for over trading and use the 1hr or 5 minute charts, my stop
loss is only 0.2% of my balance. I use the baby pips position size calculator to know my
lot size.

@Odds on: I agree with you that stochastic is one of the best entry indicators any trader
will ever use. My strategy actually started as a moving average cross over system. But I
started noticing that price moved against my entry quite powerfully before storming in
my favor. I started to experiment with other indicators in search for a work around the
retracement problem and I came across that pattern; whenever the 20 EMA and 50 EMA
crossover, stochastic will be on the other side of the crossover. It only happens with the
20 and 50 ema, it was almost magical.
The Fib addition is really my legacy to trend following systems hahaha. I think I'm the
first trend follower who buys the dip rather than the break out. But I also think my
system offers a much more accurate exit strategy than almost every other system.
Before introducing fibs I used to give up an average of 40% of my gains. Now I enter
very early and leave out only 5-10% of my gains.

Tomorrow I will share two trades that didn't work out, this is where the pattern gets
really powerful.
Last edited by PhilipPirrip; 02-15-2015 at 06:52 PM.
rookie39 and Kumar7 like this.

Reply With Quote

02-15-2015, 10:22 PM#10
zhangshuo
Junior Member
Join Date
Dec 2012
Posts
100
hi, Philip:
What is your setting for the stochastic oscillator in your screenshot?

Shuo

Read more: http://forums.babypips.com/free-forex-trading-systems/72042-most-profitable-trading-

pattern-you-will-ever-encounter.html#ixzz3bGowhSRM

Indikator Akurat FSS 30 No Repaint

Indikator Akurat FSS 30 No Repaint - Sering kali ketika mengikuti sinyal yang diberikan oleh suatu indikator
kita akan ketinggalan moment, hal ini karena sinyal yang dikeluarkan bersifat lagging atau lambat. Nah, kali ini
saya akan share satu indikator yang sangat jitu yang bisa sobat jadikan acuan dalam membuka open posisi.
Menurut komentar di forum-forum, memang indikator ini menjanjikan profit yang cukup besar asalkan menurut
aturan seperti pada gambar di bawah ini.
Indikator ini disebut juga FLOWER INDICATOR. Silahkan dicoba, SALAM PROFIT.
Download :indikator|template
Saya sudah Test di berbagai broker, tapi Broker Octafx yang sangat cocok, Hati - hati, broker laen kadang masih
banyak repaint.

Forex channel trading Renko System

September 15, 2014 By Hung Vu 2 Comments

281
Facebook126

Twitter38

Google+117

This Forex Channel Trading System is being given FREE by Mark Soberman the
President of Netpicks Trading. This Forex Channel Trading System can trade 20+
currency pairs and catch the big moves in the market. When you download this
Forex Channel Trading System, you get all the indicators, a plugin template and
video training on how to trade with this system all FREE.
Download2434 downloads

These are the indicators that you are going to download:

RenkoLiveChart_v3.2.ex4

RenkoLiveChart_v3.2.mq4

HeikenAshi3.ex4

HeikenAshi3.mq4

FastTMALine.ex4

FastTMALine.mq4

smFisherTransform3.ex4

smFisherTransform3.mq4

Repulse2.ex4

L Repulse2.mq4

TrendWave2.ex4

fct1
Strategi Forex 200 SMA dan 5 EMA

Strategi Forex Add comments

Jul 012013

Stretegi forex menggunakan beberapa time frame akan memungkinkan untuk meningkatkan
peluang mendapatkan keuntungan dari pasar forex. Strategi forex 200 SMA terdiri dari 3 time frame
yang berbeda yaitu 4 jam, 1 jam dan 15 menit. Dalam strategi khusus ini, baik grafik 4 jam dan grafik
1 jam digunakan untuk melihat trend secara keseluruhan di pasar. Grafik 15 menit digunakan untuk
menentukan saat yang tepat untuk masuk dan keluar pasar serta menentukan stop loss. Setelah
anda sudah melihat ketiga grafik forex pada time frame tersebut maka anda baru bisa masuk ke
dalam pasar forex dengan menggunakan strategi forex yang akan dibahas dibawah ini.

Pengaturan Trading :

Pasangan mata uang : Semua pasangan mata uang

Time Frame yang digunakan : 4 jam, 1 jam, 15 menit

Indikator forex yang digunakan : 200 SMA, 5 EMA

Jam trading : pada sesi Eropa dan Amerika Serikat

Bagaimana cara kerja strategi forex menggunakan 200 SMA

1. Menentukan tren secara keseluruhan pada grafik 4 jam grafik 1 jam.

Trend beli: Ketika garis 5 EMA memotong garis 200 SMA dari bawah ke atas
Trend jual: Ketika garis 5 EMA memotong garis 200 SMA dari atas ke bawah

Perhatikan tabel dibawah ini

2. Syarat untuk Buy

Pasar sedang dalam trend beli

Buy jika 5 EMA memotong 200 SMA dari bawah ke atas pada grafik 15 menit.

Pasang stop loss 1 pips lebih rendah dari titik support terbaru

Pasang target profit sekitar 50 pips atau sesuai dengan target anda. Usahakan target profit
lebih besar daripada stop loss.
3. Syarat untuk Sell

Pasar sedang dalam tred jual

Sell ketika garis 5 EMA memotong garis 200 SMA dari atas ke bawah pada grafik 15 menit

Pasang stop loss 1 pips lebih tinggi dari titik resistance terbaru

Pasang target profit sekitar 50 pips atau sesuai dengan target anda. Usahakan target profit
lebih besar daripada stop loss.

Perhatikan pada gambar dibawah ini yang akan memberikan contoh singkat untuk lebih
memahami strategi forex SMA 200.

Grafik 4 Jam: Pada tanggal 8 November, Euro/Dollar dalam Trend Jual

Grafik 1 jam: Pada tanggal 22 November, Euro / Dollar dalam Trend Jual
 Grafik 15 menit: Pada tanggal 26 November, Euro/Dollar masuk posisi Jual

Pada tanggal 26 November, 5 EMA memotong 200 SMA dari atas ke bawah pada grafik 15 menit.
Akibatnya, Euro/Dolar telah memberikan sinyal jual dan itu diperkuat dengan grafik 4 jam dan grafik
1 jam yang mengindikasikan trend jual. Kita buka posisi sell di pasar pada penutupan bar di 1.3338.
Stop loss awal ditempatkan 1 pip diatas level resistance terbaru di 1,3385. Risiko kerugian: 47 pips.
Target profit adalah dua kali lipat dari risiko (94 pips) atau paling kecil 50 pips.

- See more at: http://xemarketsforex.com/strategi-forex-200-sma-dan-5-

ema/#sthash.AtoxCU99.dpuf

Talking Points:
The MACD and Signal line crossover gives traditional buy/sell signals.
Histogram is the difference between the MACD and Signal line.
We can enter when Histogram begins to get smaller rather than wait for a
cross.
Most technical traders have experience using the more popular oscillators, RSI, CCI, and MACD,
etc. But many traders Ive taught are not aware of the alternative way to use the MACD. In this
article we will discuss how to use MACDs histogram to open trades and show how in many cases
we can get a quicker entry than the traditional MACD method.
What Does the Histogram Represent?
The green histogram or bar chart included in the background of the MACD displays the difference
between the MACD and Signal line. When the MACD is above the Signal line, the bar is positive.
When the MACD is below the Signal line, the bar is negative. The actual height of the bar is the
difference between the MACD and signal line itself.
Learn Forex: MACDs Histogram Construction
The chart above shows what the Histogram represents. The first label shows how the MACD is
higher than the Signal line. This creates a positive green bar that has a height equal to the
difference of the two lines. The second example the MACD is below the Signal line. This creates a
negative green bar that has a height equal to the difference between the two lines. We can also
see that when the Blue and Red lines cross, the histogram flips from one side to the other.

How to Enter Based On the Histogram

So how can we read the histogram to generate trade signals? We first want to track the histogram
as it moves away from the zero line, in other words, track it as its bars grow larger. The actual
signal comes when the histogram no longer gets larger and produces a smaller bar. Once the
histogram prints a smaller bar, we look to trade in the direction of the histograms decline. We can
see an example of this in the chart below:

Learn Forex: MACD Histogram Entry Logic

The Sell signal on the left was created by four growing bars in a row followed by a fifth bar that
closed smaller. Five bars later, we see the MACD line crossing below the Signal line which is a
traditional MACD signal. This later signal would have missed a majority of the move that the
Histogram signal would have caught. Therefore, using the histogram as a signal can earn us a
greater number of pips.
The Buy signal on the right is a similar story. We saw four bars growing consecutively until a
5th bar was created that equaled the 4th. We want to wait until a bar is smaller, so the trigger
would have been presented after the 6th bar closed. This buy trade came several bars before the
MACD/Signal cross and gave us a better entry as well.
Once we are in the trade, we can use sound Money Management to close out the trade
appropriately.
And The Rest is Histogram
This entry strategy is fairly straight forward and can quickly be adopted by a technical trader. Have
you traded in the forex market before? If not, test out this trading technique using a FREE FXCM
Demo account. There is no risk and you can be up and running in minutes.
Good trading!
---Written by Rob Pasche
To contact Rob, email rpasche@dailyfx.com.
Sign up for my email list to stay up to date with my latest articles and videos.
Video Lessons || Free Forex Training
Trading Using Fibonacci (13:08)
Reading the RSI, Relative Strength Index (13:57)
Money Management Principles (31:44)
Trade Like a Professional Workshop (1:44:14)
My Favourite Forex Reversal Indicators
October 12, 2010 by Kelvin
Filed under Fx Indicator
It is very important for you to know when the price is going to reverse or retrace as it will be able to alert you to
exit your current position before the market takes it back or it can also alert you to enter a trade to trade the
reversal.
Therefore in this post today, I will be sharing with you several indicators that I use to identify possible reversal or
at least a retracement. As usual, these indicators will not be able to identify reversal 100% of the time as trading
is a game of probability but they are pretty accurate.
1) MACD Indicator One of the way I use the MACD indicator to identify a reversal is its histogram. When you
are in an upward movement and you see the MACD histogram shortening, it is a sign that the buyers are losing
strength and a possible reversal is coming.
If you are in a downward movement and you see the histogram shortening below the water line, it is sign that the
sellers are losing strength while the buyers are gaining strength.

MACD Indicator
2) CCI Indicator- As for the CCI, I will usually use the 200 mark as a sign of reversal. When the price crosses
above the 200 level, I will wait for it to move back down to the 100 level before I enter a reversal trade.
If it goes below the -200 mark, I will wait for it to move up to the -100 mark before I enter a trade.
CCI Indicator
Besides the above 2 indicators, I also make use of some candlestick patterns to help me in the identification of
possible reversal.
1) Spinning Top The spinning top is made up of a short body with long wick at the top and bottom. This is
usually a sign of indecision among the buyers and sellers.
If it occurs at the end of a strong trend, it is usually a sign of possible reversal.

SpinningTop
2) Railway Track I have written a post on this railway track candlestick pattern and you can read it here. The
railway track is a sign of traders getting into the wrong position and the 2 long opposite candles are formed as
traders quickly exit their wrong position and enter the opposite side.

RailwayTrack
If you happen to see the indicators showing the same reversal signal together with the formation of any reversal
candlestick patterns, this will greatly increase the chance of the price making a reversal.
If you have any recommendation for reversal indicators, do feel free to comment below as your input will be very
useful for everyone here

Today I want to share my "Stupid Guy" Trading System that can make pips up to 50-100 pip a day!
^_^
Lets go!
Pair = EUR/USD only
Time Frame : 15 Minute Only
Zoom out to 50 or 75 percent to see the magic.
And the secret is... MACD!
Set it to 35 45 30.
The Rule is, ENTRY WHEN CROSSING. ITS so simple!! Check the picture below!
Patient is the key, and you may sometimes checkout the Histogram Divergence to spot next cross.
Don't forget to set trailing stop (SL+), Avoid News, Cut Loss when MACD cross again (almost never
happen)
Happy Stupid Trading ^_^ See you at the top!

The 4 secrets you have to know

about the MACD

Yes, you made it Congrats! Youre about to learn

everything you need to know about the MACD
and how its going to make you way more money
trading AAPL.
Lets get started, the MACD is short for
moving average convergence/divergence.
WOW, thats a mouth full, what does it mean?
Now I could go into a super technical definition
but I dont want to bore you so Im going to focus
only on what you need to know to make money.
However, if you are a super geek (like me) you
can click here to get the whole scoop from
Wikipedia. But make sure you come back
and finish this article because Wikipedia doesnt
show you the secrets Im going to show you below

MACD Secret #1 Can you predict the Future?

The first secret to using the MACD is to look for divergence, this is
when the stock price and the MACD are going in opposite directions.
Click the chart above to get a bigger look. Notice the swing high in the
stock, and then the higher swing high in the stock. Now, look at the
MACD, notice the MACD made a lower swing high while the stock
was making a higher swing high. This is a divergence and a BIG RED
FLAG that AAPL is losing its momentum and may head down.

MACD Secret #2 Which Direction is it going?

The second secret to using the MACD is to look for direction. Is the
MACD going up, down or sideways?
This is very important. Notice how the MACD gives you a great
confirmation of direction. When the MACD is trending up, the stock
price has a higher probability of trending up. When the MACD is going
sideways the Stock price has a higher probability of trending
sideways.
This is super important for option traders because as you know your
going to use a much different strategy during sideways trending
markets then in very bullish trending markets. Covered Calls,
butterflies and Iron Condors work great in these types of sideways
markets. You will learn more about these kinds of option strategies in
a later AAPL Secret Email.

MACD Secret #3 Whos winning, blue or yellow?

In line with keeping things simple and only focusing on what you need
to know to make more money, this secret is all about the blue and
yellow crossover. Its important to look at the two lines on the MACD to
see when they cross. This crossing gives you an early signal telling
you there may be a reversal coming so get ready.
Another thing to notice is: by how much are they winning? Is there a
lot of space in between the lines or are they pinched together? This is
an important indication of momentum. Notice the chart above, when
AAPL is going sideways the MACD lines are very close together,
when AAPL is trending up, the distance between the blue line and the
yellow line is increasing.

MACD Secret #4 Getting the Right info at the right

time
By now you know how important the MACD is for long term investing
in AAPL and that investors who used this indicator saved a ton of
money during the last 40% decline in AAPL. But did you also know
that when the MACD is above the zero line you have an increased
probability of success swing trading and day trading AAPL to the
upside?
And, if you flip that, when the MACD is below the zero line you have a
increased probability of success swing trading and day trading AAPL
to the short side? This is huge and will not only make you money but it
can save you from getting in at the wrong time and we all know a
dollar saved is a dollar earned, right?
Using the MACD is one of many tools we use everyday at
AAPLTrader to make more money. In the next few days your going to
receive the next AAPL Secret (all about Pay Day Cycles) in your email
box, so make sure you check them out and add
Support@AAPLTrader.com to your contacts because missing just one
of these secrets will cost you money and I know you want to make
more money, right?
If you enjoyed this article feel free to leave your comments and
questions below and Ill be happy to personally reply to them or if you
just want to thank me for giving you all this good info, you can do that
below as well.
Micah also writes for The International Business Times (IBTimes) and
The Wall Street All-Stars. Micah is a Stock & Options Mentor, helping
thousands of traders become more successful! Supporting traders in
learning technical analysis, option spreads and trading as a business!
PS. Heres a chart of AAPL over the last year and a half with the
MACD cross over points highlighted with arrows 1-4. Enjoy! For the
long term trader/investor, this one simple tool is pure gold!

Technical Analysis Using MACD

When youre trading stocks, its important to have a basis on which to make your trading decisions.
You might know a company inside out, and have a real feel for its prospects in the future, but that
level of knowledge wont tell you what the likely day-to-day, week-to-week price movement will be.

Stocks never move up or down in a straight line, and there is plenty of money to be made short term
trends within a longer term trend. The secret to making money from actively trading a stock is
spotting these price trends.

Fortunately there are many ways of selecting the stocks to trade, and then the prices at which to buy
and sell shares. As an active trader, its likely you will rely heavily on technical analysis, looking at
charts and price patterns to confirm the levels at which to trade in and out of a stock.

Within this area of technical analysis there are numerous indicators of price movement that traders
look to, but one of the most popular is the MACD.

Like most other technical analysis methods, when you use the MACD (which stands for the Moving
Average Convergence Divergence) you are examining historical price data and looking for patterns of
trend that are repeated. First developed in the 1970s, it wasnt until the 1980s that its use really
took off.

And this popularity came about because of the addition of a histogram which makes it one of the
most easily read visual indicators available in todays market.

To be able to use the MACD, you firstly need to know what its three components are, and how they
are combined to construct the MACD.

As the name suggests, the MACD uses moving averages as its basis of price analysis. These moving
averages need to be exponential moving averages, which sounds a mouthful but are actually easy to
calculate, though time consuming.

Using a set number of historical days price data, you would calculate each days moving average in
relation to the number of days data up to that point and then plot the results on a graph.

If this sounds like too much hard work, or still a little complicated, theres no need to worry: most
trading systems will calculate the emas for you, and then create the graph and histogram from
which you will note the changing price trend. You can also draw MACD graphs using websites such as
Yahoo finance.

The first of these is the short time exponential moving average, known as the faster ema. The most
common time period for this ema is 12 days.
The second component is the longer time exponential moving average: the slower ema. The most
common time period for this line is 26 days.

The MACD line itself is drawn by calculating the difference between the faster and slower emas.

The final component is a shorter term ema of the difference between the faster and the slower
emas. This is known as the signal, and is most commonly calculated on a nine day period.

Each of the lines on a MACD graph is drawn in different colors.

The MACD line is drawn in blue.

The signal line is drawn in red.

Finally, a histogram of the difference between the MACD and the signal is drawn in the form of a bar
chart.

When inputting your time periods to a charting tool to draw a MACD, you input them as (faster,
slower, signal). In the example above, this would read as MACD (12, 26, 9).

Heres an example of a MACD (12, 26, 9) graph:

Now all you need to know is how to interpret a MACD. Again, this is fairly easy, though as with
anything worthwhile takes a little practice.

The emas of the share price show the changing price of an asset over time. The MACD line
shows the trend of this price change. So by comparing the two, you can identify shifts in the
changing trend, in strength as well as direction.

When the MACD (blue) crosses the signal (red), this is a signal that the trend of price direction is
changing. If the MACD crosses up through the signal, then this is a bullish crossover and
indicates a buying opportunity. On the other hand, if the MACD crosses down through the signal,
then this is a bearish crossover and signals a selling opportunity.

At the point of crossover, the histogram will always have a value of 0. This histogram narrows
toward a crossing point, and so is also a good identifier of the changing trend.
Another indicator of a changing trend on a MACD graph, though not as good as the bullish and
bearish crossovers, is when the MACD line crosses zero. A move from the negative to the
positive is bullish and vice versa.

The third main indicator shown on a MACD graph is the difference between the actual stock price
and the MACD line (divergence). If the stock price hits a new low but the MACD line doesnt,
then the down trend may soon reverse. Again, the opposite is true: if the stock price hits a new
high but the MACD line doesnt, then an uptrend in price may soon reverse.

The final divergence indicator is the divergence between the stock price and the histogram. If the
stock price hits a new high, but the histogram doesnt, then this is a bearish indicator, and vice
versa.

Use the MACD intelligently

All technical analysis tools have their limitations. If there was a stock price indicator that was
infallible, then everyone would be using it and the market would become defunct. So a good
trader, whilst using various technical indicators, will also be aware that, from time to time, they
will be wrong. Just like medical tests, the MACD, and other indicators, can give false positives or
false negatives.

So its important to become familiar with the MACD, and find how it best works for you. Many
traders wait for a change of trend to be confirmed after two or three days before acting, and
others look at increasing trading volumes or combine with other technical analysis to make trade
decisions.

But one thing is for sure: when you are proficient with the MACD it will become part of your
everyday routine, and help you make better trading choices.

Now you now about MACD, how about look at..

What Are No Supply And No Demand Candles?

How to identify no supply and no demand candles.

In past articles we have talked about pin bar reversal candles, and outside bars, as potential areas in
the market where price can reverse. I now want to look at another candle formation that can also be
an indication of a potential reversal signal.

No supply and no demand candles take into consideration the buying and selling volume within the
candle formation. By studying the volume within a candle, you can establish where buyers and
sellers are active or inactive in the market.
No Supply Candles. (No Sellers)

No supply candles indicate a potential long trade. The criteria for a no supply candle is as follows.

The Volume within the candle formation has to be lower than the volume of the previous 2 candles.

The candle has to close bearish (red body).

There has to be some sort of rejection (pin or wick) at the low of the candle.

If the candle closed at the bottom it would not be a no supply candle.

Below is an example of a no supply candle on a daily chart. The dotted line highlights the bearish
candle with rejection at the low, and lower volume than the previous 2 candles.

As you can see it was a nice reversal level in the pair, and went on to produce some nice pips.

No Demand Candles. (No Buyers)

No demand candles indicate a potential short trade. The criteria for a no demand candle is as
follows.

The Volume within the candle formation again has to be lower than the volume of the previous 2
candles.
The candle has to close bullish (green body).
There has to be some sort of rejection (pin or wick) at the high of the candle.
If the candle closed at the top it would not be a no supply candle.

Below is an example of two no demand candles on a daily chart. The dotted lines highlight the
bullish candles with rejection at the high, and lower volume than the previous 2 candles.

The two no demand candles both produced nice trades, but more importantly they also formed a
double top in the market, which is another good reversal signal in itself.

If you look at the second no demand candle, you will also see an inside bar next to it, which is a sign
of indecision in the market. A nice 50% retrace entry on that too before the sell off :)

Using no supply and no demand candles as potential reversal points within supply and demand areas
is a trading strategy that can produce some nice results.

If you enjoyed this article and you think it would benefit others then please feel free to like it on
Facebook, share it on Twitter or bookmark it using the bookmarking buttons below.

Thanks for visiting and have a great day. ;)