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M-oscillator

How to use the RSIHi guys, today I will be explaining how to use the Relative Strength Index (RSI) to your advantage. First of all if you have not already, please follow me. Okay, so the RSI is commonly said to buy when oversold and sell when it is overbought. However, this strategy does not always work, and can result in you predicting what the security will do. First Step: You should first check to see if the RSI is making higher lows, or lower lows. This is important because it can show whether the asset has strong buying pressure or weak buying pressure. I call it buying pressure because the index essentially represents the demand for it. So, why would you short something, when tons of people are buying in? However, the index can work short term, if you are day trading, but does not work as well for swing traders. If you see a rising RSI it is a good sign, and the opposite for a falling. Second Step: This is a step where most people don't do, but I think is very important. The step is to check whether or not the asset has an RSI that is hitting overbought, or hitting oversold. In this example, Gold is hit oversold two times. This proves how weak gold is and why it could have a breakdown. Another thing to check in this step is if it stops falling at the oversold level and does not fall beneath. If this occurs, it is a great sign because it shows that the asset is strong. For Gold, it had done that, and if you had spotted that you could have made 40%! In sum, the second step is to see if the asset is hitting overbought levels (good), or hitting oversold levels (bad). Third Step: The next step is to draw support and resistance levels, look at other indicators, etc. You could even look at fundamental data to support your technical data. Last step: Your last step is to place you limit order, and or stop order. Thanks for viewing guys, and please like and follow. Thanks!
AMEX:GLDEducation
by SmartVest
A 100% profitable strategy on BitcoinHello guys, in the Daily chart of Bitcoin after last candle close, recently something bullish happened, short term 5 Moving average crossed long term 20 Moving average. MACD is also supporting the further upward movement in the daily chart. this is a bullish signal in an uptrend. this is one of my swing trading strategies in Bitcoin market. I'll go long with a low leverage margin, whenever this daily Moving average crossover happens. I'll close the position as soon as the opposite situation happens which is short term 5 daily MA crossing down the long term 20 daily MA. A useful tip to this strategy is to combine it with a oscillator indicator like MACD or STOCHASTIC to prevent the fake outs. For example do not go long if the STOCH is at overbought territory and do not go short if It is at oversold territory. Disclaimer** This strategy doesn't work in a range market condition. Only use it in trendy markets. You can go back in the chart and backtest this strategy, it is pretty great for swing trading. Please like and share this idea if you like it. Thanks for your attention
Education
by TiranTrading
3
How to set the RIGHT Stop loss!Hey hey traders!! Setting the "right" stop loss is a vital skill, yet for many traders... its a random act. This video will help you find stcutrue in setting the right stop loss, a stop loss that has the best chance of not being hit and allowing your trade to workout! For us that comes down to basics: 1. Use the ATR value 2. Enter only via the fibs (definite entry) and by following this process we have achieved great things so far, even increased our win ration by a solid 12% in February (since we added it) If you have questions, feel free to ask! All the best and good luck trading!
Education
by PrimedGroup
TDI Indicator for Entry SignalTDI (Traders Dynamics Index) is a powerful tool that determine the entry signal This indicator consists of 3 important indicators a below RSI (30, 70) Period (20) --> Green MA (50) --> Red Bollinger Bands --> Yellow with Blue band lines How to use the above indicator is as below When the Green cross the Red positively, this is a green signal to buy When the Yellow cross the Red positively, this is a green signal to buy When the Yellow moves above the Red line, the market in up trend. If the Yellow moves below the Red line, the market in down trend Crossing the Yellow line of the lower RSI band from bottom to top mean time to buy, while Crossing the Yellow line of the upper RSI band from top to down mean time to sell Crossing the Yellow line the average RSI line (50) means time to buy When the Green line cross the upper BB means the trend is strongly going up. If the Green line cross the lower BB line means the trend is strongly going down Easily can determine the RSI Divergence (opposite top or bottoms) with the stock. If opposite bottoms, time to buy and if opposite top, time to sell Best buy signal is when the Green line cross the Red line positively after the existing of RSI Divergence at the essential level
NASDAQ:AAPLEducation
by hamzaabusitta
Price Oscillator StrategyThe 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.
Education
by apadanaforex
2
Why does technical analysis work?Introduction If you're here on TradingView, it's probably because you believe that charts and technical analysis can give you an edge in the trading of currencies, metals, cryptocurrencies, and stocks. Granted, sometimes technical analysis doesn't work, but it works often enough to keep hundreds thousands of traders coming back here day after day. The larger question is why . Four Reasons Technical Analysis (Sometimes) Works To a fundamental trader like me, technical analysis can sometimes seem like voodoo. Why should lines on a chart tell me anything useful about the total value of future dividends and cash flow for a stock? I admit I especially roll my eyes at Fibonacci ratios. Personally, I feel they're about as scientific as using divination or horoscopes to buy and sell stocks. But then again, if a lot of people believed that their horoscopes could help them win at stocks, you'd be a fool to ignore them. In fact, you could then gain a large edge by using astronomical data to forecast future horoscopes, getting tomorrow's horoscopes today. Which brings us to the first and most basic reason that technical analysis works: It works because people believe it works. If a lot of traders believe that Fibonacci ratios apply to stock markets, then a lot of traders will set their buy and sell orders at significant Fibonacci retracement levels. And then there's another whole contingent of traders who don't believe in Fibonacci numbers, but they know that lots of other people do, so they set their buy and sell orders there anyway. It becomes a self-fulfilling prophecy. Active trading is largely about predicting what other traders will do, and technical analysis is their playbook. And predicting other people's behavior brings us to the second reason that technical analysis works: It works because human psychology follows patterns. For instance, trend-following strategies might work, in part, because of "bandwagoning" and the "Fear of Missing Out" (FOMO). If traders see their friends getting rich off of Tesla or Bitcoin, they will fear being left behind. Speculative enthusiasm cascades through social networks until it has saturated them and everyone is leveraged long to the gills. Only when there's no one left to convert does the momentum finally stall. (Wall Street traders often quip that when their barber starts giving them stock tips, the market is saturated and it's time to sell.) As for support and resistance levels, they work partly because of regret. People remember the price they paid, or the price they wish they had paid, and that memory then shapes their behavior. For instance, if traders remember that they missed several opportunities in 2020 to buy an SPY dip to $323, then they are more likely to buy that level in the event of a future dip. What about oscillators? Well, perhaps humans distrust anything that moves too fast. Even if I'm romantically interested in someone, I'll still pull back if she proposes marriage on the first date. Plus, humans are loss-averse, so at some point we like to lock in gains. It works because it takes time for the market to fully price in news . The advent of algorithmic trading has made it hard for traders to gain an edge by reacting to news events. Stock prices move fast the moment a headline hits, so by the time you see it, you may already be too late. That said, algorithms are pretty good at picking the direction a news event should move a stock, but not necessarily the magnitude . The initial fast news response is often followed by a slow news response as the information spreads through the human population and its implications are assessed and priced by human traders. Trend-following strategies may be able to pick up on these slower processes of repricing in light of news. It works because today's news begets tomorrow's news . This is probably the most underappreciated of all the reasons that technical analysis works. Good news often leads to more good news. If a company posts a large positive earnings surprise, then there's also a good chance that it will get a dividend raise, analyst upgrades, or upward revisions of future estimates in the days or weeks to come. Likewise, bad news often leads to more bad news. For instance, if the company posts a negative earnings surprise, then there's an increased chance that it will need to take on debt or issue shares to sustain operations in the future. The same principle applies to industry-wide or even economy-wide news. If, for instance, the state California bans a company's product, then there's an increased chance that other states will follow suit. And if the Federal Reserve cuts or raises rates, then the next rate change is likely to be in the same direction, because Fed policy goes in cycles. The news-begets-news principle means that trend-following strategies might work, in part, because they are detecting the current direction of the news cascade. Three Reasons Technical Analysis Sometimes Doesn't Work I should emphasize, however, that technical analysis doesn't always work! Here are a few reasons it might not work sometimes: Traders try to anticipate signals . The larger the number of people who know about a trading technique, the less well it works. Take supports and resistances, for instance. If I expect the rest of the market to buy at a particular Fibonacci or moving average level, then I might place my own buy order just above that level in an attempt to front-run everyone else's move. If enough people do this, then the price may not ever actually reach that level. Whales create fake signals in order to harvest profits from technical traders. For instance, if a whale knows that a lot of people have stop loss orders set at a particular support level, then the whale might short a stock to that level in order to trigger all those sell orders, causing a price collapse and an opportunity for the whale to buy shares at a cheaper price. Timing risk. Sometimes you can correctly identify the direction of the trend but still have bad timing. For instance, we're in an interest rate-cutting cycle by the Federal Reserve, which has caused a strong upward trend. But the reality is that we're probably near the end of that cycle. If the Federal Reserve suddenly changed its tune tomorrow and started forecasting rate hikes next year, it would take some time for that information to be fully reflected in slow-moving technical signals, and you could lose a lot of money if you sell only after those signals change. It's perhaps best, then, to have a good understanding of what's driving a technical trend so that you can get out early if you see the underlying drivers change.
Editors' picks
AMEX:SPYEducation
by ChristopherCarrollSmith
77
How to Spot Blow-off Tops - ES1!Here are 3 blow-off tops and 1 failed attempt which all occurred in the last 7 months. Successful completions are marked in solid black. The failed attempt is shown in dotted black. On all 4 attempts, the price accelerated upwards to different degrees. Each target can be roughly measured based on the price move. Notice how the failed blow-off begins closer to a price bottom than the successful ones did. Volume was either steadily increasing or declining during successful blow-offs, compared to the unsuccessful attempt when volume was not clearly trending. ROC (momentum) was increasing with all 4 attempts. The blow-offs were successful when momentum was at 0 or positive at the start of each blow-off. Disclaimer: This is my opinion. This is not advice. Trading involves risk.
CME_MINI:ES1!Education
by ValkyrieBlue
Advanced Tradingview CalculationsThis is a tutorial on how to get the most out of Tradingview by using advanced price calculations. The focus will be on crypto, and more specifically bitcoin. Nevertheless these tricks can be applied to other assets as well. Let's say you want to look at the current bitcoin price. The problem is that there are a lot of different exchanges and they all have different prices. Sure they're all around the same price level, but there's still a difference. So it would be quite useful if we could just look at an average price of all the most relevant markets. Here's how you can make that happen... Average price calculation First you click on the ticker on the top left, which will open the ticker tab. Open the parenthesis by typing: "(". Next you look for the markets you're interested in. In the example on the chart (bottom left line chart) I made an average for Coinbase, Bitstamp, Bitfinex and Binance. So you start typing "BTCUSD" and then with the up/down arrow keys on your keyboard you can select the exchanges you want. Each time you select an exchange you type: "+". Then type "BTCUSD" again and select another exchange. The binance pair is versus USDT instead of USD. So to easily find that market type "BTCUSDT". Once you're done selecting markets you close the parenthesis and divide the whole thing by the amount of markets you've chosen. In my example I took 4 markets so I divided it by 4. Finally press enter. Now you have a price chart that's an average of all the markets you selected. Converted currency price chart On the top left you see a red line chart. This is the Bitflyer spot market. There's an issue though, it's a Japanese Yen pair. I would like to be able to compare it to USD markets. So let's convert it and make a price chart with USD values. Just like last time, open the ticker tab. Look for "BTCJPY" and select the Bitflyer market. Now type "*". We're going to multiply it with a forex pair. Type "JPYUSD" and select a forex pair. When that's done you press enter and your price chart will be in USD instead of JPY! Making ratio's There's so much possible with these types of calculations, but I'll share one more trick to give you some inspiration. Let's compare certain markets with each other and create ratios. To the chart on the right you can see in green a ratio of some of the top USD markets in relation to the top USDT markets. This way we can see which markets have a premium or a discount. It always starts the same way: open the ticker tab. First open the parenthesis: "(". Just like with the average price calculation you're going to select a few USD markets of your liking. I used Coinbase, Bitstamp and Bitfinex for this example. Don't forget to type "+" in between each market. Then close the parenthesis and divide the selected USD markets by 3 (because I'm using 3 markets here). Now type "-" and open the parenthesis again. We're going to add a few USDT markets just like we did for USD. I used Binance, Huobi and Poloniex. Again close the parenthesis and divide by 3. And finally press enter of course. The price chart will be replaced by the ratio and it'll look kind of messy. Let's make it look like a nice indicator. You can do this by clicking on the "compare" button and doing the entire calculation there. It'll add a big fat orange line on top of your price chart. By clicking on the three dots you can click on "new pane below". Then go to the style settings and change it to your liking. I made it green and decided to use a line chart with markers. Looks pretty nice. Interesting ratio too... The blue ratio on the top of the chart is a simple Coinbase/Bitfinex comparison. Click the "compare" button again and type the following formula: COINBASE:BTCUSD-BITFINEX:BTCUSD This way you can see which exchange is more bullish/bearish. That's all I have for you today. Hopefully you found it interesting.
Editors' picks
COINBASE:BTCUSDEducation
by UnknownUnicorn2188849
23
Divergence in BTCUSDPrice while approaches its resistance level, is forming a divergence with MACD. Price is creating higher highs and MACD is forming lower highs. That means BTCUSD is losing its momentum. On the other hand there are confluence of sell orders in that resistance level. Therefore it probably can't break that level and goes down. But that's not enough for us. we need to catch a strong down move. What if it didn't breaks that level, but create a trading range around that resistance level? We do NOT want that. So we need evidence that shows us the price had reverse its move and is forming a downtrend. That evidence is our TRIGGER. The trigger could be break of a trend line, a candlestick pattern, or anything that shows we're entering a downtrend move. I used breakout of a trend line here. And for take profit, I used an 20 EMA as a trailing stop loss. Thanks for reading. Write your opinion in the comments.
BITSTAMP:BTCUSDEducation
by Trading-with-Ali
2
Moving Averages Crossover Divergence Masterclass Part 2Moving Averages Crossover Divergence Masterclass Part 2 In the previous masterclass, we saw two different ways of using MACD as an indicator. In Part 2, we'll look out for two other ways to use MACD along with other indicators. The two previous ways were: 1. Centreline Crossover 2. Signal-line Crossover Moving forward the two more ways are: 3. MACD + Awesome Oscillator: Awesome Oscillator - Bill William's Awesome Oscillator It is a momentum oscillator Calculated by subtracting 34-period SMA from 5-period SMA plotted through bar-midpoint (H+L/2) Clearly shows what is happening to the market driving force Bullish Scenario- Awesome Oscillator is greater than 0; If AO is moving up bullish trend is strengthening while if AO is moving down bullish trend is weakening Bearish Scenario- Awesome Oscillator is less than 0; If AO is moving down bearish trend is strengthening while if AO is moving up bearish trend is weakening Awesome Oscillator defined the predominant trend while MACD Signal line crossover(as discussed in Masterclass Part 1) is used to generate the trade signal. Thus BUY when AO >0 and MACD crosses up the signal line, while SELL when AO <0 and MACD crosses below the signal line To prevent fake signals, a stop loss can be set-up at the low for the entry candle. 4. MACD + Stochastic: Stochastic Indicator - Momentum Indicator Compares a particular closing price to a range of its prices over a certain period of time Just like MACD, it has faster and slower moving metrics Slow Stochastic Indicator (%K) = (C - L14)/(H14 - L14)*100 Fast Stochastic Indicator (%D) = 3 - period moving average of %K Bullish Scenario- Stochastic Indicator < 20 i.e. oversold condition; market trading upward, prices will close near the high Bearish Scenario- Stochastic Indicator > 80 i.e. overbought condition; market trading downward, prices will close near the low MACD Centerline Crossover(as discussed in Masterclass Part 1) defines the predominant trend while the Stochastic Indicator (%K) is used to generate the trade signal. Thus BUY when MACD > 0 and Stochastic Oscillator < 20, while SELL when MACD <0 and Stochastic Oscillator >80 Trade signals can also be generated using crossovers of %K and %D for the Stochastic Oscillator. A lot more interesting things can be done using MACD, but we'll move to the next indicator in our next Masterclass. STAY TUNED ---------------------------------------------------------------------------------------- Your questions and comments are most welcome. If you find the post useful, please like, share, and follow to make sure that you get more information once I publish it. - Mudrex
Education
by Mudrex
6
Trading strategy using the DeMarker indicatorThe DeMarker indicator, also known as DeM, is a technical analysis tool that compares the most recent maximum and minimum prices to the previous period's equivalent price to measure the demand of the underlying asset. From this comparison, it aims to assess the directional bias of the market. It is a member of the oscillator family of technical indicators and based on principles promoted by technical analyst Thomas DeMark. The DeMarker indicator helps traders determine when to enter a market, or when to buy or sell an asset, to capitalize on probable imminent price trends. It is considered a “leading” indicator because its signals forecast an imminent change in price trend. This indicator is often used in combination with other signals and is generally used to determine price exhaustion, identify market tops and bottoms and assess risk levels. Although the DeMarker indicator was originally created with daily price bars in mind, it can be applied to any time frame, since it is based on relative price data. Unlike the Relative Strength Index (RSI), which is perhaps the best-known oscillator, the DeMarker indicator focuses on intra-period highs and lows rather than closing levels. One of its main benefits is that, like the RSI, it is less prone to distortions like those seen in indicators like the Rate of Change (ROC), in which erratic price movements at the start of the analysis window can cause sudden shifts in the momentum line, even if the current price has barely changed. How does the indicator itself work? When the curve line moves below 0.7 from top to bottom it means that we are in a overbought zone and we have a potential sell scenario. When the curve line moves trough the minimum 0.3 level from bottom to top it means we are in oversold zone and we may have a potential buy opportunity. But! There is a catch. It is not recommended to short or buy aggressively when the curve crosses both of the levels for the first time. Usually when the curve crosses from the top the 0.3 level, indeed, it means we are heading to oversold zone, but there is going to be additional sell impulse. That's why the curve can have readings above 0.7 or below 0.3. I personally use DeM on the daily chart and this is my only oscillator. Usually Demarker indicators are payed and are very expensive. The free versions of the indicator which are massively distributed are not truly mathematically perfect, but they do fine job. Here with USD/CAD example I have placed my DeM on the daily chart for the pair. I will highlight the period from September till now with the latest signals.
Education
by DailyChartist
3
Relative Strength Index Masterclass Part 2Relative Strenght Index Part 2 In the previous masterclass, we saw the two different ways of using the Relative Strength Index as an indicator. In Part 2, we'll look out for two other ways to use RSI along with other indicators. The two previous ways were: 1. Oversold-Overbought Region 2. 50-Level RSI Midline Moving forward the two more ways are: 3. 2-Period RSI + Simple Moving Average (SMA) 2-Period RSI: 2-period RSI is the shortest and most volatile RSI signal which can be used A 1-period RSI cannot be used as it will merely give just two values, either 0 or 100 as a 1-period RSI will consider values from just the last 1 candlestick 2-period RSI will generate trade signals at the local highs and lows of the predominant trend and will lead to a reversal in the market price Therefore, 2-period RSI Strategy is also known as Mean-Reversion Trading Strategy The 2-Period RSI will generate a signal using a Threshold of 95-5, with price above 95 in the overbought region while below 5 in the oversold region 200-Simple Moving Average: 200-SMA is a Simple Moving Average of the past 200-candlestick When price moves above the 200-SMA, the market is moving above average and indicate a bullish trend When price moves below the 200-SMA, the market is moving below average and indicate a bearish trend Thereby, 200-SMA giving the predominant trend and 2-Period RSI generating trade signals. Thus Buy when the price is above 200-SMA and RSI<5 while, sell when the price is below 200-SMA and RSI>95. 4. RSI + MACD RSI: The RSI will generate a signal once a predominant trend is generated using MACD The threshold for RSI will be 70-30, with price above 70 in the overbought region while below in the oversold region The lookback period for RSI is taken as default (14) MACD: MACD is a trend-following momentum indicator MACD is calculated by subtracting 26-period EMA from 12-period EMA, resulting in MACD line A nine-day EMA of MACD results in Signal line When the signal line is above the MACD line indicates a bullish signal as small period EMA is greater than the long period When the signal line is below the MACD line indicates a bearish signal as small period EMA is lesser than the long period Thereby, MACD giving the predominant trend and RSI generating trade signals. Thus Buy when the Signal line is above MACD and RSI<30 while, sell when the signal line is below MACD and RSI>70. A lot more interesting things can be done using RSI, but we'll move to the next indicator in our next Masterclass. STAY TUNED ---------------------------------------------------------------------------------------- Your questions and comments are most welcome. If you find the post useful, please like, share, and follow to make sure that you get more information once I publish it. - Mudrex
COINBASE:BTCUSDEducation
by Mudrex
5
A filtered MACD strategy on the 1 hour chartA 1 hour chart strategy. Presented to you. When: - The price is above the 4 hours 100-EMA - The MACD & Signal(5) lines are below zero - The MACD (blue) crosses above the Signal (red) line We buy When: - The price is below the 4 hours 100-EMA - The MACD & Signal(5) lines are above zero - The MACD (blue) crosses below the Signal (red) line We sell To keep in mind: Specific to EURUSD (but it's almost the same thing with most major pairs that all have the same average true ranges): Stops are supposed to range from 15 to 40 points, with targets 30 to 80. The daily ATR ranging from 50 to 150 points. Anything below 30 pts target is starting to be too small and above 80 points it is too big we're not thinking intraday here. A quick backtest on EURUSD And that's already 21 trades for the EURUSD with a winrate of 52.4%, plus the title 5 setups that were a bit cherry picked I won't lie. I didn't even cherry pick them I got lucky on my first try (I thought I was continuing my backtest in July 2017 didn't realize it was on 2020) but I wouldn't expect an 80% winrate in general. EURUSD: 11 Wins. 10 Loss. 1:2 risk to reward. 52.4% winrate. Next is GBPUSD And here is another batch of 21 which is a good sample size. GBPUSD: 12 Wins. 9 Loss. 1:2 risk to reward. 57.1% winrate. It is important to zoom out (I know no one does it). A look at the daily chart. Just going to check quickly because it is getting boring. Should have taken the 5 minutes to make a script to filter this but I'm in too deep to go back now. And I just noticed I have been backtesting GBPUSD with the 200 EMA. Well nevermind, it is the same thing. Result wouldn't change much. And here I made the whole box. 12 Wins 19 Loss. Still a winrate of 38.7%. I can go for worse ones How about the recent EURUSD price action? 37.5% winrate If you think it gets immediatly better, here are the next ones: The findings: - When the conditions are good it won 55% of the time - When the conditions are average it won 38% of the time - When the conditions are bad (range plenty of false trends) it won 10% of the time With a RR of 2 the breakeven winrate is 33.33% But we have to include spreads. This strategy goes a bit further than "day trading" so stops and targets are quite wide. The typical stop/target is something like 25/50 (for EURUSD), the spread is 1 point. Other pairs of course are a bit more expensive. 50/25 = 2 49/26 = 1.88 breakeven winrate = 34.72% (10+38+55)/3 = 34.33% 🤔 ... Interesting coincidence... If the risk reward on average is of 1.88 and the winrate is 38% then the profit factor is 38*1.88/62 = 1.15 which is not very high but if the strategy takes a whole lot of small trades it is ok. The few cases I looked at prove nothing, this might have a blind winrate of 50%, 20%, or 33.33% (most likely). I don't know how to backtest with tools maybe I should learn so I can clic and let it execute for me... Stay tuned for a tutorial! :D You would have to execute this strategy when you think the price will trend. But not a very strong trend or there will never be a signal. An average or weak one, or something that contains trends, like what I have shown and backtested 3 times. So this means you'd still have to make a directional bet. There is no escape. Sorry no magic trick to avoid it. A directional bet on the price or on the volatility itself, the trends... Once you make your directional bet, what is the advantage of day trading with a macd strategy over just taking the trade and holding? The power of compounding. Here someone made a backtest on the daily chart for the S&P500, the strategy took 500 trades with a profit factor of 1.2 and returned 95%! Without counting any spread/commissions. And just holding the S&P during the same period returned 151%. Amazing. Then what is it that gets compounded with technical day trading? Easy. Losses & costs. Also causes to miss out when right about the direction. Lots of inconvenients, and no advantages. Sounds amazing. The power of COMPOUNDING™. Ye I'm not sold. There might be a tiny edge but it's just so worthless. Picking pennies... Got to imagine the amount of desperation to make any profit anyone would have to try that. And they'd probably end up losing. Why did I waste my time?
Education
by MrRenev
5
My favorite indicators update [part 2]An update on my use of indicators. Going to throw my thoughts out my thought process if you're interested. In my last "My favorite indicators" idea I placed the moving averages in the ones I do not use, they were top of the list thought the first ones that come to mind and make most sense. They are no substitute for a complete analysis but you need a starting point and when you are scanning 40 different charts you want to make it simple. I've been turning the trend indicators on and off (and probably will continue doing that). Right now using EMAS again. Not too many I don't want the chart to get all nasty, no full GMMA that hide the price. Just 2 fast moving EMAS. Fast moving but not dumb either. What I get out of those is I see the daily trend because they are daily ones, I don't need to have D1 & H4 side by side. "My eyes are trained to see the trend" BS I keep doing random stupid things buying too early... I've not really been trend following for long, I used to with crypto during the bubble because it was too easy but otherwise I had an edge doing something else, I must be 1 in a million doing this xd Most retail fight the trend and lose, professionals follow it I fight vertical moves and idk worked out so far. Helps filter baddies, helps spot what is going on faster (I have a watchlist of 40 charts I can't every day full analyse them all I need to filter first), they look great I love the blue and red. Goes faster to have the daily trend on the 4 hour chart, don't have to look at 2 charts side by side and zoom in and out and always have to reajust the screen etc. But honestly the main point is probably I like how they look. The red & blue. Makes a good looking chart I think. Makes it look all technical and professional and I just love the colors. Isn't that the most important part? Having fun and wanting to look at the charts. I kept losing this month. A good 17 losses in a row even with 1 potential winner I missed out on.... All those losses really ate up my other strategies profit. Pissed. Had +5 and +7 on a strat /3 and +5 -17 on my trend following strat for a grand total of 0, and then a few breakeven and +1 -1 zzzz Tried to make it with EURUSD had a wide trailing stop but it really bounced and all I got was 1R... Of course. And I have 4 positions now of course it's all slow 2/4 are more long term and this usually doesn't even move far from the entry where I can count it as a winner for a good month. And the other 2... We will see. Not counting the positions > 3 month horizon. I doubt 90% would survive these situations, well I did have winners that absorbed my losses so it's not that bad actually. And I choose to machine gun every setup with my new strategy (started as revenge trading at the start of the year and since I kept winning I looked into in again took a few good setups in the summer while backtesting and working on the strategy and then september I apply my rules and go for it for real and keep losing 🙃) Normally I take, with the other 2 strategies, like 18 setups a year each. So 3/month total. And with this trend following I should probably take another 3/month not over 20... Constant re-evaluation etc. So... I spent all of July to September backtesting improving and thinking this simple pullback trend following strategy. I starting using it in the first 3 months of 2020, and had alot of knowledge from the start I did not start from zero. I did not spend my whole days on it I looked at plenty of other things. I would vaguely estimate I spent 8 hours a day on it for 3 months that's a total of 720 hours. And it's a rather simple strategy. Just trying to get a decent strategy with a few setups here and there, that works for me. Meanwhile complete noobs that aren't especially smart expect getting consistently profitable in 3 months with 1 hour a day on the side. I tried looking at the oscillators again, see if they filter things I do not want. This joke: Versus: On top of this, using arbitrary numbers, in a month there is 30*16 = 480 hours, and 16 hours a day, say on the average day I: - Spend 4 hours going out to not go crazy (wups failed my objective here) as well as eating and sometimes playing - Spend 4 hours reading articles watching videos that I count as grinding my skillz & knowledge and posting on tradingview - Spend 4 hours backtesting improving estimating probas and doing boring things like taxes - Spend 4 hours doing research on potential setups AND managing trades (2 hours for the 30/month + 2 hours for the 3-4 I actually end up taking) That's it. There are no more hours on the day as you see. They get eaten up fast. If I get overwhelmed with these trash RSI signals... how many hours will that take? Should I spend less time doing my DD on other setups and miss out the good ones or take bad ones? Should I eat up hours in the backtesting (even if I'm happy with my strategies I want to adapt to changing conditions). Then I can spend less time doing loose research (articles & videos) or the "leisure" and burn out and also potentially miss some important info, some piece of news... Not going to post the whole RSI analysis (I can't even if I wanted it's all over the place I have stats & screenshots spread everywhere it's really disgusting). But I am 100% on this. It is not for me. Or anyone else. Sucks beyond belief. I don't know maybe there is a microscopic edge in using it oh cool. How well will that hold up after 20 loss in a row? Continue using it? Consider it doesn't work anymore? Flip it? So that was an equity curve of some "many setups" strategy, maybe something with the RSI or macd lines firing mediocre signals over and over. They really look like this. Well they would if anyone sticked to it. Now an equity curve with less setups but being more picky with alot of research time spent on studying the currencies or other instrument (enough to avoid really bad setups and to be more precise and to manage it better at least). And then of course when you reach the scholarly peak and go for diversified strategies (it isn't possible in my experience to have that much diversification but a little is possible. Basically if you tried diversifying too much you'd end up repeating the same strategies but with different conditions or taking positions too large by trying to diversify via assets because assets are correlated you can't have 10 different strategies but you can have a couple by having different timeframes different markets and some reversal if that's possible careful most fail and some trend following if quant then also arbitrage and so on holding fixed income too can be added but not only the markets aren't offering infinite uncorrelated possibilities but also each strat that you add is hundreds or thousands of hours to design and then alot of time and attention to manage and execute) But with 2-3 strat that equity curve would look something like this... Can strategies be completely uncorrelated thought? They're likely to all use some support and resistance analysis. It's sort of the same for forex stocks etc. Liquidity area. There aren't 30 ways to do this. What if S&R changes, what if they don't matter for whatever reason? Then it all falls down. Just trying to use a simple example to show it can't all be uncorrelated. Even if you held bonds as an additional profit stream, their yield will change and it will impact the trends etc... Oh and let's be real, the market does not provide an endless number of setups. I never heard of anyone that made money in choppy markets (if they do they are on a higher TF where it is not choppy). Even my reversal strategy is for trending markets. Some people say they trade inside ranges well even if they do and aren't just lucky lying or delusional there are very few clean ranges so here. I do not remember ever hearing Goldman Sachs or Bank Of America or JP Morgan Chase going "ok we think the kiwie is going to stay in a range so we will buy it at the lows because it is oversold". It's either "Based on the research presented, the trend, the fundamentals, the market conditions/past data, here are our 3/6/12 months targets" or "we think the euro will continue going lower" or "we think the usd rally is not over so we are still long" or "we see a ranging market we have no position". You really got to bring the retail swing traders to come up with this kind of stupid crap 😂 Here is a quote from an investment banker active on social networks: "Its 80% fundamental, 20% Technical. Professional Traders don't day trade often so day trading is a small part of a much larger overall approach. There's no such thing as swing trading in professional trading circles. That was something made up by brokers for the retail market. To be honest I had never heard of it until I started teaching retail traders and someone told me what it was. I laughed out loud when they told me! No Joke." I don't know all the kinds of weird messed up strategies the various funds have but as far as I know bankers look for momentum. How many opportunities there are day trading if there are some is irrelevant just look at the daily chart and how many are there matter for this thought process, because if day trading did better than real trading I think we'd f**ing know by now and every hedge & mutual fund would be looking for day traders. So ye, not that many opportunities realistically per strategy (day trading can be an additional strategy but there are only 16 hours in a day at some point I really don't think more than a couple is possible and 2-3 max probably with day trading), even over a good dozen instruments (like a dozen fx pairs). Even Jérôme Kerviel that lost 5 billion looks for big movers, big volatility :D Last thought: Howie Hubler made a successful short bet against the trend (or bubble rather) in subprime mortgages in the U.S (the big short) except he got the money from selling insurance on AAA morgages (the rating companies are basiclaly trolls) and he lost 9 billion 1 shot aaaaand it's gone. Rekt. I've heard of plenty of trend followers (systematic or discretionary) Bitcoin bagholders from 2012 George Soros on the yen/Nikkei early buy/sell Warren Buffett..., I've heard of plenty of countertrend success (Enron shorts, 2007 CDS, Soros against the pound and SEA countries and so on), never heard of the "great flat market range trader". Well with the exception of the great signal providers and educators of course. Even Livermore didn't make money in ranging market but Livermore has alot to learn from 20 years old Ricky & Forex Lambo lifestyle & some random dudes in comments with 6 month old accounts and that have been offline for 2 years since then and whoever promotes this.
Editors' picks
Education
by MrRenev
16
Relative Strength Index Masterclass Part 1Relative Strenght Index(RSI) RSI is a momentum oscillator, whereas the momentum is the rate of the rise or fall in price. RSI is an oscillator ranging between two extremes, in the case of RSI, it ranges from 0 to 100. The relative strength index is computed with: RSI = 100RS/(1+RS); where RS is relative strength. RS= (Previous Average gain*13+Current gain)/(Previous Average loss*13+Current loss) Relative Strength is a ratio of a stock price performance to a market average (index) performance. RSI will rise as the number and size of positive close increases and will fall as the number and size of losses increase. There are two terminologies for RSI: Lookback period: The time frame that is used to calculate the relative strength, by default it is 14. A look-back period greater than 14 will give a smoother RSI signal while less than 14 will give a rough volatile RSI signal Threshold Frequency: The oversold-overbought value ranges are the threshold frequency, default is 70-30 (which depend on various factors reasons such as risk factor), for eg. 80-20(less risk) and 66-33 (more risk) RSI touching the overbought condition is a bearish sign (prices are likely to go down) while RSI attaining oversold condition is a bullish sign (prices are likely to increase) There are many ways of using RSI as an indicator Oversold-Overbought Region : Oversold Region - The situation at which a lot of selling has happened and everyone who was willing to sell has sold, RSI value less than 30 Overbought Region - The situation at which a lot of buying has happened and everyone who was willing to buy has bought, RSI value greater than 70 In this, we have default values for the lookback period(14) and threshold frequency(70-30) which you can change according to your requirement and risk management. A look-back period of more than 14 would be more interested in long term trend while less than 14 would be inclined towards short term trades. The look-back period can also be increased to smoothen out the RSI line. A threshold of 80-20 (more-safer) or 66-33 (more-riskier) can be taken into consideration. A Buy signal will be generated when RSI is less than 30 i.e. the oversold region while a Sell signal will be generated when RSI is greater than 70 i.e. overbought region. 50-Level RSI Midline The overbought-oversold condition helps detect sudden changes in the momentum of price without providing much information about the overall trend of the market, therefore using the overbought-oversold strategy without getting information on the overall trend could be a bit risky. Thus we use RSI with different timeframes and the threshold for trend information as well as signal generation. In this we will have two different RSI: A RSI with the look-back period of 20-days and 50-50 frequency, also called midline RSI. In an uptrend, this RSI is above 50 and below 50 for a downtrend. A RSI with the look-back period of 5-days and 66-33 frequency, the look-back period is sufficiently low so that in a predominant trend, local maxima or minima can be used for generating buy or sell signal with the small look-back period RSI ensuring the signal is reactive to current price fluctuations. Thereby, an uptrend is signaled if 20-RSI is greater than 50, with the buy signal being generated in the uptrend with 5-RSI in the oversold region while a downtrend is signaled if 20-RSI is less than 50, with the sell signal being generated in the downtrend with 5-RSI in the overbought region. A buy signal is generated when 20-RSI is greater than 50 and 5-RSI is less than 33 while a sell signal is generated when 20-RSI is less than 50 and 5-RSI is greater than 66. A lot more interesting things can be done using RSI, about which we'll be talking in the next Masterclass on RSI, STAY TUNED! ---------------------------------------------------------------------------------------- Your questions and comments are most welcome. If you find the post useful, please like, share, and follow to make sure that you get more information once I publish it. - Mudrex
COINBASE:ETHUSDEducation
by Mudrex
8
Ichimoku Cloud Indicator MasterclassIchimoku Cloud Ichimoku Cloud is a set of technical Indicators that show support and resistance levels, momentum as well as trend direction which is done by taking into consideration multiple averages and plotting them over the chart. It is composed of 5 lines, 2 of which compose a cloud where the difference between the two lines is shaded in where the price may find support or resistance. The 5 lines include, a 9-period average (conversion line), 26-period average (baseline), an average of those 9-period and 26-period averages (Leading Span A), a 52-period average (Leading Span B) and a lagging closing price line (Lagging Span) There are different ways to interprate the Indicator: Ichimoku Cloud The cloud is the most prominent feature of the Ichimoku Cloud plots. The leading Span A moves faster than the Leading Span B as Leading Span A, the average of conversion line (9-period average), and base line (26-period average) while Leading Span B, 52-period average making the shorter moving average more sensitive and faster than longer moving averages. The price is above the cloud indicates an uptrend and it is strengthened when the Leading Span A is moving above and rising from Leading Span B, similar for downtrend. Ichimoku Crossover For the crossover strategy there will be use of Conversion Line (9-period moving average) and Base Line (26-period moving average). The crossover line takes lesser data points into consideration and reacts to the price more quickly while the baseline considers more data points tending it away from the market price thereby making the reactions slower. Therefore, for Ichimoku crossover a buy signal is generated when the conversion line moves above the base line and sell when the conversion line drops back below the base line. Price-Baseline Trend As the price moves down below the Base Line representing a short-term oversold situation within a bigger uptrend with the pull back ending when the price moved back above the Base Line to trigger Bullish signal while as the price moves above the Base Line representing a short-term overbought region within a bigger downtrend with the bounce ending when the price moved back below the Base Line trigger to a Bearish signal. Ichimoku + RSI The Oscillator indicator is RSI and the moving average is Ichimoku in which we’ll be using RSI to give signal i.e. the signal chart while Ichimoku will provide with the trend i.e. the trend chart. Buy when Leading Span A is above Leading Span B, and the value of RSI crosses up 30 and sell when Leading Span A is below Leading Span B along with the value of RSI crosses below 70. Few Limitations of Ichimoku Cloud Can make chart complex and distracting There are few points plotted in future which might go in vain May become irrelevant for long period of time as price remains way above or way below the cloud Different signals from different elements making it a bit confusing ---------------------------------------------------------------------------------------- Your questions and comments are most welcome. If you find the post useful, please like, share and follow to make sure that you get more information once I publish it. - Mudrex
COINBASE:BTCUSDEducation
by Mudrex
13
Super set of oscillators by Thomas DeMark!Dear friends! I continue describing oscillators developed by Thomas DeMark. In my previous articles, I have already explained such tools as TD REI and TD POQ (look here ). In this post I’ll continue describing technical tools developed by Thomas DeMark. TD DeMarker I I’d like to start with the TD DeMarker I indicator. It is similar to TD REI and aims to distinguish between trend and non-trend movements in the market, and then, having determined the trend, it searches for reversal points depending on how the indicator reacts to oversold and overbought levels. Its calculation technique is very simple. TD DeMarker I compares the current and the previous trading day’s highs according to the following algorithm: 1. Calculate the TD DeMarker I numerator • If the current bar’s high is higher or equal to the previous bar’s high, the difference is calculated and added to the numerator. • If the current bar’s high is lower than the previous day’s high, then zero value is assigned to that bar. Next values of the difference between the highs for each bar are added to the numerator over a series of 13 consecutive bars. • If the current bar’s low is equal or less than the previous price bar’s low, then the difference between the previous day’s low and the current low are the numerator. • If the low of the current bar’s is greater, a zero value is assigned to the nominator at this bar. The next values of the difference between the lows for each bar are added to the numerator over 13 consecutive bars. 2. Calculate the denominator of TD DeMarker I equation • You add the value in the denominator to the sum of the differences between the lows in the same period. 3. Calculate TD DeMarker I = divide the numerator by the denominator. • As a result, we get a value that will move in the range from zero to 100 in the form of a fluctuating 13-period line. At the same time, the overbought zone will be above 60, and the oversold zone will be below 40. Now, let’s find out how this indicator’s signals are interpreted A buy signal should satisfy the following conditions: 1. DeMarker I must not be below 40 for more than 13 bars 2. The bar’s close at the signal level should be lower than the low of one or two bars ago 3. The bar’s close at the signal level must be lower than the previous bar’s open or close. 4. The open of the next bar following the assumed reversal bar must be less than or equal to the close of any of the two previous bars. 5. The asset must be trading higher than at least one of the two previous closes. As an example, I’ll take the BTCUSD market situation that has recently occurred. It is clear from the above chart that the BTCUSD was in the overbought zone (above 60) from the start till the end of May. Afterwards, the price rolled down below 40 and the indicator entered the oversold zone. Immediately after that, we look for a point where the bar features the low before price exits the oversold zone. Finally, when the price went beyond the oversold zone on June 13, we can easily identify the low in the period when the ticker had been below 40, according to TD DeMarker I. Now, we can analyze the continuation pattern based on the above conditions. 1. The DeMarker I indicator was below the level of 40 for not more than 13 bars - in our case it was only 5 days; 2. The bar’s close under the red arrow is lower than the previous bar’s low (blue dots are above than the red dotted line). 3. The close of the bar below the arrow is lower than the previous bar’s open and close (blue dots are far lower than the previous bar). 4. The next bar’s open following the reversal bar is equal to the previous bar’s close (there are no gaps). 5. The asset is trading higher than the previous bars’ close levels. Furthermore, when the indicator exited the overbought zone, the price had been already trading above all the previous bars’ close levels. Therefore, one could have safely entered a buy trade at the current level when the new bar of June 14 opened (I marked it with a red cross in the chart). As we already know, this signal reached the target and provided the opportunity to gain on the BTCUSD movement up to the high at 14 000 USD. I should note that when a buy signal is not confirmed, that is, the five conditions above are not met, there is still a signal, but it is a sell signal. Although such a sell signal cannot be as strong, it can be a confirmation for bearish signals of other indicators. There is a good example in the chart above. It displays bitcoin’s all-time high at 20 000 USD. After the DeMarker I had been in the overbought zone for quite a long time, it moved into the oversold zone, and so, we start counting and see how long the price will be in this zone. Finally, there is the following situation: 1. DeMarker I was not below the level of 40 for more than 13 bars, in this case it was 12. So, this condition is satisfied. 2. The close of the bar under the red arrow is lower than the previous bar’s low (blue dotetd line is below the red dotted line). This condition is also satisfied 3. The close of the bar under the arrow is lower than the previous bar’s open and close. This condition is also met. 4. The open of the bar following the reversal bar is equal the close of the previous bar (there are no gaps). This condition also confirms the bullish scenario. 5. The asset is trading above the previous close levels. This condition is not met. It is clear from the above chart the bar following the oversold zone (marked with a red arrow) went down lower than the close levels of the previous two bars, and, moreover, it was trading below the close level of the two bars preceding the reversal bar. Therefore, the last condition is not satisfied, and so, we have the reasons to assume that there is a real reversal of the bullish trend. Now, let us study the sell signals. The following conditions must be met: 1. A sell signal should meet the following conditions: 2. The indicator must be above level 60 for at least six bars. 3. The signal bar’s close must be above the previous bar’s open and close. 4. The open of the bar following the signal must be equal or higher than the close of any of the two previous bars. 5. The asset must be trading below one of the previous close levels. As soon as all these conditions are satisfied, it can be interpreted as a sell signal. TD DeMarker II The above chart presents an example of the Bitcoin bullish trend reversal in December 2017, after which there started a long-tern bearish trend. Let us analyze this situation as a bearish signal. When the bar marked with a red cross was forming, the DeMarker I indicator leaves the overbought zone and goes below level 60. Therefore, it is the case for looking for a sell signal within the zone, where the price was above level 60 (the zone is highlighted with green in the chart). The red arrow highlights the bar that closed higher than the highs of the previous two bars, and so, higher than the previous bar’s open and close (in the chart, it is marked by the purple dotted line on December 17 that is above the green line). The next bar, following the one with the red arrow, also meet the condition and opens above the close of the second-last bar. Finally, there is the trend reversal signal and the opportunity to take the profit on December 20 (it is the bar marked with the red cross in the chart). However, this indicator, like other technical tools, may send false signals. To filter the entry signal, it is recommended to apply TD DeMarker II as a supplementary tool. TD DeMarker II Unlike the TD REI and TD DeMarker I, which compare the price highs and lows with those of one bar ago, TD DeMarker II analyzes a number of price ratios to measure the pressure of buyers and sellers. Let us study the calculation formula of the TD DeMarker II. Calculate the numerator: 1. Calculate the difference between the current bar’s high and the previous bar’s close. 2. Add the result to the difference between the current bar’s close and its low. 3. Distract the previous value from the current bar’s high 4. Sum up all the values. If there is negative result, assign a zero value to it. Calculate the denominator: 1. Add the difference between the current bar’s low and the previous bar’s close to the numerator. 2. Add the result to the difference between the current bar’s high and its close (this value defines the selling pressure). The buy and sell signals of this indicator work under the same conditions as for the TD DeMarker I, so, I won’t enumerate them again. I have already many times mentioned that, if multiple buy or sell signals are at the same place, the signal becomes much stronger. As it is clear from the above chart, a buy signal sent by the TD DeMarker II (green cross) matches to the one sent by the TD DeMarker I (red cross), which in combination confirms the sell signal and enhances it. TD Pressure DeMark suggests that the price action is directly affected by the supply/demand ratio. As the price change is often preceded by a change in trading volume, DeMark suggests measuring the speed of changing in the trading volume along with the speed of price changes. In addition, according to DeMark, these parameters are more important for the current bar, rather than for the complete bars. In general, these values determine the buying pressure on the market, which is calculated by subtracting the current bar’s open from the its close and dividing the result by the price range of this bar. The result is multiplied by the trading volume of the current period and is added as a progressive total to the indicator value. Finally, we have an indicator that shows buying pressure. For example, if the bar’s open is equal to its low, and the bar’s close is equal to its high, then the trading volume will be on side of buyers, and the indicator will display a strong rise of buying pressure. And vice versa, if the bar’s open and close coincide, even a greater trading volume won’t affect the indicator, as the market will be balanced, and the bulls’ power will be roughly equal to that of bears. The indicator’s band moves from 0 to 100%, and the overbought and oversold zones, like for the indicators, described above, are the zones above 60 and below 40 respectively. The buy and sell signals sent by this indicator are interpreted in the same way as those sent by TD DeMarker I and II. Besides, this indicator is also a confirming one, and when it coincides with other signals, it confirms the indicated direction. You see in the above chart that the signal sent by the TD pressure (yellow cross) matches to the signals sent by the DeMarker I and the DeMarker II (red and green crosses respectively), which means that the sell signal is true. TD Rate of change (TD ROC) TD ROC is an integral component of TD Alignment but can also be used in isolation as an overbought/oversold indicator. It is thought to be quite simple and is determined by dividing the close of the current price bar by the close of twelve price bars earlier. Although it is pretty simple, this indicator is quite efficient. According to Thomas DeMark, the bears’ zone is below 97.5. Bulls zone is above 102.5. Therefore, when the indicator is in a narrow band between 97.5 and 102.5 the market is in balance. So, this indicator helps you identify the market sentiment at any moment. But this is not its primary advantage. You can employ this indicator in technical analysis and draw the common patterns and trend lines. The chart above shows how a triangle worked out. A strong momentum, marked with a red arrow, draws the indicator beyond the triangle, which means that the market lost balance and started moving in the bullish trend. Next, after the triangle was broken out and the bullish trend started, we build trend lines according to the common rules; in the bullish trend, the trend is outlined along the support line (red line), in the bearish trend -along the resistance lines (green line). It is clear from the chart above that the breakout of these lines and entering the bear zone send a sell signal (red cross) in early July. Afterwards, we build the trend line along the resistance levels sand expect until the price breaks it through and enter bullish zone. Finally, in the mid-July, there is such a buy signal, marked with green cross in the chart. Next, there is a strong growth in the bullish trend that is marked with the red trend line. The breakout of this line sends a signal to take profit, and entering bearish zone again signals the trend weakness. As you see from the chart above, the indicator broke through the green trendline in late July but it hasn’t entered the bullish zone, and so, there has been no buy signal so far. Another signal that really matters when using this indicator is the signal of convergence and divergence. These signals are rarely sent by this indicator, but they are usually quite accurate, especially in long-term timeframes. There is a clear divergence in the above chart. When the price is growing, the indicator is declining, which signals the trend exhaustion. In early July, the price couldn’t break through the previous high, thus confirming the direction of the indicator (marked with a circle). Finally, as I have already said, the indicator went down below the trend line, which sends a strong sell signal; however, as you know, the bearish correction didn’t work out, so, for an accurate forecast, it important to employ all the DeMark's tolls together. TD Alignment Just for this purpose, to combine all the tools together, the TD Alignment indicator was developed. TD Alignment is a composite indicator that combines the following five TD oscillators to measure buying and selling pressure: 1. TD DeMarker I 2. TD DeMarker II 3. TD Pressure 4. TD Rate of Change 5. TD Range expansion Index (this indicator is described here) Each of these indicators has its own distinct method of measuring overbought/oversold conditions. TD Alignment is based on the values of all the above indicators according to the principle, where the final result is determined of the number of indicators in an oversold condition, overbought and equilibrium. In addition, to calculate the TD Alignment, there were defined the following overbought/oversold zones: Overbought/Oversold 1. TD DeMarker I - 60/40 2. TD DeMarker II - 60/40 3. TD Pressure - 82/12 4. TD Rate of Change - 101/99 5. TD Range expansion Index - 40/-40 Therefore, when the TD DeMarker enters the oversold zone, 1 is added to the total result. If the indicator enters the equilibrium zone, between 60 -40, a zero value is assigned, if it is below 40, 1 is subtracted from the total value. Based on the same principle, all the indicators are calculated, and finally, there is the TD Alignment value that is moving between -5 and +5. -5 is reached when all the indicators are in the oversold zone, and +5 is associated with the case when all the indicators are in the overbought zone. Unfortunately, I failed to find the TD Alignment in free access, so I had to write everything on my own. I must admit there may be errors in calculations, nonetheless, it performs quite well during testing. As you see, the main benefit of this indicator is showing the cases when the market reaches the extremes of the overbought/oversold zones. In the above chart, I highlighted these levels from +4 to +5 and from -4 to -5. When the indicator reaches this zone, it is obvious that the price will start correction soon and so you should take a corresponding decision on either taking profit or entering a trade. In addition, the indicator shows the market sentiment currently dominating; if it is above zero, bullish sentiment is dominating, if it is below zero, the market is bearish. Buy or sell signal here must meet the same 5 conditions, described for TD DeMarker at the beginning of the article, the only difference is that you need to count the number if bars above or below zero. Based on my own experience, I would add one more condition, the sixth one, to be met for entering a buy or a sell trade. A buy/sell signal is confirmed when the TD Alignment indicator breaks through zero level (red dots) only provided that the indicator hit the overbought/oversold zone before. In the above chart, I tried to illustrate that, after the indicator hits green or red zone, i.e. overbought or oversold zone, the sixth condition is satisfied. So, when the indicator breaks through or rebounds from the zero level, there is a buy or a sell signal (according to the market sentiment, I marked the entry signals with green and red arrows). A red thumb down marks the levels where the market doesn’t reach the zones indicated above, and so, the condition is not met and the buy or sell signal is false; I marked false signal with the red crosses in the chart. However, not everything is that perfect, because this indicator is rather sensitive and so, it sends quite many false signals. That is why, I do not recommend employing this indicator alone, rather, it should be used together with other DeMark's tools so that it will be more efficient. I will describe other useful DeMark's indicators and explain how to apply them to BTCUSD trading in my next articles. Subscribe not to miss the continuation! I wish you good luck and good profits!
BITFINEX:BTCUSDEducation
by Hypov
3
My favorite indicatorsIndicators. They make us feel good, they comfort us, we love to expect too much from them then call them useless when they fail to predict the future. Or at least some people do. I myself find indicators comforting, or should I say they bring me relief. They can make every thing smoother, they throw numbers at us. The number is either above our threshold or below, the answer is binary. They give us certainty which is something we all crave in this seemingly random continuous dynamic flow of prices. I am going to start with the indicators I always use, and then present a few of my favorite ones and describe what they do and what I think of them. 1- Fibonacci Sometimes it gets called an indicator, sometimes it does not. Indicator or not there is not 1 buy or sell I do that does not involve a retracement, extension, or at least the measuring tool. I trust my eyes alot, but if I was to trust them to know if we are at 50%, more, or less, my judgements would be all over the place. The definition of a fib retracement that is given is a tool that allows analysts to find areas of support. It helps me see where we are and where to enter a trend. 23,6% and below is too early for me, 38,2% is often a nice one. Fib extensions let me see how far we really have gone, and helps with finding targets, or when to look for reversal. Depends on the context on various timeframes, this includes alot of things, depends my goals, and the pair or commodity. 2- Average True Range (ATR) I use this one all the time. This indicator measures how much the price has been moving in the past specified number of candles, including gaps. "It was created to allow traders to more accurately measure the daily volatility of an asset by using simple calculations." I want to know how volatile the market is to help find out how "active" the pair is and other things, and to help define stop loss, entry, target. If I am looking at a trend on the H4 and D1 timeframes and I want to ride it I will not want to buy a pullback of 1 H1 ATR. And target more than this too. It can also be used to note how expensive - in spreads - a pair is: if the spread is 20% of the daily ATR, it will be pretty hard to day trade it. Now, the ones I do not use often. a- Moving Averages Moving averages are indicators that go on the chart and show what the average price for a certain period & timeframe is over time. The smooth out noise, and provide indications to determine what the direction of the trend is. There are several types of moving averages: Simple, Exponential, Smoothed. I do not use them. First of all my eyes are trained to detect trends and find what I want to see in the price quickly. Second, I am interested in vertical moves, both for going with or against the trend, am I so picky that the price clearly is past MAS. Third, once I identified something I like I will do a full analysis of it, very detailled, precise, using MAS would be ridiculous. b- Relative Strength Index, MACD, and Stoch Ah one of scammy "vip educators laptop on the beach lifestyle" & novice investors favorite. Those momentum indicators show strength, with alot of lag, and poor precision, the MACD also has additional info I will not get into. Some bad unprofitable market participants use it for "oversold" readings, meaning they will consistently buy in downtrends. I look at them sometimes mainly because I think they look good. They look "professional", and they can be conforting, seeing divergence triggers the rewarding center. But I would not seriously incorporate them in my activities. c- The Commitment of Traders It is a report that shows the open interest of participants in the futures market. A simplified version such as in the example below can help make decisions to buy long or short contracts. While imperfect (a big hedger with a small speculative position has all counted as "commercial") and general, it can help with one's study of a commodity. For example, gold was over-shorted at the bottom in August 2018. d- Average Directional Movement (ADX) This indicator that was designed for commodity daily charts can be used for about everything, and it shows the strength of a trend. It does so by measuring the amount of price movement in a single direction. Wilder suggests that a strong trend is present when ADX is above 25 and no trend is present when below 20. I think it is better than the RSI or worse Stoch & MACD. In particular in the following example with the smoothed version (25 DI length), otherwise it can be all over the place. I see how it could be used with an alert (when value > 25) to warn an investor a trend might be happening. Also to help filter consolidations many want to avoid, if the eyes are not trained yet to a naked chart, or if the investor is not disciplined. e- STDEV & Implied Volatility Standard Deviation is a statistical calculation used to measure the variability. Implied volatility is a metric that captures the market's view of the likelihood of changes in a given security's price. The VIX is a market index that tries to project the expected volatility (downwards because that's all they care about) in the stock market. I do not care much about those values. ATR + Fib + Measuring tool etc are better. f- Bollinger Bands These bands envelop the price using a moving average (20SMA) and standard deviations away from it. "When the bands tighten during a period of low volatility, it raises the likelihood of a sharp price move in either direction." It is supposed to help visualise tight periods before a big move. And the price often stays between the bands (that's not very helpful). Sometimes when the price really gets tight with BB it really hits the eyes (Bitcoin), the small range and then the massively expanding one. I do not really see the use for it. Bollinger Band users blind much? I have no use for them but they sure look pretty. g- Volume for Stocks & Crypto Good luck using volume with Forex. Volume tells us how much activity has happened. Did the price go up with only a few buyers? Or were there a whole lot of them? Is a support strong: Many participants are watching it? Or only a few = not that strong. There is a whole lot you can deduce with volume, but it is not the holy grail either. I rarely use it because the Forex market is OTC and we do not have that data, and with futures, it is rarely that useful. h- On Balance Volume (OBV) OBV rises when volume on up down is bigger than volume on down days. Its creator thought that volume precedes price. It was designed to help detect bottoms with divergence, and spot smart money (big institutions) buying while dumb money (retail) was selling. I doubt it will make the dumb money (that all think they are this special wonderboy) outsmart the dumb money. Retail investors are likely to call bottoms every 2 weeks and chase bottoms and get giga rekt in the biggest bear market ever. Maybe a good idea to go short when there are bullish signals in the future? I can already picture greedy and overexcited "investors" chasing every single "signal" they see. There will be many pullbacks in the big downtrend.
Education
by MrRenev
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