An MACD Trading SystemThis simple trading system was applied successfully to forex pairs using the moving average convergence/divergence. See if it'll work for you. by Alexander Sabodin Today, we see advertisements of different automatic trading systems at numerous websites and forums. If we took those ads seriously, all we would have to do is click the mouse and money would pour into our pockets. Not only that, such black boxes usually don't come cheap. Keeping all that in mind, let's try to create our own trading system. As long as you don't lay claim to the holy grail, a trading system can help you make that trade. THE MACD TRADING SYSTEM To build our own trading system, we will use the following indicators: [*]Bollinger Bands: Period 20, deviations 2, shift 0, apply to close.[*]MACD: Fast exponential moving averages (Ema) 12, slow Ema26, apply to close.[*]Stochastic oscillator: %K period 5, %D period 3, slowing 3, price field close/close.The moving average is based on the exponential method. Time intervals are MN (monthly), W1 (weekly), D1 (daily), H4 (4-hour), and H1 (1-hour). http://www.traders.com/Documentation/FEEDbk_docs/Archive/032008/ForexFocus/fxfsfig1.gifFIGURE 1: GETTING THE GREEN LIGHT. Here, the price exceeds the Bollinger Band and there is an MACD divergence.Let's start with Bollinger Bands. When you apply this indicator, you'll note that prices are between the upper and lower lines 90% of the time. Correspondingly, when the price gets beyond the scope, there's 90% confidence that it'll return inside the lines. In any case, if the price reaches the upper line, the potential of its going down is higher. If it gets to the lower line, its potential for going up is higher. I think of the Bollinger Bands as a yellow signal light that says "Steady!" The indicator certainly gives us leading signals, but if it's the only indicator you use, you may make your entry and exit decisions in a haste. Originally published in the March 2008 issue of Technical Analysis of
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This is a good time for the first post on trader sentiment as specualtive euro longs are near an all-time high (just down from the all-time high made last week actually). At market turns, speculators are on the wrong side and commercial hedgers are on the right side. In other words, a marke top forms when speculators are very long and commercials very short. Looking at commercial buying is important. Commercial buying of the USD index on the NYBOT is the highest since the week that ended 12/12/2006. The EURUSD topped during the week that ended 12/8/2006 at 1.3364 and fell to 1.2865 within 5 weeks. It is not a coincidence that commercials were the longest they had ever been (the USD) just before the USD gained 500 pips against the euro. The same setup is occurring now and a USD low (EURUSD high) should be in place within the next week or two (it may already be in place at 1.3680 but there is no evidence of that yet). The chart below shows the commercial positioning in blue and speculative positioning in red. It is obvious that tops occur when specs are extremely long and when commercials are extremely short. This is the current setup so be ready!Attached Imageshttp://www.learncurrencytrading.com/fxforum/attachment.php?attachmentid=6547&stc=1&d=1178559440
[ 本帖最后由 hefeiddd 于 2008-5-23 15:17 编辑 ]
I updated the techs this morning to show that the USDCAD is likely to continue 'eroding' towards 1.0733 in a 3rd wave. The period of consolidation that would follow would be the anticpated 4th wave back to (or close to) 1.1168. Interestingly, if the 3rd wave does decline to 1.0733 (or close to this level), then the 38.2% of 1.1824-1.0733 would be at 1.1150. 4th waves often retrace approx 38.2% of wave 3. Regarding the COT implications. The COT is released once a week and is longer term in nature. A bounce back to 1.1150 or so would not do any damage to the downtrend.
Attached Imageshttp://www.learncurrencytrading.com/fxforum/attachment.php?attachmentid=6631&stc=1&d=1179838230
In trending markets, taking the opposite side of the SSI does work (if SSI is negative, then go long). Here is a chart of the EURUSD with the SSI below. The SSI has been negative since October (with the exception of one spike above 0 in January), and the EURUSD has continued to rise. It sounds like your trading is more aggressive and shorter term in which you trade both sides of the market (trend and countertrend). The SSI is a trend following indicator and may not be of much use to you.
Attached Imageshttp://www.learncurrencytrading.com/fxforum/attachment.php?attachmentid=6648&stc=1&d=1180444951
I have also attached the chart with COT positioning here.Attached Imageshttp://www.learncurrencytrading.com/fxforum/attachment.php?attachmentid=6758&stc=1&d=1181653737
The 10 day average of the AUDUSD 1 month risk reversal rate (25 delta)remains pointed up, which is bullish. However, there is divergence with the rate and price, which bearish. The near term sentiment picture is confusing, so there are likely better opportunities elsewhere.
Attached Imageshttp://www.learncurrencytrading.com/fxforum/attachment.php?attachmentid=6776&stc=1&d=1181740558
Is everyone noticing how the dow and the eurjpy are trading in tandem. They have been doing this on a larger scale since the early part of this decade but lately, they have been trading together on a very short term basis. The charts here are a 15 min eurjpy and a 5 min dow (longer for eurjpy because the market is open around the clock). The markets are trending together. If you look all the way to the left of each chart, you can follow the sequence - up, down, up, down, up. What does this tell us? It tells us that these markets are going up and down as liquidity expands and contracts. Liquidity can not expand forever, and one big margin call will occur...the question of course is when.
Attached Imageshttp://www.learncurrencytrading.com/fxforum/attachment.php?attachmentid=6803&stc=1&d=1181830159
EURJPY chart below
Have a good weekend
JamieAttached Imageshttp://www.learncurrencytrading.com/fxforum/attachment.php?attachmentid=6818&stc=1&d=1181916744
The 10 day average of the 1 month risk reversal rate is turning up from the same level that it turned higher from in October 2006. If the EURUSD downtrend is to continue, then the decline needs to accelerate soon (price must remain below 1.3552).
Attached Imageshttp://www.learncurrencytrading.com/fxforum/attachment.php?attachmentid=6847&stc=1&d=1182265627
Pretty interesting observation, but I'd also like to draw your attention to the 1-year risk reversal rates. They've turned negative for the first time since June '05. The pair subsequently dropped 300 points in several weeks after this happened in '05, and after a correction, eventually moved below 1.1800 before the 25-delta 1-year RR's turned higher.
Likewise significant, there's been a pretty significant divergence in price and risk reversal rates. I admittedly don't know exactly what to make of this, but I am quite sure that it's not bullish for the EURUSD. Unfortunately the Bloomberg doesn't give you access to more than 4 years of risk reversals, so I can see no historical precedent.Attached Imageshttp://www.learncurrencytrading.com/fxforum/attachment.php?attachmentid=6853&stc=1&d=1182322790
Fortunately, I have found all data for EURUSD risk reversals. As I suspected, moments of divergence in price and sentiment (as seen through options) imply a much-weakening trend. Check out the massive divergence we saw in '04-'05 to draw some similarities to the trend we've seen unfold through '06-'07. Keep in mind, of course, that this is a weekly chart, and a divergence in the yearly RR's and price imply a long term change. I was and remain a long-term EURUSD bear.Attached Imageshttp://www.learncurrencytrading.com/fxforum/attachment.php?attachmentid=6854&stc=1&d=1182325222
The risk reversal rate on the USDCAD has really shot up the past two days, indicating strong call option volatility. Still, I am wary of getting too bullish USDCAD until the channel resistance line is broken.
Attached Imageshttp://www.learncurrencytrading.com/fxforum/attachment.php?attachmentid=6884&stc=1&d=1182441446
Three Gold Coins Chart & More Details
Sorry for my slow response, but I was out of town last week taking a much needed break. My live results can be viewed at http://www.topforextraining.com/live_results.htm so you can see that this EA has performed well thus far in actual live trading. My EA is designed to catch points where the trend is reversing on the 4 hr. time frame. So trend reversals are actually how this EA makes profits. It can also catch a point where Price has temporarily pulled back against the trend and then reverses back towards the long-term trend direction.
If you check out my results, you'll notice that there are not many trades placed each month. I have learned from years of personal trading experience and many books read that most people fail because they over-trade the market. They are looking for excitement instead of waiting for higher probability setups, which can be quite boring at times. If we apply the same logic to an EA, it is probably not good for an EA to over-trade either. I think that is a key reason most EAs destroy people's accounts. The greed factor sets in and traders want to earn 50-100% returns per month, which simply is not possible using good risk management.
My EA identifies trade opportunities based first on the custom MACD indicator. It filters the trade using 4 MA's. It is not simply having a 5 MA below a 100 MA for a Short, it is a bit more complicated than that, but I can't reveal all the secrets. There is also a Price filter, to help eliminate some of the false moves in the market. Finally, CCI is used to determine trades where we need to exit early, because the trend is reversing against our open position.
Please view the attached chart to see the last trade executed in April. http://www.topforextraining.com//img/gbpusd.gif
http://www.learncurrencytrading.com/fxforum/images/attach/pdf.gifFXCM Trader 4_Transfer For_18032008_FXCM LLC.pdf (110.8 KB, 180 views)
http://www.learncurrencytrading.com/fxforum/images/attach/pdf.gifFXCM Trader 4_Transfer Form_18032008_FXCM LTD.pdf (85.1 KB, 30 views)
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On behalf of the FXCM Powercourse department, I want to congratulate all June contest winners. Good luck with your trading in July!Attached Imageshttp://www.learncurrencytrading.com/fxforum/attachment.php?attachmentid=7092&stc=1&d=1184102112 http://www.learncurrencytrading.com/fxforum/attachment.php?attachmentid=7093&stc=1&d=1184102118
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Hello Takeabyte,
Thanks for posting - we welcome the feedback. Here are the trading records of the top 5 traders:
Attached Fileshttp://www.learncurrencytrading.com/fxforum/images/attach/pdf.gif1st New Zealand_Niwa Nuri_05-31-2007_06-30-2007.pdf (15.6 KB, 8599 views)http://www.learncurrencytrading.com/fxforum/images/attach/pdf.gif2nd Taiwan_Yu-min Lin_05-31-2007_06-30-2007.pdf (17.5 KB, 2935 views)http://www.learncurrencytrading.com/fxforum/images/attach/pdf.gif3rd United States Anonymous_05-31-2007_06-30-2007.pdf (16.2 KB, 2059 views)http://www.learncurrencytrading.com/fxforum/images/attach/pdf.gif4th Sweden Anonymous_05-31-2007_06-30-2007.pdf (15.8 KB, 1909 views)http://www.learncurrencytrading.com/fxforum/images/attach/pdf.gif5th China Anonymous_05-31-2007_06-30-2007.pdf (73.2 KB, 2392 views)
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On behalf of the FXCM Powercourse department, I want to congratulate all June contest winners. Good luck with your trading in Aug!Attached Imageshttp://www.learncurrencytrading.com/fxforum/attachment.php?attachmentid=7587&stc=1&d=1187126019 http://www.learncurrencytrading.com/fxforum/attachment.php?attachmentid=7588&stc=1&d=1187126025
Best regards,
King of the MiniAttached Fileshttp://www.learncurrencytrading.com/fxforum/images/attach/pdf.gif1st Place KoM July.pdf (19.7 KB, 5462 views)http://www.learncurrencytrading.com/fxforum/images/attach/pdf.gif2nd Place KoM July.pdf (16.3 KB, 2013 views)http://www.learncurrencytrading.com/fxforum/images/attach/pdf.gif3rd Place KoM July.pdf (16.9 KB, 874 views)http://www.learncurrencytrading.com/fxforum/images/attach/pdf.gif4th Place KoM July.pdf (16.4 KB, 264 views)http://www.learncurrencytrading.com/fxforum/images/attach/pdf.gif5th Place KoM July.pdf (13.3 KB, 304 views)
Attached Fileshttp://www.learncurrencytrading.com/fxforum/images/attach/pdf.gif1st place_Anonymous.pdf (14.5 KB, 637 views)http://www.learncurrencytrading.com/fxforum/images/attach/pdf.gif2nd place_Colin Hammond.pdf (14.7 KB, 415 views)http://www.learncurrencytrading.com/fxforum/images/attach/pdf.gif3rd place_Anonymous.pdf (23.5 KB, 340 views)
[ 本帖最后由 hefeiddd 于 2008-5-24 07:22 编辑 ]