Fibbonacci Pivot Point

Fibonacci Pivot Point

R3 = PP + ((High - Low) x 1.000)
R2 = PP + ((High - Low) x .618)
R1 = PP + ((High - Low) x .382)
PP = (H + L + C) / 3
S1 = PP - ((High - Low) x .382)
S2 = PP - ((High - Low) x .618)
S3 = PP - ((High - Low) x 1.000)
C - Closing Price, H - High, L - Low

Fibonacci pivot point levels are determined by first calculating the pivot point like you would the standard method.

Next, multiply the previous day's range with its corresponding Fibonacci level. Most traders use the 38.2%, 61.8% and 100% retracements in their calculations.

Finally, add or subtract the figures you get to the pivot point and voila, you've got your Fibonacci pivot point levels!

Look at the chart below to see how the levels calculated through the Fibonacci method (solid lines) differ from those calculated through the standard method (dotted lines).

The logic behind this is that many traders like using the Fibonacci ratios. People use it for retracement levels, moving averages, etc.

Why not use it for pivot points as well?

Remember that both Fibonacci and pivot points levels are used to find support and resistance. With so many traders looking at these levels, they can actually become self-fulfilling.

Read more: http://www.babypips.com/school/other-pivot-point-calculation-methods.html#ixzz1S73esrue

Hot to Trade MACD

How

ArticlesOctober 1st, 2009

FXSmooth Indicator Is Optimized
To Make Maximum Profits On ANY PAIR!

The MACD, or the Moving Average Convergence Divergence, is probably the most popular technical indicator. Almost every trader has traded the MACD at the beginning of his trading career, and some even continue to use it later on. In this article we will describe the origins of the MACD, its calculation and the markets it functions well.

Calculation
The MACD is calculated with 3 EMAs: 12-days EMA, 26-days EMA and 9-days EMA. The main MACD value is calculated by subtracting the 26-days EMA from the 12-days EMA. A 9-days EMA is then calculated on the MACD, to produce a signal line.

Main MACD = EMA[12] – EMA[26]
Signal MACD = EMA[9] of MACD

Orientation
The MACD is in essence a trend-following indicator. It uses Exponential Moving Averages which are a traditional trend-following mechanisms.

Trading Methods
There are several trading methods to be used with the MACD indicator. The simplest of all is thecross method.

The basis of the cross method is the cross of the MACD signal line by the main, faster line. Examples:

Another trading method is the Divergence. The basis of this trading method is a diversion between price and MACD – that indicates that price and MACD does not correlate. Traders take trades hoping that price will reverse in the direction of the MACD.

Examples:

Price and MACD does not correlate – Short Divergence Signal

Price and MACD does not correlate – Short Divergence Signal

The 3rd trading method with MACD is the Moving Average Bounce, also known as the Zero-Line-Reject. The basis of this method is the following: MACD value is reaching the value of zero, and suddenly reverse in direction. The technical idea behind the trade is that the 12-days EMA is bouncing off the 26-days EMA.

Examples for Trades:

MACD came close to zero line and bounced – signaling a long trade.

These three methods are the strongest trading methods to incorporate the MACD indicator – and they are useful not only in FOREX but any commodity.

It is advisable to trade and experiment with these methods on demo account before risking your own money.

FXSmooth

FXSmooth Indicator Is Optimized
To Make Maximum Profits On ANY PAIR!

Free Indicator that generates buy\sell signals that are based on a touch of Bollinger Bands. The indicator uses Bollinger Bands from upper time frames to produce stronger signals.

Screens

Download
MTF Bollinger Signal

CCI Indicator

Forex CCI Indicator Explained

May 16, 2010 by Kelvin
Filed under Forex Indicator

5 Comments

The CCI indicator is known as the Commodity Channel Index and this is an indicator that is developed by Donald Lambert.

I will not bother you with the calculation of this indicator because your trading platform can automatically help you to calculate and plot out the indicator. What I am going to share with you today is what exactly this indicator can do for you and how you can integrate it to your trading plan.

For this CCI indicator, it will come with +100 and -100 levels. Most of the time, this indicator will move in between the +100 and -100 levels and it will exceed the levels for about 20 to 25% of the time.

Here is what you can use the CCI for:

1) As a buy and sell signal – Whenever you see the CCI moving above the +100 level, you are in fact in a period of strong uptrend and this is the time you can enter a LONG trade. Once the CCI moves back to the +100 level, you should then exit your trade.

However when you see the CCI moving below the -100 level, you are in a strong downtrend period and you can enter a SHORT trade. Similar to the above LONG trade, you should exit your trade once the CCI move up to the -100 level.

Buy & Sell Signal

From the picture above, you can see that the market move higher when CCI reaches the +100 level and vice verse.

2) As a reversal identifier – There are basically 3 ways you can make use of the CCI indicator to identify reversal and I am going to go through one by one in detail.

a) Trend Line Break: You can make use of the CCI to draw trend line and once you see the trend line being breached, you are going to see the market moving in the direction of the breakout.

Trend Line Break

b) CCI Divergence: Similar to MACD divergence, the CCI also produces positive and negative divergences. When you see the market making higher highs while the CCI making lower highs, you are in fact seeing a negative divergence. This is usually a signal that the market is going to move down but the time it takes for the down move may vary and you should not assume that it is coming in the next few candles.

Positive Divergence

If you see the price making lower lows while the CCI making higher lows, it is a sign of positive divergence and the market is going to produce an upward movement soon. Similarly, you should not assume that it is going to happen very soon.

Negative Divergence

c) Overbought & Oversold: Similar to the Stochastic and the Relative Strength Index, the CCI can be used as an oscillator. When you see this indicator moving above the +200 level, you are in an overbought zone and you can place a SHORT trade when you see the CCI crossing below the +100 level.

When you see the indicator moving below the -200 level, you are in an oversold zone and you can then place a LONG trade once you see the indicator moving above the -100 level.

Overbought & Oversold

However there is nothing that works 100% of the time and below is one such example

Example

The CCI indicator has been a great help to my trading so far and it can be integrated into various type of trading methods due to its multi-features. You can try this indicator out in your trading chart and see how it performs for you .

Stochastic Indicator

Forex Stochastic Indicator Explained

June 2, 2010 by Kelvin
Filed under Forex Indicator

21 Comments

The stochastic indicator is a tool that is developed by George C.Lane. It is in fact a momentum indicator or oscillator that is used to compare the current market price to the high and low of a specific period of time.

The stochastic is made up of 2 lines, %K and %D. Depending on your setting, you can adjust the sensitivity of these 2 lines to suit your plan.

Although there are 3 types of stochastic namely full, fast and slow, the fast and slow ones are more commonly used. So let us take a look at both of them.

Fast Vs Slow

From the picture above, you can see that there are more crossovers for the fast stochastic which means that it is actually more sensitive than the slower one. However this gives rise to more false signal which is undesirable in trading.

As for the slow stochastic, it is less sensitive and produces lesser false signals as compared to the fast one. Due to its low sensitivity, it will usually signal you to enter a trade after the market has already moved by certain amount.

How to Read the Stochastic?

When the stochastic moves above the 80 level, the market is considered to be overbought and when it moves below the 20 level, the market is considered to be oversold.

However there is one thing you have to take note, when it moves above the 80 level, it does not always mean that the market will reverse. There are times where it will continue to stay above the 80 level and in this situation; it usually indicates that the market is in a strong uptrend.

overbought and oversold

The important thing to note when reading the stochastic is when the %K crosses above %D after it reaches the oversold level or when the %K crosses below %D after it reaches the overbought level.

How to Use the Stochastic?

There are several ways you can use the stochastic to help you in your trading and below are some of them

1) Entry Signal: It can be a great tool when it comes to giving entry signal. Personally I like to enter my position when the %K crosses the %D and move out of either the overbought or oversold level.

If I am looking to go LONG, I will wait for the stochastic %K to cross above the %D and move above the 20 mark. If I am looking for a SHORT trade, I will wait for the %K to cross below the %D and move below the 80 mark.

2) Exit Signal: The concept for using stochastic to exit my position is about the same as the entry. If I have taken a LONG trade, I will wait for it to move to the overbought zone and exit my position after %K crosses below %D and move below the 80 mark.

Exit Signal

3) Reversal Signal: Other than MACD divergence, you can also make use of stochastic divergence to enter a trade. The positive divergence occurs when the market makes lower low while the stochastic make higher low. This is usually an indication that the market is going to reverse up.

Positive Divergence

The negative divergence occurs when the market makes higher high and the stochastic make lower high. This usually signifies a downward reversal is going to occur.

Negative Divergence

The above are 3 ways I usually use the stochastic and I hope that you will be able to make full use of its ability to help you in your trading.

Breakout Strategy

My Forex Breakout Strategy Revealed

January 11, 2010 by Kelvin
Filed under Forex Tutorial

7 Comments

Forex breakout is one of the more commonly used trading strategies that are used by currency trader. The main reason it is so widely used is because of the clarity and simplicity of execution. It is so simple that even new traders without much experience can trade profitably with it if they put in some effort to practice the strategy in their demo account.

So what exactly is Forex Breakout?

It is the sudden surge of price in a particular direction after a period of side way movement or consolidation. With the sudden price movement, you will then enter a trade in the direction to grab the profit by riding the trend.

Forex Breakout Sudden Movement

But How to Identify Forex Breakout Opportunity

First of all, you need to know the various candle patterns that will eventually constitute a breakout trading.

1) Triangle

Triangle

2) Flag

Flag Formation

3) Trend Channelling

Trend Channel Formation

These are the common patterns for a forex breakout to occur. Usually It takes some time for the patterns to emerge and you should be on your toes when you saw these patterns on your chart and wait patiently for an entry opportunity.

Secondly, you need the help of an indicator called “Bollinger Bands”. The purpose of this indicator is to provide you with volatility check. It will be able to tell you whether the price is currently in consolidation or not.

When the upper and lower bands are narrow, it is signaling to you that the price is currently in consolidation and you should be waiting for a breakout.

Here are the steps I usually take to trade forex breakout

1) Setup the following indicators – Bollinger Bands (Default Setting), Stochastic (Slow) and MACD (Moving Average Convergence Divergence).

2) Draw the necessary trend lines to identify support and resistance level or even channel wall.

3) Always keep a lookout for the Bollinger Bands when it is narrow as it usually signals a consolidation in progress and then wait for the stochastic to either go oversold or overbought. Once the price produces a sudden surge in movement and also at the same time the bollinger bands starts to widen, you should then wait for the stochastic to either curve up if you are going LONG or curve down if you are going SHORT.

Bollinger Band Volatility Check

4) Always wait patiently for a proper trend line break before you enter any trade. Failure to do so may lead to loss of money due to fake outs.

Example

This is usually how I trade breakout in forex and the winning percentage is pretty high for this strategy. Take some time to practice this strategy on your demo or micro live account until you are able to achieve consistent success before you go into standard account trading.

Scalping System

Forex Scalping System Revealed

December 24, 2009 by Kelvin
Filed under Forex Tutorial

15 Comments

Forex scalping has become more and more popular among new traders. This is because forex scalping tactics allows the trader to see fast profit sometime within less than 20 minutes of trading and this is what entices some traders.

Although scalping the forex market can see quick profit, it can also amount to quick loss if you do not execute it with proper analysis. Due to the scalping nature of your trade as a scalper, you can enter several trades within 1 hour and it can amount to a sizeable loss if you have consecutive loss trades.

Here are the forex scalping analysis you can do:

1) Mark out the important support and resistance levels, typical support and resistance levels are

• Fibonacci 0.618, 0.5. 0.328
• Pivot Point S3, S2, S1, PP, R1, R2, R3
• Previous high will be your current resistance and previous low will be your current support.

2) Use oscillating indicators like stochastic or RSI or even MACD can help you to time your entry more accurately.

• If you are looking to SELL, you should try your best to wait for the oscillating indicator to go overbought and start to curve down.
• If you are looking for BUY, you should try your best to wait for the oscillating indicator to go oversold and start to curve up.

Besides timing your entry, these oscillating indicators can also help you to time your exit.

• If you go SHORT, you should be looking to exit your trade when the oscillating indicator reaches the oversold zone.
• If you go LONG, you should be looking to exit your trade when the oscillating indicator reaches the overbought zone.

3) Confluence of Events – In trading, we should also wait for confluence of events to happen before we enter or exit a trade. Confluence of events refers to the situation where two or more conditions to enter a trade or exit a trade happen together. This can gives you more confident and assurance in the trade.

• The best long entry point is when the price hits the support level with the oscillating indicator reaching the oversold zone and start to curve up.

• The best short entry point is when the price hits the resistance level with the oscillating indicator reaching the overbought zone and start to curve down.

Above are the forex scalping system I have been using. Although some of you may be thinking that it is a simple strategy and may even wonder if it can make you money, you need to know that the most profitable strategy are those that are easy and simple to execute.

I do not encourage you to start trading this strategy immediately and I actually hope that you have the habit to try out new strategy on DEMO account and master the way to execute it before trading LIVE with it.