Indicator trend lines System

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Indicator trend lines System

Postby AndyT » Tue Oct 12, 2010 3:05 pm

Long time, everyone..
I've decided to add today the system I picked up from a mentor some time ago when I learned how to trade Forex.
He made good trades with it, at least his charts convinced me. I was stupid enough to not save them :( , but at least I've saved the "scripts". Enjoy!



...Since I have been repeatedly asked in the past 3 years to explain what indicators and techniques I use to make my “uncanny” market calls and trades, I decided to write it down and save it for all to read. So here is an overview of some of what I look for, and sometimes I deviate from this and just wing it. I usually regret it later too.

Indicators I use (on ALL time period charts)…Monthly-Weekly-Daily-4 hr-1 hr-30 min-15 min-5 min-1 min…….are RSI 14, Williams %R 50, MACD with histogram 12,26,9, Slow Stochastics 50,3,3 and 14,3,3, SMA10,72, EMA 5,20,50,200, Bolligner Bands 20,2 SMA, Parabolic SAR std settings. I draw trend lines on ALL the indicators, as well as the channels and trend lines on the price charts.

To catch the good 150 - 300 pip price swings, which is what we should all be trying to catch, I look for these scenarios, in order.

1. Hourly MACD starts to diverge, meaning that if the price has been moving up, than the MACD peaks are lower than the previous peaks. This is the early warning that things are set to change. BUT, it means nothing YET.

2. My stochastic pair is at the extreme levels on the 30 min charts, meaning both stochastics are either above 90 or below 10 levels and have been pretty much staying there for awhile, several sessions anyway, but then they start to diverge as well. BUT, this is nothing YET either.

3. My hourly RSI 14 is at fairly extreme levels, and there is a wedge drawn in the RSI trend lines that has worked close to the point.

4. When all of the above are present, then my trigger is usually when my 30 min Williams % R50 breaks through its wedge formation, and at the same time there is a MACD cross, and Stochastics cross and turn together. I draw a vertical line on the chart at the moment the %R50 breaks its wedge line, and it almost always happens at the same time the Hourly RSI 14 breaks through its wedge line.
Now, the 30 min %R 50 will move so fast it will scare you. It can shoot up or down 50-75 points in a straight line, but the price hardly moves…..it is almost a sure thing that the price will soon catch up with it and pass it by.

I pretty much play the indicator trend lines, and if price trend lines are there too, so much the better. I particularly like to get an Hourly RSI major trend line that is being tested, and trade into it when it fails. Same thing for daily charts and even weekly charts. If I find a daily RSI scenario like that, my trade sizes will be substantially larger, and I will hold the positions longer for bigger moves, 300-600 pip type moves.

I also calculate Fibonacci projections and use them for targets. If the price has broken through one level, I will hold the trade until it meets the next projected level.

I also print out 4 hr and daily charts with nothing but EMA 20, 50, 200 and SMA 10, 72 on them. I then get a straight edge and pencil and try to identify trends, support / resistance lines of importance, breakout levels, and then patterns. I try to calculate a rough idea of how big each up coming move will be based on Measured Moves and Flag pole theories, past moves in the trend etc…….sometimes a hands on approach gets the brain working sharper.

My indicator trend lines not only give trade entries, they also tell you when to get out.
AndyT
 
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Joined: Mon Jun 14, 2010 4:44 pm

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