Forex ; Volume Indicator

Trading with Volume indicator offers the following features:
Volume confirms the strength of a trend or suggests about its weakness.
A rising volume indicates rising interest among traders, while a falling volume suggests decline in interest.
Extreme Volume readings — Climax Volume often highlight price reversals.
Points where market trades on high volume are the points of strong support and resistance.
All various kinds of breakouts and market spikes can be validated or voided with a help of Volume indicator.
Details
Why Volume
Volume is the second most valuable data after the price itself.
Large volume signifies that there is large number of market participants involved, including financial institutions. The last ones bring the highest turnover to the market, and if they are trading, it means the interest to the price at certain point and/or to the trend overall is high.
Small volume tells that there are very little participants in the market, neither buyers no sellers have any significant interest in the price. In addition, no financial institutions will be involved, thus a market is going to be moved only by individual traders and so the move will be weak.
Volume and Trend
Volume helps to learn about the health of a trend.
An uptrend is strong and healthy if Volume increases as price moves with the trend and decreases when price goes counter trend (correction periods).
When price is going up and volume is decreasing, it tells traders that a trend is unlikely to continue. Price may still attempt to increase at a slower pace, but once sellers get the grip on it (which will be signified by an increase in volume on a down candle), the price will fall.
A downtrend is strong and healthy if volume increases as price moves lower and decreases when it begins retracing upwards.
When price is falling and volume is decreasing, the downtrend is unlikely to continue. Price will either continue to decrease, but at a slower pace or start to rise.
Volume and Reversals
To understand the nature of spike in volume before a trend reversal, traders need to know how the data for volume indicator is gathered in Forex.
Forex volume cannot be measured precisely as it is done, for example, in Equity market, where every share traded equals 1 volume, and selling 200 shares means 200 in volume. Forex by nature cannot count how many contracts and what sizes of contracts were traded at any given time, because the market is wide and decentralized. Therefore to count volume in Forex the number of ticks/changes in price is used. 1 tick measures 1 volume. As it moves up and down volume adds up.
When volume rises, it means lots of participants are actively selling and buying currencies. When volume spikes at certain price level, traders know that there was lots of interest shown by traders to that price level. If there is a lot of interest, it means the level is an important one.
This simple observation of a volume indicator allows identify important Support and Resistance levels, which would certainly play significant role in the future.
Where Volume spikes are distinctively extreme (larger than any historical spikes around) — Climax Volume — traders should look for clues from the price itself. Candles that have a narrow range, spinning tops/bottoms, dojies, stars, other candles with extremely large tails have highest chances to become the price turning points.
Single volume spikes only bring price to a halt. A lot of stand-alone average volume spikes occur during fundamental economic announcements on daily basis. News can cause spike in volume for a single day and then volume disappears again.
Reversals, however, happen not over one day but a series of days. If higher than average volume stays on the market for several to many days a huge volume spike — volume climax — will crown a point of market reversal.



Volume and Breakouts
Volume indicator helps to validate all kinds of breakouts.
When market is consolidating on a low volume, a sudden pick up in volume would signify that a breakout is due.
Breakout occurring on rising volume is a valid breakout, while a breakout that caused no interest from traders as it is happening on a low volume is more likely a false one.
Trend lines and other breakouts are validated or voided the same way.

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Forex “Detrended Price Oscillator”

What is DPO indicator about
Detrended Price Oscillator (DPO) is an indicator for eliminating trends in prices.
DPO allows to more easily identify cycles and, based on that, overbought/oversold levels.
Detrended Price Oscillator (DPO) indicator is used to isolate short-term cycles, from long-term cycles.
By eliminating long term trends, DPO helps to focus on shorter price moves/cycles, thus again making it easier to spot an overbought/oversold level.
How DPO indicator does it?
Detrended Price Oscillator compares closing price to a prior moving average, eliminating all cycles that are longer than the moving average.
Standard DPO indicator setting is 20-period.
The indicator oscillates around zero level, and, if to take 20-day DPO, it'll remove cycles longer than 20 days.
How to trade with DPO indicator

DPO trading During Trending Markets
Identify a trend and trade in the direction of the main trend.
Buy when DPO hits zero from above or dips below zero for a while and then goes up above zero.
Sell when DPO hits zero level from below or even crosses above zero for a while and then turns back below zero.
DPO trading During Ranging Markets
Identify overbought and oversold levels individual for every currency pair based on the past price behavior.
Buy after DPO dips below an oversold zone and then exits from it closing above the oversold zone.
Sell rafte Detrended Price Oscillator enters an overbought zone and then exits from it and closes below the overbought zone.

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Forex Stochastic Momentum Index

Stochastic Momentum Index
SMI was created by William Blau in January 1993 issue of Technical Analysis of Stocks & Commodities. The SMI demonstrates where the close is relative to the middle of the last high/low range, in comparison to the close relative to the recent low/high with the Stochastic Oscillator, which resembles the Stochastic Momentum Index.
It's an oscillator that shifts between -100 and +100 and can be a bit less inconstant than an equal period Stochastic Oscillator. The oscillator consists of 2 lines - the moving average of the SMI (red) and the SMI (blue). The SMI will be negative if the close is less than the middle point of the range. The SMI will be positive if the close is greater than the middle point of the range.
The SMI interpretation is in fact the same as that of the Stochastic Oscillator. The most ordinary way of using it is to trade from is to sell when the SMI rises above +40 and then returns to the point under that level and to purchase at the moment when the SMI decreases under -40 and then shifts back above it. Another trading sign is to purchase when the SMI shifts above the moving average, and sell when the SMI decreases below the moving average.
Usually before basing any trades on strict oversold or overbought levels it is better to qualify the trendiness of the market using an indicator, for example, R-Squared. Levels should provide the most effective results if indicators provide a non-trending market trades based on strict oversold or overbought.

Forex Scalping Strategy

Urban Towers Scalping Strategy
Indicators : Blue MA
Time Frame : 15min

Description : During a trend, when the market retraces to the blue MA with at least 3 consecutive lower highs (3 towers), we enter at the break of the high of the last high. Ok let me explain in details one by one.

Steps to Follow :

- Price is above the blue MA trend is up
- Price is below the blue MA trend is down
- Market retraces towards the blue MA with 3 consecutive lower highs (in a uptrend)
- At the break of the high of the last candle, we enter long (in a uptrend)


Trade Example

Alright, what do we know right off the bat by looking at this. We know the market is in a uptrend because the market is above the blue MA. The market retraced to the blue line with 3 consecutive lower highs (3 towers) as we can see the red candles above. Next, we entered long at the break of the high of the last retracement candle - which in this case is 3rd tower as we can see above

Now here is a example of a “no good trade”.
this example, the market was in a uptrend, it did a 1, 2, 3 tower retrace but it never had a breakout on the high of the 3rd tower, in fact, the market continued down and changed to a down trend. This example is to show that this strategy helps avoid many fake trades.

--- SBJ ---- by ; Navin, UrbanFx ------

Forex Trading System - ADX Indicator

Forex ADX
Trading with ADX indicator involves the following signals:
ADX staying below 20 level — there is no trend or the trend is weak.
ADX moving above 20 level — trend is strong.
ADX passing 40 level — trend is extreme.
ADX value rising — trend is going stronger, falling — trend is weakening.
+DI stays on top of -DI — uptrend is in place.
-DI stays on top of +DI — downtrend is in place.
Two DI cross — trend is changing.
Details
The Average Directional Index (ADX) depicts a presence or absence of a trend. ADX advices on the strength of the dominant forces that move market prices here and now.
In other words, ADX advices on trend tendencies: whether the trend is going to continue and strengthen or it is about to lose its positions.
The author of Average Directional Index J. Welles Wilder considers his ADX indicator as a primary achievement; and only because signals given by ADX are not an easy to take a grasp of from the first look, many Forex traders avoid using ADX in favor of more visually comprehensive indicators.
How to interpret ADX
ADX indicator has 2 lines: ADX itself (white), +DI (green) and -DI (red).
Traders then need to draw a horizontal line at the level of 20.
All readings of ADX which are below 20 suggest a weak and unclear trend, while readings above 20 indicate that a trend has picked up.
That is, basically, the simplest explanation of the purpose of ADX. ADX allows Forex traders to determine whether the trend is strong or weak and thus choose and appropriate strategy to trade with: a trend following strategy or a strategy fit to consolidation market periods with no significant price changes.
There is also additional line to be added to ADX indicator window - at 40 level.


How to trade with ADX
Trading with ADX looks as follows:
If ADX is traded below 20 - there is no trend or the trend is weak, thus a non-trend-following strategies should be used, otherwise losses may occur as a result of false signals and whip-saws taking place. An example of non-trend-following method is channel trading.
If ADX is traded above 20 but below 40, it is time to apply trend following methods. An example would be: Forex trading Moving averages or or trading with Parabolic SAR indicator.
When ADX reaches 40 level, it suggests an overbought/oversold (depending on the trend) situation on the market and it is time to protect some profits of at least move Stop loss order to a break even.
When ADX passes 40 level, it is a good time to begin collecting profits gradually scaling out of the trades on rallies and sell-offs and protecting remaining positions with trailing stops.
ADX -/+ DI lines are used for spotting entry signals. All -/+ DI crossovers are disregarded while ADX remains below 20. Once ADX peaks above 20 a buy signal occur when +DI (green) crosses upwards and above -DI (red). A sell signal will be the opposite: -DI would cross +DI downwards.
If after a newly created signal another opposite crossover happens within a short period of time, the original signal should be disregarded and position protected soon or closed.
ADX indicator is never traded alone, but rather in combination with other indicators and tools. ADX indicator most of the time gives much later signals comparing to faster reacting moving averages crossover or Stochastic, for example, however, reliability of ADX indicator is much higher than for other indicators in traders' toolkit, which makes it a valuable tool for many Forex traders.
And just one more idea to test out:
When ADX rises above 20 for the first time and then goes flat for some time, there is believed to be a new trend being born and the reason for ADX being currently flat is because market reacts to this new trend formation by making first initial correction. During this correction it is a good time to initiate new orders.

Forex Aroon Oscillator

Trading with Aroon Oscillator involves the following signals:
Aroon Oscillator line above the zero — suggestion of a bullish market.
Aroon Oscillator line below zero — a bearish market.
The further the Oscillator line is from Zero level, the stronger the trend.
When values are near Zero line, the market is trending nowhere.
Details
The idea behind Aroon Oscillator
Aroon oscillator is based on Aroon Indicator. Aroon Oscillator is a trend-following indicator that illustrates the strength of a current trend and its potentials to last.
How to interpret Aroon indicator
An oscillator that oscillate between -100 and 100.
It oscillates around zero line, defining times when AroonUp and AroonDown lines of Aroon Indicator cross each other.
Aroon Oscillator Formula
Aroon Oscillator = AroonUp - AroonDown.

Aroon Forex charts example


Conclusion
The positive value of Aroon Oscillator indicates an uptrend, while the negative value indicates a downtrend. The higher the absolute value of Aroon Oscillator, the stronger the trend.

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Forex Chande Momentum Oscillator

The Chande momentum oscillator is calculated within preset time interval by the following formulas:

diff = Pi - Pi-1,

where Pi -the price (usually closing price) of the current period;

Pi-1 -the price (usually closing price) of the previous period;

If diff > 0, then cmo1i = diff, cmo2i = 0.

If diff < cmo2i =" -diff," cmo1i =" 0." sum1 =" Sum(cmo1," sum2 =" Sum(cmo2," cmo =" ((sum1-sum2)/(sum1+sum2))" style="font-style: italic;">The CMO Oscillator basic methods of using are

- As the indicator of tend. The sell operations are performed when CMO of the short period crosses the CMO of the long period. Purchase operations are performed when CMO of the long period crosses the CMO of the short period.

- The standard method of CMO interpretation is looking for overselling/overbuying. Overselling occurs if value is under -5. Overbuying occurs when the value overcomes +50 point. The aforesaid figures are similar to the 70/30 level of RSI Indicator.



The Chande Momentum indicator is a momentum oscillator. This oscillator can be used as a trading signal in two various ways.

The first method is to purchase when the oscillator crosses above its MA line and to sell when the oscillator crosses below its MA line. The second is to measure overbought or oversold levels for a certain currency.

The Chande Momentum indicator is built using the sum over a certain period of price changes on up days, sum (high-low) up, and the sum over the same period of prices on down days, sum (high-low), down. An exponential this line's moving average is afterwards overlaid upon the oscillator as a signal line. The oscillator needs two parameters: the period for the moving average and the period when the price ranges will be summarized.



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