Advanced Trading Strategies

Momentum

  • Momentum is a general term used to describe the speed at which prices move over given time periods. 
  • Momentum indicators determine the strength or weakness of a trend as it progresses over time. 
  • To add a Momentum to the chart: in the top toolbar, select “Insert”, “Oscillators”, and then “Momentum”. 
  • Momentum is generally highest at the start of a trend and lowest at market turning points.

Momentum Strategy

} If you want to get the odds on your side when trading you should ALWAYS enter a market with price strength on your side (if bullish) or weakness (if bearish). 

Stochastics

  • Stochastics are the ultimate momentum indicators to help you time your trading signals with greater accuracy. 
  • The 2 “Trigger” lines are plotted on a scale of 1 to 100. 
  • The 80% value is normally used as an overbought signal, while the 20% is used as an oversold signal. 
  • To add a Stochastics to the chart: in the top toolbar, select “Insert”, “Indicators”, “Oscillators”,

“Stochastic Oscillator”

  • Note the 0%, 20%, 80%, and 100% mark 

Stochastic Strategy

} When the 2 lines intersect above the 80% or below the 20%, it means a change in the trend direction. 

Relative Strength Index

  • Developed by Wells Wilder, the Relative Strength Index is the most widely used contra-trend oscillator in the world. It shows the market’s strength compared to the market’s former price history. 
  • To add Relative Strength Index to the chart: in the top toolbar, select “Insert”, “Indicators”, “Oscillators”, and then “Relative Strength Index”.
  • The shorter the Period of time used for the calculation, the more volatile the RSI will be. 
  • The RSI has a default of 14, which is the value devised by Wilder when originally calculating RSI. 
  • The main purpose of the RSI is to measure the market’s strengths and weaknesses. An RSI above 70, indicates an overbought bull market. 
  • On the other hand an RSI  below 30 indicates an oversold bear market. 

MACD

  • MACD which stands for Moving Average Convergence / Divergence, is a technical analysis indicator created by Gerald Appel in the 1960s.
  • There are three common methods used to interpret the MACD:
  • Crossovers
  • Divergence
  • Dramatic Rise

To add MACD to the chart: in the top toolbar, select “Insert”, “Indicators”, “Oscillators”, and then “MACD”. 

  • The lower graph presents the MACD line in blue and the signal line in red. 

MACD shows the difference between a fast and slow exponential moving average (EMA) of closing prices.

  • When the MACD falls below the signal line, it is a bearish signal, which indicates that it may be time to sell. 
  • Conversely, when the MACD rises above the signal line, the indicator gives a bullish signal, which suggests that the price of the asset is likely to experience upward momentum.  
  • A crossing of the MACD line up through zero is interpreted as bullish, or down through zero as bearish. 
  • When the security price diverges from the MACD,  it signals the end of the current trend. 
  • When the MACD rises dramatically – that is, the shorter moving average pulls away from the longer-term moving average – it is a signal that the security is overbought and will soon return to normal levels. 

There’s another very Important Forex Trading system called Elliot Waves developed by Ralph Nelson Elliot.