The last ten articles have been entitled Analysis Toolbox and we discussed the various market cycles including trends and continuations. We will discuss the indicator in the context of the chosen market, and if it resonates with you, please continue to do your own analysis with it. Trading successfully is all about feeling comfortable with a methodology and using that system repeatedly even when boredom sets in. I will be discussing indicators in alphabetical order that can be found on the MotiveWave platform.
In this Indicator Series, we talk about the mechanics of trading. This indicator uses the quotient of the Average True Range, and the Bollinger Band difference, to plot its path. The base line is a simple moving average.
Each band is a Fibonacci ratio of the ATR away from the base line. The user may change the inputs but the standard input uses the period ATR and the period BB with 2 standard deviations. When combined with other technical analysis methods, the ability to identify volatility can signal a change in trend or an acceleration in the current trend after a period of consolidation.
In this calculation, the base line is the period simple moving average SMA , which presents as the middle band. Is the trend strong or is the trend weak? Is the market overbought or is it oversold? Is a trend reversal imminent or is a correction due? Can we look at volatility to identify if a larger move is due?
The bands will begin to expand which is indicative of a trend move or change in direction. For trading purposes, one might move to a smaller time frame to trade the move down.
The closing price on that 4-hour candle is 1. As soon as the 5-minute candle closes above the first Fib Ratio band which coincides with a close above the upper BB in orange, take note and follow the price action. This is a day traders dream — to be alerted to the trend and trade the trend long on pullbacks. This market gave several buy signals as price moved from The 10 Habits of Highly Successful Traders.
Copyright c by Jody Samuels. This book and ebook is available at all bookstores, online booksellers, and from the Wiley web site at www. There is a high degree of risk involved in any type of trading.
Foreign Exchange trading is not suitable for all investors. Past results are not indicative of future returns.More...