Technical analysis
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Hello, dear colleagues. Today I bring to your attention the third lesson of the series "Price Action Trading Methods". And today I will begin the story of simple Price Action price patterns. Why do I begin? Because I cannot discuss them all in one lesson. But before we proceed directly to the patterns, let's define the basic concepts. Pattern is an English word the meaning of which is translated in Russian as "pattern", "system", "structure", "principle", "model". Because of its use in various Western disciplines and technologies, it has entered the Russian-speaking environment as a specific term in several spheres of activity at once. Thus, we can say that Рrice Astion is a trade...
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[info_block align="right"]When used with other trading indicators, it can definitely help improve the accuracy of your trading strategy.[/info_block] VWAP is an intraday calculation used mostly by HFT algorithms and institutional traders to estimate where stocks are trading relative to the average volume for the day. Intraday traders also use VWAP to estimate market direction and filter trading signals. Before using VWAP, you need to understand how it is calculated, how to interpret and use it, and what the disadvantages of this tool are. How is VWAP calculated? VWAP (Volume Weighted Average Price) is an abbreviation for volume weighted average price. At first glance you might think that VWAP is...
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Trend - in the sphere of financial markets it is a direction of price movement of the chosen instrument: growth or decline in the price of an asset. Types of Trends Trend Phases Trend Strength Drawing a Trend Line Rule of Numbers Difficulties of Trading by Trend Line Traded correctly Classic Strategy Method of Determining Trend by Peaks and Declines by Dow Theory Trend Indicators Trend Indicators Advantages and Disadvantages of a Trend Strategy There are three main types of trends: an uptrend (bullish trend, up-trend), which shows price growth in a certain period of time. On the chart it looks like a series of price lows, each higher than the previous one. a downtrend (bear trend, down-trend), which tells...
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[info_block align="right"]The Fibonacci time zone indicator allows predicting potential price reversal points on the chart.[/info_block] Indicators based on the Fibonacci number sequence have long been popular with traders. Today we will talk about the most controversial and doubtful indicator - the Fibonacci time zones. What is the difference between Fibonacci time zones and other indicators? Like other Fibonacci tools, the time zone indicator is based on a numeric sequence where each successive term is the sum of the previous two: 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, etc. The main difference between the time zones and other Fibonacci indicators is that they are based not on price movements, but on...
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The application of the RAIX layer oscillator - the possibility of the full description of the dynamics of the band components of the signal of the traded instrument quotations. The technical indicator developed by the author of the article - the RAIX layer oscillator - is offered for practical use by traders. The indicator is recommended to be used together with the previously published indicator of RASL layer, it is also possible to use the RAIX oscillator together with other technical indicators. Figure 1 shows the RASL layer indicator (upper picture 1) and the RAIX layer oscillator (lower picture 1) for the signal fluctuations layer of the traded instrument quotations, concluded within the limits from 20 to 60 periods. A full description of the RASL layer technical indicator is given in the previously published article "New RASL layer trend indicator and trading strategy...
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Every trader sooner or later begins to experiment with technical indicators, trying to find "the one" which will allow opening deals with at least 100% profitability. Often, the result of such investigations becomes a diagram with all sorts of "superprofitable" indicators' signals that reminds one of abstractionists' pictures. The best is the enemy of the good, and, unfortunately, many classical indicators are becoming forgotten, although their effectiveness is not inferior, and sometimes even superior to all grails. Today we are going to talk about one of such indicators, namely MACD. MACD is an indicator for beginners MACD is an abbreviation of Moving Average Convergence Divergence. Its name is pronounced correctly...
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The application of the technical indicator of RASL layer is an opportunity to present the complex dynamics of quotes signal in the form of a set of simpler (band) components. RASL Indicator - idea and application The technical indicator of RASL layer developed by the author of the article is offered for practical use in trading. The example of RASL indicator for the layer of quotes fluctuations concluded in the interval from 4 to 20 periods is shown in picture 1. The construction stages of RASL layer indicator are shown further in figures 2 and 3. Figure 2 shows nine moving averages RAMA with smoothing periods from 4 to 20 with step change of 2 (4, 6, 8, 10, 12, 14, 16, 18, 20). Algorithm...
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Spectral analysis in modern trading Any trading signal is organized rather complicated. It can be concluded that it consists of many rhythms with different periods, at that rhythms are not constant - they appear and disappear during their evolution in time. The structure of quotes signal rhythms can be estimated by means of digital spectral analysis, which is used in digital signal processing. Spectral analysis is widely used in trading nowadays. Figure 1 shows a typical spectrum of some quotes signal. The peaks with different heights on the spectrum graph reflect the value (amplitude difference) of the rhythms with the corresponding periods. The graph of the spectrum is displayed in the range of periods up to 100 (extreme right value). From.
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Many traders chase the modifications of indicators, thinking that the more "contrivances" in it, the more accurate and profitable trading signals will be. Standard indicators turn out to be completely undeservedly forgotten and abandoned. Today we will discuss one such indicator that, when used properly, gives a trader a huge advantage. The case in point is the Heiken Ashi indicator. What are the advantages of the Heiken Ashi indicator? Very often, the heightened volatility throws traders, especially beginners, off their trading plans. The Heiken Ashi indicator dampens the volatility as if by transforming the abrupt volatility into smooth and easy-to-read price movements. HA is a kind of filter for low-frequency market fluctuations, at the same time it does it equally on...
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The higher quality of averaging (smoothing) of the indicator is connected with its higher noise immunity, i.e. with a significant decrease of the fast pulsations of the coherent line of the indicator. RAMA vs. SMA The technical indicator RAMA (weighted moving average) with the averaging period equal to N and with the weight function of averaging W (solid line), which is shown in figure 1 (calculation is made with the averaging period N=20 bars) is offered for practical use in trading. For comparison, Figure 1 also shows the uniform smoothing weight function (dashed line) of the classic indicator SMA, also with an averaging period of 20 bars. You can see that the weighting function W has a significantly non-uniform character, the large weights...
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We continue to analyze candlestick patterns indicating a reversal of price movement. In the previous article we discussed "Hammer" and "Hangman", now we will talk about a fairly common reversal candlestick pattern "Absorption" (Jap. Tsutsumi). Rules for the formation of a candlestick pattern "Absorption" For the formation of a candlestick pattern, both bullish and bearish, a number of conditions must be met: The presence of a pronounced trend; The body of the second day must completely absorb the body of the previous day. However, it doesn't mean the tops and bottoms of the two candlesticks can't coincide, it only means the tops and bottoms of the two bodies can't be both equal; The color of the first day reflects the trend: black color in case of a downward trend...
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Some time ago we published some lessons on trading with Ishimoku indicator by Andrew Lukin, the links to which you can find below. Today we will return to this topic, refresh our memory and try to answer some questions related to practical application of the rules of these lessons. This article is written in the form of a question-answer, but to fully understand the essence of the subject we recommend to take a look at the literacy on the Ishimoku indicator. Lessons on Yishimoku: the indicator, its components and basic signals Trading with the Yishimoku: the cloud, its purpose and trading signals Lessons on Yishimoku: market entry and stop orders Trading with the Yishimoku indicator: the Chinkou Span...
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Hello, dear traders. We continue our series of articles on "Price Action Trading Methods". This article, which is the second in a row, is dedicated to trend lines as an integral part of the Price Action system. What are trend lines and how to draw them correctly? The concept of a "trend line" is often treated ambiguously and inconsistently. However, it should be remembered that out of the many trend lines, only one is true. Fig. 1. Examples of trend lines of a beginning trader. Let's see what we see on the chart of the beginner trader. Figure 1 shows such "desktop" where we see a lot of lines that often cannot be called a trend line. Naturally, the principle "some or other line" works in such drawings.
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Candlestick analysis of the currency market has been popular for over 200 years. Invented by the Japanese, it confirms its effectiveness today and therefore is in demand by traders. Candlestick patterns are a combination of market bars from 1 to 5, which predict further market movement. How to trade using candlestick analysis? When trading using candlestick patterns, known as candlestick analysis, you don't need anything but a streaming chart. The market indicators are the bars and their formations. This is especially useful for long term trading on higher timeframes when it is necessary to look into the terminal only once a day. Using the candlestick analysis in trading is quite simple - you just need to know...
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The legacy of the great Italian mathematician Leonardo of Pisa, better known as Fibonacci, is still actively used in all spheres. Trading on financial markets is not an exception. Tools based on numerical sequences of Fibonacci are very popular among traders. However, not everyone knows how to use correctly the built-in MT4 terminal Fibonacci indicators. And if almost everybody can "stretch" the grid of Fibonacci expansions, only few of them use the Fibonacci Fan having a different specifics of its creation. Let us join this effective tool. Fibonacci Fan is a trading instrument based on Fibonacci numbers. The lines, which are supports and resistances,...
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Fractals were used in the analysis of trading operations long before Bill Williams. His merit is that, as a result of extensive scientific work, he established that market movements are related to chaotic systems. Bill Williams claims that the market is a chaotic system, not a linear one. Accordingly, the use of linear methods and indicators will give a very weak effect when forecasting price movements. The market is characterized by chaos and the market stability is only temporary. Fractal analysis: Fractal Components Fractal analysis was a continuation of computer modeling. The result of the scientific work was the discovery of the feedbacks describing the market structure. The formation recurring at any timeframe of the price chart is...
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-Fibonacci trading forms the basis of many e-trading systems used by successful traders around the world. All such systems are based on the famous Fibonacci ratios (.236, .50, .382, .618, etc.) and each of them specializes in a particular ratio as well as other additional indicators to determine entry and exit levels with the highest possible accuracy. One of the most popular Fibonacci ratios is 0.382. As you can see from any chart, currency prices are constantly changing and following an oscillatory pattern with peaks and troughs. The limit of the peak is usually called a resistance level, while the troughs are called support. In order to find the 0.382 ratio level, you should, first of all,...
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Joe DiNapoli-style Fibonacci retracement levels and extensions should be considered only as a single system. Using each tool separately will give only partial results. DiNapoli's method Regarding the correction levels, it should be said that he left only 2 levels in his method - 38.2% and 61.8%. The level 50% was omitted. In our opinion, he uses the minimum levels only for entry purposes, since it doesn't matter whether you enter on a pullback at 61.8% or 76.4%, anyway, the stop loss is behind the beginning of the wave (or "reaction" according to his definition). Ultimately, the grid of corrections looks like the figure below. In principle, knowing his entry methods, this grid will be enough!..!
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Divergence is quite a popular type of trading on the market among professional currency traders. It is considered to be the destiny of professionals, and it is not recommended for newbies to get involved in this topic. However, we will try to explain this trading method in simple language understandable even to a beginner. What is important in the analysis of divergences? Today there is more than one divergence indicator, but even the use of such analyzers will not give you the efficiency in trading if you do not have at least a general idea of such a notion as a divergence. In general, the meaning of both divergence and convergence is in the divergence of the oscillator from the price chart. Usually, the following indicators are used for the analysis of the divergence: MACD, slow Stochastic,...
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One often hears that some instrument on the exchange or the market as a whole is expensive/cheap, overbought/oversold. These notions immediately become a kind of anchors for a trader. Further he will always be within this category and follow everything that is taught in books. All these anchors are nothing more than a trader's personal opinion and have nothing to do with reality. Because, in addition to cheap/expensive, there are such beautiful words as cheaper and more expensive. And there is nothing that prevents the market from staying that way for as long as it wants. On the overbought/oversold side, if the market enters a "cheaper/expensive" state, the trader will constantly catch knives flying up and down, gradually...
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