Trading Spikes in FOREX market

 Some of you may have been confused with the price action after yesterday's US inflation report.

As explained the reason for a stronger US dollar is that traders now expect the central bank to increase the interest rates more and more to fight inflation which makes USD more attractive.

Many of you probably are searching to find the best trading setup for a situation like this.

I am talking about FOREX mainly. (We do not have any in our portfolio at this stage )

My suggestion is, do not trade big price actions on short time frames like 5 min. It is better to look at daily or at least 4H charts.

Be careful, if you look at any FOREX chart for USD pairs on 5min or 4h at this time you will see a big outstanding candle in favor of the USD but if you wait for confirmation on daily charts then you can enter the market safely.

The candle at this stage is not a spike it is mostly a big candle with no or small shadow. If you look at longer time frames and observe them for a few days depending on the next fundamental news you may see spikes with shadows. You should wait for the candle after the one with a shadow and if that is in opposite direction then open a trade. By doing this you have waited enough for the first part of the volatility and you have entered a trade safely.

Yes, you may think that you could enter at the bottom of the candle before you see the shadow or the next candle to have more profit. My suggestion is to stay safe and ignore that profit.

Market and portfolio update June 2022

McGinley Dynamic Indicator

McGinley Dynamic Indicator:

• It was invented by John R. McGinley.
• It would automatically adjust itself in relation to the speed of the market.

This future can be very helpful as it is sometimes difficult to choose the right period for the MA. 

• It also helps to account for the gap that often exists between prices and moving average lines.
• Can't be used as a single indicator and we need to combine this with other indicators or another McGinley indicator.

Price actions respect moving averages because so many traders use them in their strategies.

Because of the formula, the Dynamic Line speeds up in down markets and moves more slowly in uptrends. One wants to be quick to sell in a down market, yet ride an up-market as long as possible. 

Head and Shoulder Pattern

 Please watch the video to understand how this pattern shapes.

• A Head and shoulders pattern is described by three peaks, the outside two called left and right shoulders which are close in height and the middle is the highest named Head.
• A Head and shoulders pattern describes a specific chart formation that predicts a trend reversal or a price consolidation in a very trendy market.
• The head and shoulders pattern is believed to be one of the most reliable patterns.

Price Channel Trading Strategy

Characteristics:

• Channels are banded current trend-following indicators. 
• Similar to other indicators they lagging.
• They have an upper and a lower line.
• Upper and lower bands are at equal distance from a middle line. 
• The area between upper and lower lines is the channel. 

Signals:

• The upper or lower line breakouts.
• The upper and lower lines bounce backs.

Channels can be seen in trendy or sideways markets.

Different types of channels will be discussed in other videos like:

Donchain Channels

Keltner Channels

Fibonacci channels

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Vertical Horizontal Filter

 

I normally do not use this indicator for signals. Instead I am using this to recognise the trend as a confirmation for my signals.

• Rising values confirms continuation of a trend. (Uptrend or downtrend)
• Falling values indicate a ranging market.
• High values: Potentially end of a trend.
• Low values: Maybe start of a trend.

A volatility indicator can help you in interpreting this indicator as in a more volatile market the range will be wider!

Ultimate Oscillator

 

Buying Pressure (BP) = Current Close – Minimum (Current Low or Previous Close)

 

Ultimate Oscillator = 100 x [(4 x Cycle1) + (2 x Cycle2) + Cycle3] / (4 + 2 + 1)

 

Calculation

If:

·         Cycle 1=7

·         Cycle 2=14

·         Cycle 3=28

Then:

Ultimate Oscillator = 100 x [(4 x Average7) + (2 x Average14) + Average28] / (4 + 2 + 1)

 

Overbought and oversold signals:

In an uptrend:

Buy when the indicator rise above oversold line.

In a downtrend:

Sell when the indicator falls below the overbought line.

Divergence signals:

Buy signal normally at the end of a downtrend: Wait for the bullish divergence in the market. This means, the price should make a lower low, but the indicator should display a higher low.

Sell signal normally at the end of an uptrend: Wait for the bearish divergence. This means, the price should make a higher high, but the indicator should display a lower high.

Typical Price

 

Typical Price is an approximate arithmetic average. Some people call this a Pivot point

How to calculate:

High: H

Low: L

Some people use this Open: O      TP= (H+L+O+C)/4

Close: C

The formula is as below:

TP= (H+L+C)/3

Strategy:

Combine this with a moving average.

Signal: Every time TP crosses above MA it gives us a buy signal

A TP crossing below the MA produces a sell signal.

Triple Exponential Average (TRIX)

 

Triple Exponential Average (TRIX)

·       TRIX is an Oscillator: Oscillates around zero

o   Overbought if it is above zero - I do not like this definition!

o   Oversold when it is below zero - I do not like this definition!

·       When TRIX is used as a momentum indicator

o   Positive value means the momentum is increasing.

o   Below zero line suggests the momentum decreasing.

·       When TRIX is used as a trend indicator

o   More time staying above the zero means uptrend.

o   More time below the zero line means downtrend.

·       Signals

o   Many analysts believe that when the TRIX crosses above the zero line it gives a buy signal, and when it closes below the zero line, it gives a sell signal.

o   I prefer combining TRIX with a moving average with smaller time period

§  Buy only if in an uptrend and you see the TRIX crosses above MA

§  Sell only if in a downtrend and you see the MA crosses above TRIX

·       Divergence

o   A divergences between price and TRIX can indicate significant turning points in the market.

Time Series Forecast Indicator (TSF)

 The Time Series Forecast tries to calculate a best-fit line over a specified time period using Linear Regression. This line is then plotted forward for a user-defined time period.

I use this in an identical way as I use 2 moving average indicators.

So the same setups will be used here. You can watch the video for how to use moving averages here .

The advantages of using TSFs over MAs are:

1. Moving average has more delays.
2. TFS also tries to forecast the price.

Swing Index Indicator (SI)

1. Swing Index is used to compare a price movement to price swing 
2. The purpose is to defining the strength of price movement.
3. Positive SI reading can be a sign of a price up-move and negative SI readings considered as a sign of price down-move. 
4. Swing Index is based on the 2-bar data
5. I prefer to use SI on shorter time frames as it is only reliable to predict just several bars into the future. 

Signals:

• Buy signal: when the Swing Index crosses over zero. (Duration of trade only next few candles)
• Sell signal: when the Swing Index crosses below zero. ( Stay in trade or change SL after only a few candles)
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Stochastic Momentum Index (SMI)

We can use this indicator to get the following information.

Overbought or Oversold: Above the overbought and below the oversold lines.

Trend: More oversold in compare to overbought indicates a downtrend.

More overbought in compare to oversold areas indicates a downtrend.

Trading Signals: Crossing the lines inside the extreme areas.

Random Walk Index Indicator (RWI)

This is a perfect indicator to determine the trend direction! 💲💲💲💲💲💲💲💲💲💲💲💲💲💲💲💲💲💲💲💲💲💲💲💲💲💲💲💲💲💲💲💲 ✅ Uptrend strategy: When RWI high (purple in this video) is above the RWI low then the trend is up. Combine this indicator with the Fisher Transform indicator, then open long positions as per the Fisher Transform when the trend is up. ✅ Downtrend strategy: When RWI high (purple in this video) is below the RWI low then the trend is down. Combine this indicator with the Fisher Transform indicator, then open short positions as per the Fisher Transform when the trend is down.

Price Oscillator Strategy

The Price Oscillator uses two moving averages.

 ✔ One shorter-period, and one longer-period. 

✔ When 2 MAs cross each other the PO reads 0. 

The Price Oscillator technical indicator can show overbought and oversold areas. 

Strategy: Only go long in an uptrend. Only go short in a downtrend 

Uptrend strategy: Look for an oversold situation to open a buy position. Close when get to overbought then close some more when crossing back to the zero line.

 Downtrend strategy: Look for an overbought situation to open a sell position. Close when get to oversold then close some more when crossing back to the zero line.

Pretty Good Oscillator Indicator

In a Downtrend: Only sell 1. At the end of the overbought area 2. Add when crossing below 0 line 3. Add at the start of Oversold In an Uptrend: Only buy 1. At the end of the oversold area 2. Add when crossing above 0 line 3. Add at the start of overbought Indicator Settings Period 28 Overbought 2 Oversold -2 Your Capital is at Risk. This is only an educational video.

Linear regression slope indicator

  A statistical technique used to identify the strength and direction of the market trend is using the Linear Regression Slope as this is a centred oscillator type indicator. It fluctuates above and below a central line drawn at 0.

 This indicator can be used to measure the strength or weakness and direction of the momentum.

•  The momentum is positive when the slope is above 0

•  The trend is negative when the slope is below 0. 

Example:
If the normalized slope is 0.2, this means that the regression line is increasing at 0.20% rate per bar.
A slope of -0.50 suggests that the regression line is decreasing at a rate of 0.50% per bar.

Highest High Value Indicator (HHV)

 Highest high value is the highest value of the market during the selected period.

Highest High Value = Maximum (High) of n−periods

Strategy: Combine it with a simple moving average for trading signals. In an uptrend: Buy when HHV goes above MA In a downtrend: Sell when the HHV crosses the MA from above to below.

High Minus Low indicator (HML)

 Recognise the volatile market.

Figure out the trend direction.

Open your new positions.

HML indicator simply plots the difference between high and low.

High readings mean we are in a trendy market.

Low readings mean we are moving sideways in a range.

My strategy:

✔Combine this with a volume indicator (Like Accumulation/Distribution Indicator)

✔High reading HML and increasing volume mean we are in an uptrend.

✔High reading HML and decreasing volume mean we are in a downtrend.

For the link to the video, please click here!

Important event 16th May 2019

Today we have these important events:
Please manage your open positions carefully.
AUD Unemployment Rate (APR)  (9:30 GMT+8)

Shows the number of employed in Australia

AUD Employment Change (APR)  (9:30 GMT+8)
The Unemployment Rate is the most important indicator of the health of the labour market.