Forex technical indicators pdf file

Finally, the last three rows are displaying ending balance, last trading date and paid commission to broker. MetaTrader as Forex trading online software that is used In this study following assumptions are formulated to combine extensively by foreign exchange traders is one of the twenty conditions of traders. Accordingly, each trader was significant tools used in this study. Buying and selling is prevented from any distractors of the results.

The assumptions feasible via this software for traders. Regarding to the fact that since, shorter period generates unreliable results and longer calculations are based on each item as well as great volume of period makes data processing complex and difficult. In addition, TA-Lib program traders. It reduces collected from Meta Trader software were evaluated.

The ordering did not stop during 10 years period of this TABLE I study which show the capital could reach to end of project. The profit resulted from buy orders is more than loss from sell orders and covered it and has extra pips profit. This profit generated by pips loss from sell transactions and pips profit from buy orders.

PROCESS Results and discussion of the study are presented based on In most of years the buy transactions generated profit while applied methodology; that is, data collection, data assessment, sell transactions resulted loss. Then, by interpreting the indicator for the four is loss in four years and one year is neutral.

Afterward, based on the compared to sell signals. However, the last result is positive assumptions, proper trading software has been run to gain and show profit but it could not add money to its capital due to profit or loss of each currency regarding indicator application, the time of generation. It means at the beginning of the study therefore there are four virtual traders. With the employment of MACD for EURUSD in order to Therefore, the loss or profit for beginning of study time area identifying the signals to enter and exit the market, would be bigger compare to end of study period.

Since at the orders include buy orders and sell orders has been first MACD made loss the next generated profit had lower proceeded. MACD indicator during ten years is presented B. It means trading with MACD results loss more than benefit and it caused decreasing capital while the time is passing.

Moreover, the final loss created by buy orders is pips which is resulted from pips profit and pips loss while the final loss created by sell orders is pips which is resulted from pips profit Fig. Finally, there are pips loss created indicator for the years to by sell and buy orders from pips profit and pips loss.

As a result of those transactions pips loss has been According to Table 4 there is no clear relationship between made which included pips profit and pips loss. The pips loss which created by sell transactions Finally the losses which generated by sell and buy orders are included pips profit and pips loss.

While, the so close to each other. The table shows the progress of the pips loss production within ten years. Moreover, it shows this indicator is producing more profitable buy signals compared to sell signals. This pips loss contained pips loss from sell transactions and pips loss from buy transactions. There are sell orders and buy orders generated by MACD interpretations. Table 5 showing the yearly details of buy and sell Fig. It shows MACD produces more profitable buy signals than sell signals.

Arash Habibi Fig. Expert Systems evaluated. To unify the trading condition in order to make the results [3] Cerrato, M. Sarantis, and A. Saunders, An investigation of customer order flow in the foreign exchange market. Journal of International Financial Markets, Institutions and Money, Journal of Economic Dynamics and Control, Hsu, Profitability of technical analysis in financial and commodity futures markets -- A reality check.

Decision still is open. Support Systems, Timmermann, and H. The Journal of receive the buy or sale signal from the indicators Finance, Journal of Financial and Quantitative Analysis, Lakonishok, and B. LeBaron, Simple technical trading rules and the stochastic properties of stock returns. The Journal of Finance, Easley, and M. O'hara, Market statistics and technical analysis: The role of volume.

Weller, and R. Dittmar, Is technical analysis in the foreign exchange market profitable? A genetic programming approach. Jegadeesh, and J. Lakonishok, The profitability of momentum strategies. Financial Analysts Journal, p. Economic Policy Review, Mamaysky, and J. Wang, Foundations of technical analysis: Computational algorithms, statistical inference, and empirical implementation. It also provides a number of trade signals. When the MACD is above zero, the price is in an upward phase.

If the MACD is below zero, it has entered a bearish period. The indicator is composed of two lines: the MACD line and a signal line, which moves slower. When MACD crosses below the signal line, it indicates that the price is falling. When the MACD line crosses above the signal line, the price is rising. Looking at which side of zero the indicator is on aids in determining which signals to follow. For example, if the indicator is above zero, watch for the MACD to cross above the signal line to buy.

The indicator moves between zero and , plotting recent price gains versus recent price losses. The RSI levels therefore help in gauging momentum and trend strength. The most basic use of an RSI is as an overbought and oversold indicator. When RSI moves above 70, the asset is considered overbought and could decline.

When the RSI is below 30, the asset is oversold and could rally. However, making this assumption is dangerous; therefore, some traders wait for the indicator to rise above 70 and then drop below before selling, or drop below 30 and then rise back above before buying.

Divergence is another use of the RSI. When the indicator is moving in a different direction than the price, it shows that the current price trend is weakening and could soon reverse. A third use for the RSI is support and resistance levels. During uptrends, a stock will often hold above the 30 level and frequently reach 70 or above. When a stock is in a downtrend, the RSI will typically hold below 70 and frequently reach 30 or below.

Stochastic Oscillator The stochastic oscillator is an indicator that measures the current price relative to the price range over a number of periods. Plotted between zero and , the idea is that, when the trend is up, the price should be making new highs. In a downtrend, the price tends to make new lows. The stochastic tracks whether this is happening. The stochastic moves up and down relatively quickly as it is rare for the price to make continual highs, keeping the stochastic near , or continual lows, keeping the stochastic near zero.

Therefore, the stochastic is often used as an overbought and oversold indicator. Values above 80 are considered overbought, while levels below 20 are considered oversold. Consider the overall price trend when using overbought and oversold levels. For example, during an uptrend, when the indicator drops below 20 and rises back above it, that is a possible buy signal.

But rallies above 80 are less consequential because we expect to see the indicator to move to 80 and above regularly during an uptrend. During a downtrend, look for the indicator to move above 80 and then drop back below to signal a possible short trade. The 20 level is less significant in a downtrend.

Technical analysis is the reading of market sentiment via the use of graph patterns and signals. Various empirical studies have pointed to its effectiveness, but the range of success is varied and its accuracy remains undecided. It is best to use a suite of technical tools and indicators in tandem with other techniques like fundamental analysis to improve reliability.

The relative strength index RSI is among the most popular technical indicators for identifying overbought or oversold stocks. The RSI is bound between 0 and Traditionally, a reading above 70 indicates overbought ad below 30 oversold. There are several dozen technical analysis tools, including a range of indicators and chart patterns. Market technicians are always creating new tools and refining old ones.

The Bottom Line The goal of every short-term trader is to determine the direction of a given asset's momentum and to attempt to profit from it. There have been hundreds of technical indicators and oscillators developed for this specific purpose, and this article has provided a handful that you can start trying out.

Use the indicators to develop new strategies or consider incorporating them into your current strategies. To determine which ones to use, try them out in a demo account. Pick the ones you like the most, and leave the rest. This compensation may impact how and where listings appear.

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The lines are said to be in Convergence. Volumes slowly reduce as the price nears the point of the triangle and then on breakout surge considerably. Below are examples of triangles : As Traders we are looking for this breakout and would either buy or sell according to the direction of the breakout. Please remember that false are common with this type of pattern. Right Angled Triangles - Are similar to symmetrical triangle but instead one of the lines drawn will either have a flat top or flat bottom and is drawn near perfectly horizontal.

These triangles are probably more accurate than all others and may also indicate which way the price could break. Again extreme caution is needed when using triangles as they DO generate false signals. Flags Pennants Wedges Flags, pennants and wedges occur on both up and down trends and indicate the market is reassessing the share price or more simply taking a breather.

They are more often than not formed at the halfway stage of a trend. They are drawn onto charts by drawing both support and resistance lines simultaneously. Once drawn they should take on the appearance as their names imply. An up trend continues Up. Below are some examples : If holding a stock and one of these patterns forms on the chart it is a signal for caution and a breach of either the support or resistance should be acted upon As you can see Wedges and Pennants are very similar in appearance but in essence as Traders we are only interested in which way they will break as opposed to what to call them.

It is at the Traders discretion whether to act on any of these signals. It is my recommendation that diligent monitoring should be applied if you are holding a stock that exhibits ANY of these patterns mentioned. All of these have their strengths and weaknesses and which style you choose will be a matter of personal preference. I personally elect to use three of the four types with point and figure the one I never use. The line chart is the one most of us would have seen many times before and is usually plotted using closing price data.

This chart is good for visualizing the overall trend of a stock and on some charting programs it will allow you to see more data over a longer time span. It's use is limited as it is basically what I call a one dimensional chart as it uses only one form of data. Good for glancing, but not for analyzing.

TOP Bar charts are probably the most widely used by traders and not only give us the closing price but also the high, low and opening prices. As traders we need to know as much as possible about a stock and its movements and these bars are the perfect tool for the job. With a single glance at one of these bars we can get a feel for how investors traded this stock for the day and their general sentiment towards it.

Small bars or bodies as they are Technically called are a sign the market maybe consolidating its position or thinking about its nest move. Long bodies could indicate the market is again on the move and looking to test new levels. Some charting packages will only show the close on the bar, many traders elect to use this style with great success. Some say the opening price does not give a true indication of market sentiment and choose to ignore it.

There is a marked difference when drawing trend lines on a line chart compared to a bar chart. With a bar chart you get the entire trading range and a trend line can be drawn using these ranges as opposed to only using closing price data on a line chart. To make this more clear please refer to diagrams opposite. These two charts are identical except one is a line chart and one is a bar.

The trend lines drawn in are the same for both charts based on the bar chart only. In the circled areas you can see the clear difference between the two. With a bar chart we are drawing trend line based on trading ranges rather than end of day closing prices. By doing this we are allowing ourselves a better chance of gaining a lower entry price and a higher exit level. We also increase the range in which the stock may trade thus allowing greater profit margins.

TOP Candle stick charting was developed by the Japanese several centuries ago and has undergone a resurgence in popularity in recent times. This form of chart is by far my personal favorite and I usually use it exclusively. Although more complex to understand, once mastered, candle charts can give you the best overall view of market sentiment. In this section I will give you a brief summary of candles but the purchase of a book dedicated to candle charting should be a must for anyone serious about developing their charting skills.

Candles are similar to bar charts in that they show all four data components open , close, high and low but that is where the similarities end. Candle charts use rectangular boxes that join the open and closing prices together, and use vertical thinner lines to define the trading range. The boxes are called the ' Real Body ' and the thin trading range line are called the ' wicks or shadow If the closing price is higher than the opening price the body will be white, if the closing price is lower than the opening price the body will be black.

Opposite is a basic list of common candle stick formations. Market tested higher levels but failed to close any higher than open. Market tested lower levels but failed to close lower than open. Also known as a ' Hammer ". The appearance of a hammer at the top of a trend could suggest lower prices may follow.

Bearish sign. Also known as Hammer. The appearance of a hammer at the bottom of a trend could suggest higher prices may follow. Bullish sign. Bullish at bottom. Bearish at top. Please note that Hammers are also referred to as ' umbrella lines ". They represent small trading ranges and are important in some candle chart patterns. Again where they occur is of the up most importance. Opposite are 3 examples of Hammers. The bottom two are bullish while the top one is Bearish.

The appearance of Dark clouds is not a good sign. It is formed with a white real body followed by a Larger black real body that closed lower than the previous days close. As mentioned at the start of this chapter Candle stick charting is so involved that the purchase of a book solely dedicated to this subject should be must for any serious trader.

I have only scratched the surface of this invaluable method of charting in this chapter. Moving Averages have been around for many centuries and helps the trader to try and eliminate some of the volatility that is associated with stock prices. There are three main types of moving averages: Simple, Exponential and Weighted.

This suits my trading style and all examples shown here are based on this. I suggest that you experiment with all 3 on the same stock to see how all three behave just that little bit differently. Moving averages are basically the share price smoothed out over a set time frame. They are calculated by adding all the closing prices together for a set number of days and then dividing this total by that set number of days.

As new data becomes available the earliest entry is replaced with the latest entry thus keeping our 20 day total intact. The longer the time frame the less false signals. As most charting packages automatically construct all three types of moving averages I believe that time is better spent here explaining how to trade using them as opposed to their how they are mathematical made up. This works as both a buy and sell signal and is one of the most widely used methods.

The key to this method is the time frame. The basic rule is the longer the time frame the less false signals. This is fine but with this you also get the longer the time frame the later the buy or sell signal. Day traders and short term speculative traders may elect for shorter time spans than a long term, more cautious trader. Ranges from 9 days to 24 months can be used.

The most common used by traders would be 9, 20, 25, 30, 50, 75, and days. We now how have two indicators giving us signals. Interesting to note that the 50ma gave a sell signal before the support was broken but gave a buy signal after the resistance was broken. It is interesting to note that such a small change can effect the timing of the signals.

This is the preferred method by many traders and the method I personally elect to use. It involves the use two or more moving averages at the same time which are set at different times spans. When the moving averages cross each other, either a buy or sell signal is generated.

When the faster moving average 25ma crosses above a slower moving average 50ma it is classed as a Buy signal. When the faster moving average crosses below the slower moving average it is classed as a Sell signal. Once again the time frames used have a great impact on where the signals are generated on the charts. Below are all the same stock with a moving average added each time. It is of PBL daily. Make sure you use the same stock for the tests. This method is by far the best way to truly understand moving averages and will allow you develop your own set of trading criteria.

Some traders like to use up to 6 moving averages at a time believing that when all the averages converge to the same spot on the chart a change of trend is very near. This method definitely its merits as the lines converging is sometimes the first indictor to get the attention of the Technical Trader and is a sign that this stock should be placed in the ' watch closely basket '. In summary I would like to advise that the best way to gain a real understanding of moving averages is to run tests.

Please keep in mind that once you have tested the ma's on the one stock and you are comfortable with the settings you have chosen, try testing those settings on at least 50 others stocks to see if they still show the same results. The more time spent testing, the more comfortable you will be when making your trading decisions.

In closing I have included a chart opposite with the settings I use when trading. It is of PBL and is a current chart. I have included all signals that are relevant that have been discussed so far. This works for me and may not be suitable for you, PLUS it will not aid in your own development as a trader, please take the time to run the tests, you will be more than rewarded in the end.

They are part of the Momentum indicator family. It is constructed by measuring the convergence and the divergence of two moving averages. The most widely used time frame is a 12,26,9 macd. The 12 and 26 ma's are divided and plotted as the Red line, the 9 ma is plotted as the blue line. A horizontal line is drawn and is used as the point when these two moving averages are at the exact same level. The 12,26 macd crosses the 9 ma This is called the Equilibrium Line. A dotted line is usually added which represents the zero line.

Bars are used as a visual aid in determining the position of the faster moving average in relevance to the slower moving average. Bars pointing above the Equilibrium Line indicate that the Macd average is above the 9 day moving average. Bars pointing below the Equilibrium Line indicate that the Macd average is below the 9 day moving average.

A buy signal is given when the bars first point above the equilibrium line. A sell signal is given when the bars first point down below the equilibrium line. The chart opposite shows two buy and two sell signals. It is interesting to note where the signals given correspond to the price action on the main chart.

The first two signals are pretty much spot on, but after the second sell signal was given, the price moved higher before moving down again. On the second buy signal the price drifted lower before moving up again. The second sell signal was too low and the second buy signal was too high. This is important because traders who set tight stop losses on their trades run the risk of getting out of their trade only to watch the stock rebound.

This is why it is so important not to rely on only one technical indicator, it is the culmination of many indicators that are positive or negative at the same time. On this next chart we have five signals being generated by the Macd. The Red circle indicates 4 sell signals occurring within 2 weeks of each other. This is a what I mean by more than one indicator turning negative at same time, it does not have to happen on the same day.

The Pink circle indicates that although the price did drop on both sell signals, the support line remained intact. The price only crossed the 20ma on the first sell signal but remained above on the second. The 20 ma remained above the 50ma on both sell signals. Convergence means two separate objects heading towards the same meeting point. Divergence means two separate objects moving away from a meeting point.

For the use in trading we are interested in the convergence or divergence of the price chart and the indicator that we have selected, in this case Macd. What we are looking for is lower lows on the price chart and higher lows on the Macd. These investors are taking into account everything from potential upcoming announcements, balance sheets, and what the potential future value could be. Technical analysis, on the other hand, is not taking into account these pieces of information.

A trader using technical analysis will be using their charts and other statistics to make their trades. The information the technical analysis trader takes into account includes price trends, indicator information, and a range of different chart patterns that could help them find where the price is moving next. Getting Started in Technical Analysis Getting started with technical analysis trading is very easy.

Whilst it is easy, that does not mean there is not a lot to learn and that you will be constantly be testing and perfecting new methods. The best way to get started is to get a free set of demo trading charts and beginning to practice some simple technical analysis strategies in a no-risk environment. With a demo account, you can practice your technical analysis without risking any real money and start to use more advanced strategies like the ones we go through below.

Mastering Technical Analysis There is a lot to master when it comes to becoming a technical analysis trader. You can choose to use just raw price action, a combination of price action and indicators, or a range of different strategies altogether. No matter what strategy you decide to use, you will need to keep some things in mind that include; You will need to have a solid risk to reward ratio trading strategy.

You will need a strategy that can handle losses and make money overall. You will need a strict rule set that is easy to follow and replicate. You will need to track your trading and constantly improve as the markets change. One of the hardest parts of trading technical analysis is that it can be hard to develop a clear rule set for making your trades.

This is crucial, so you begin to create consistent and repeatable results in your trading. One way you can do this is with a clear trading plan. Another thing to keep in mind with technical analysis is that you will not win all of your trades. The goal is to have a system that can handle losses, but it consistently makes you money at the end of the month.

The Best Technical Analysis Indicators Moving Averages Moving averages are one of the most popular indicators in the world for technical analysis. You can use moving averages for smoothing out the overall price action to find clear trends and dynamic support and resistance.

When you combine multiple moving averages on your chart, you can also find high-quality trade signals. At its simplest, the moving average shows you the overall price for a certain period of time. For example, if using period moving averages, then you will see the average price for the last 14 periods plotted as a line on your chart.

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