Tag: MACD

Breaking Away From the Herd: A Contrarian View of the MACD

Posted on by The INO.com Team

As more and more technical indicators become more taught, followed...and misunderstood I wanted to geta contrarian view of the MACD. I asked Mark Young from ChartSmarts and Wall Street Sentiment to do that for us. I've known Mark for a while and can attest to his knowledge so please take some time and read the article below and comment as you see fit! You can also learn more about MACD HERE.

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Throughout my 28 year career as an investment professional, I've learned that you've got to do things differently if you expect to beat the averages. More importantly, I've learned that one has to separate oneself from the herd if one wants to avoid being trampled by them. As such, I'm always looking for an edge to set my trading apart.

With that approach in mind, I'm going to risk being mistaken for an investment "guru" cliche' and tell you that I've got a secret "they" don't want you to know: The most popular technical indicator available today-- is a fade.

Continue reading "Breaking Away From the Herd: A Contrarian View of the MACD" →

Allow me to share with you this free mini-email trading course

Posted on by The INO.com Team

Hello,

My name is Adam Hewison. You might want to Google Me to confirm what I am about to share with you.

There are plenty of people out there that create "exclusive email courses" with little or no credentials to actually backup their teachings. So, I think it's right that I share a little bit about myself with you before we even start.

I was a former floor trader on the IMM, IOM, NYFE and LIFFE as well as a risk manager of a large, multinational corporation in Geneva, Switzerland. I also have written books on forex trading and trend following. In 1995, I founded INO.com and later co-founded MarketClub. I've been in the trading biz for over three decades and have seen it all. I created this course as a way to give back and share trading tips and techniques that I still use in my trading today.

In my Free Mini Email Course, I will show and explain the tools and strategies you need to increase your success rate in the marketplace.

Here's just a small sampling of what you'll learn in this course:
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(1) The importance of psychology in price movement (2) How to spot mega trends (3) Understanding of technical price objectives (4) How to picture price objectives (5) How to trade with moving averages (6) How to use point and figure trading techniques (7) How to use the RSI indicator (8) How to correctly use stochastics in your trading (9) How to use the ADX indicator to capture trends (10) How to capitalize on natural market cycles.

Plus, you will you will learn all about fibonacci retracements, MACD, Bollinger Bands and much more. Just fill out the form and we'll get you started right away.

Every success,

Adam Hewison

President, INO.com & Co-Creator, MarketClub

Forex 1-2-3 Method

Posted on by The INO.com Team
Let's face it... Forex is a market that has HUGE potential, HUGE liquidity, and little good information out there on how to trade it with success. That's why I've asked Mark McRae from Forex Avenger to come and teach us a bit about a 1-2-3 Method that his partner David Curran from Forex Avenger has had major success with. Please take time, read the blog entry, and visit Forex Avenger to see the success they have experienced trading forex!

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This particular technique has been around for a long time and I first saw it used in the futures market. Since then I have seen traders using it on just about every market and when applied well, can give amazingly accurate entry levels.

Lets first start with the basic concept. During the course of any trend, either up or down, the market will form little peaks and valleys. see the chart below:

The problem is, how do you know when to enter the market and where do you get out. This is where the 1-2-3 method comes in. First let's look at a typical 1-2-3 set up:


Nice and simple, but it still doesn't tell us if we should take the trade. For this we add an indictor. You could use just about any indicator with this method, but my preferred indicator is MACD with the standard settings of 12,26,9. With the indicator added, it now looks like this:

Now here is where it gets interesting. The rules for the trade are as follows:

Uptrend

  1. This works best as a reversal pattern, so identify a previous downtrend.
  2. Wait for the MACD to signal a buy and for the 1-2-3 set up tobe in place.
  3. As the market pulls back to point 3, the MACD should remain inbuy mode or just slightly dip into sell.
  4. Place a buy entry order 1 pip above point 2
  5. Place a stop loss order 1 pip below point 3
  6. Measure the distance between point 2 and 3 and project thatforward for your exit.
  7. Point 3, should not be lower than point 1

The reverse is true for short trades. As the market progresses you can trail your stop to 1 pip below the most recent low (Valley in an uptrend). You can also use a break in a trend line as an exit.

Some examples:



There are a lot of variations on the 1-2-3 setup but the basic concept is always the same. Try experimenting with it on your favorite time frame.

Good Trading

Best Regards
Mark McRae Forex Avenger

Bio - Mark McRae is a fulltime professional trader, author and coach. He has coached some of the top names in Forex trading. David Curran, Forex's latest rising star attributes his success in the Forex market to the teachings of Mark McRae. To read more about David, go HERE

Traders Toolbox: Moving Average Convergence / Divergence (MACD)

Posted on by lindsay

MarketClub is known for our "Trade Triangle" technology. However, if you have used other technical analysis indicators previously, you can use a combination of the studies and other techniques in conjunction with the "Trade Triangles" to further confirm trends.

Developed by Gerald Appel, this indicator consists of two lines: a solid line called the MACD line and a solid line called the signal line. The MACD line consists of two exponential moving averages, while the signal line is composed of the MACD line smoothed by another exponential moving average.

To complete the standard calculation of the two lines, you must:

  1. Calculate a 12-period exponential moving average of closing prices
  2. Calculate a 26-period exponential moving average of closing prices
  3. Plot the difference between the two calculations above as a solid line. This is your MACD line.
  4. Calculate a nine-period exponential moving average of the MACD line and plot these results as a dashed line. This is your signal line.

MarketClub will do the above calculations for you. The MACD line is represented by a red solid line and the Signal line is represented by a green solid line. The default values for this study are set to the suggest values listed above.

The most useful signals generated from this system occur when the solid red (MACD) line crosses below the green solid line (Signal) and a sell signal occurs when it crosses above the signal line.

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You can learn more about the MACD and Gerald Appel by visiting INO TV.

A Different Type of Moving Average Cross

Posted on by The INO.com Team

I've been trying to convince our next guest blogger to write for us since we first started these...but he's been way too busy. Well I FINALLY caught him and I think you'll agree that it was worth the wait. I'd like to introduce Mark McRae from Traders Secret Code. Mark has been a friend to INO and MarketClub since 2001 and I can personally say that his insights and knowledge have become a crucial point in my trading. His focus has been the same as Adam...teach a man to fish (trade) he'll eat (profit) for a lifetime. Now please enjoy Mark's lesson on "A Different Type of Moving Average Cross".

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Virtually every trader has dabbled with or experimented with some sort of moving average. What I want to introduce you to in this lesson is a different sort of moving average cross method, which I have found to be very good at identifying short term trend changes.

As we know a moving average is normally plotted using the close of a bar e.g. if you were plotting a 3 period moving average, then you would add the last three closes and divide the total by three to get a simple moving average.

This is where I want you to think a little differently. I have always been an advocate of taking traditional thinking and changing it around. What if you used the open instead of the close? What if you used the close of one period of a moving average and the open of another?

First, most charting packages will allow you to use the open, high, low or close to plot a moving average.

In the example below of the daily Dow Jones, I have used a 5 period exponential moving average of the close and a 6 period exponential moving average of the open. As you can see it catches the short term trend changes really nicely.

In the next example of the 1 hour EUR/USD, you can see that the close/open combination worked really well. Of course you will go through periods of consolidation with any market and any moving average method you use will be whipsawed. To get around this you need some sort of filter or approach that helps you keep out of the low probability trades.

You could use ADX, Stochastic or MACD to help filter the noise but I also like to add a time frame.

In the next example of the 4 hour GBP/USD you can see that on the 24th September 04 at 4:00 there was a cross of the 5 period exponential moving average of the close above the 6 period exponential moving average of the open. This signal has remained in place until today as I write on the 27th September.

Although there was a signal on the 4 hour, to help identify even better entry points you can drop down a few time frames to the 30 minute chart. As you can see from the 30 minute chart there have been quite a few crosses of the 5 period exponential moving of the close above or below the 6 period exponential moving average of the open.

There are lots of ways to trade this but a neat little trick is to wait for the signal on a higher time frame and then drop down a few time frames and wait for a pullback. The first signal after the pullback on the lower time frame is normally a pretty good entry point e.g. If there were a cross up on the large time frame then drop down to a lower time frame and wait for the market to retrace and then give another buy signal (cross up). The opposite is true for short signals.

Once you get the signal on the shorter time frame depending on where support is you can usually place your first stop loss under the nearest support area (valley). If the market begins to make progress you can move your stop so that it trails the market by moving your stop to just under the most recent support area.

In this lesson I have use an exponential moving average but experiment with different types of average such as weighted, smoothed or simple. You can also experiment with different lengths of moving average.

Good Trading.

Best Regards
Mark McRae

Traders Secret Code

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Please take time today and visit Mark's site Traders Secret Code as I believe the information there would be of good use to you!