How to use stochastic to improve your trades

A lot of traders underestimate the effectiveness and simplicity of swing trading using the stochastic oscillator. Stochastic is one of the best indicators to determine when a currency is either overbought or oversold. By using this indicator, you can determine when a trend is about to reverse and take advantage of that swing to the opposite direction.


This is how this strategy work:

As discussed before, we are simply taking advantage of reversals of a trend so, when the currencies are overbought, we sell or go short and, the opposite is true when a currency is oversold where we would buy or go long.
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The stochastic oscillator is the perfect indicator for this type of strategy, but, before we get into the strategy itself, let’s get the technical explanation out of the way. No worries, this is a visual indicator and you don’t really need to fully understand the formula. The formula is provided so that you know how the “engine” that drives this oscillator works.

The assumption for this technical indicator is that as a currency nears the 100 percent moving average a reversal to drive the price downwards is about to occur. The same is true as the price gets closer to the 0 percent moving average where a reversal will drive the price up.

The indicator is plotted as follow:

This oscillator is made out of 2 lines, the slow line which is the %D and the fast line which is the %K.

Since it is slower, the %D line is less sensitive than the %K line.

The %D line is a moving average of %K.

The trade signal is given by the %D line.
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These lines are drawn on your chart ranging from 0 at the bottom of your chart to 100 at the top of your chart indicating the absolute highest and absolute lowest points a currency can get. Within those two lines, you will find a line at 80% and a line at the 20% marks. When the price goes above the 80%, it is assumed to be overbought, and, when it goes below the 20%, it is assumed to be oversold.

Now, let’s trade the signals:

1. Determine where your support and resistance levels are as they are important to know.

2. Check how extreme the overbought or oversold move is.

3. Wait for the actual crossover of %K and %D in both your fast stochastic and your slow stochastic for confirmation and enter the trade.

4. Make sure to enter your stops using the resistance and support lines to determine them.

5. Take profits early before the next reversal occur. You could use the next crossover as your “take profit” signal.

6. This is actually a lesson I learned years ago, don’t get frustrated if you exit too early and made less profits than you could have. Keep in mind that you are never going to lose money by taking profits no matter how small the profit may be.
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As you can see, this strategy is very simple, yet extremely effective.

Make sure to combine the stochastic oscillator with other indicators. The Relative Strength Index and the Bollinger bands work extremely well with stochastic.

When you have an easy swing trading strategy like the one we discussed implemented, trading becomes fun because, while you are not stressing out with the implementation of your strategy, you are still making great profits!
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MACD indicator still rules as one of the best

One of the most commonly used indicators is the Moving Average Convergence and Divergence (MACD). The MACD is one of the oldest and most used oscillators.


In MACD, a currency is oversold if a low value is indicated and, at that point, the currency is likely to reverse and start an uptrend. On the other hand, a currency is overbought when a consistent high value is indicated and, in this scenario, the currency will likely start a downtrend soon.
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The MACD chart uses 3 exponential moving averages (EMA). The most commonly used combination of values for these 3 averages is (12, 26, 9). These three values create a 2-part indicator. The top part is the currency’s 12 day and a 26 day EMA. The 12 day is the faster EMA and the 26 day is the slower EMA.

These 2 EMAs can be used to determine momentum of a currency. In our setup, when the 12-day EMA is above the 26-day EMA the currency is considered to be in an uptrend. The opposite is true for a downtrend with the 26-day EMA being above the 12-day EMA. When 12-Day EMA goes faster than the 26-Day EMA, the uptrend becomes more pronounced and gets stronger. Once the 12-day EMA slows down and the 26-day EMA closes the gap between the two, that usually indicates that the uptrend is coming to an end.

The 9-day EMA is known as the histogram. The histogram shows the difference between the fast and the slow EMAs. In a chart, as the faster and slower EMA separate, the histogram gets bigger. This separation is called divergence because one of the EMAs is moving away or diverging from the the other.

The MACD is a great indicator used by many traders to help determine trends and changes in trend. However, MACD should never be used alone and should always be used in combination with additional indicators such as stochastic to help you confirm the start and end of trends as they develop.
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The Equilibrium Chart will make you a better trader

The equilibrium chart also known as the Ichimoku Kinko Hyo is an extraordinary trading technique that will certainly enhance your trading. This technique isolates higher probability trades by illustrating where the prices are more likely to go and when to enter the trades. This is possible because the Ichimoku chart displays a clearer picture by showing more data points, thus providing a more reliable price action. Once you master this chart and technique, it will certainly become an integral part of your trading toolbox.

Understanding the Ichimoku chart

In the most basic of explanations, the chart consists of three lines that are usually color coded for easier readability and what the developers call a “cloud”. All this lines create multiple tests on the price action and show higher probability trades.

How are these lines and the “cloud” plotted

Conversion line or Tenkan-Sen (apply first color here) – is calculated as follow: highest high plus lowest low divided by 2. Calculate this formula over the past 7 to 8 time periods.
Base line or Kijun-Sen (second color) – Calculated by adding the highest high to the lowest low and dividing it by 2. The difference from the Tenkan-Sen is that the Kijun-Sen uses the past 22 time periods as base of calculation.
Lagging span or Chikou Span (third color)- Calculated by using the most recent closing price and plotting it 22 time periods behind.
Senkou Span A (fourth color)- Is calculated by adding the Tenkan-Sen and the Kijun-Sen and dividing them by 2. Plot the resulting value 26 time periods ahead.
Senkou Span B – (fifth color, although I prefer to use the same color as Senkou Span A for clarity) Calculated by adding the highest high and lowest low and dividing the result by 2 over the past 44 time periods. You should plot this 22 periods ahead.

The space between the Senkou Span A and the Senkou Span B creates what is known as the “cloud” or Kumo. Tip: Although days is the preferred time period measurement, you can modify this to be any time period as long as it is consistent throughout all calculations.

How do you use the resulting 3 lines and “cloud”

1. Look for the Kijun / Tenkan Cross – The crossover of these 2 lines are similar to the more commonly used moving average crossover. This crossover intends to isolate moves in the price action.

2. Use the Chikou to confirm a Down or Uptrend – The Chikou helps confirm that the market sentiment is in agreement with the crossover. This confirmation greatly increases the probability for profits. Look at the Chikou is as if it was a momentum oscillator.

3.Wait for the price action to break through the cloud – When the price makes a clear break through of the cloud which shows your resistance and support levels, the probability of a profitable trade increases dramatically.

As you can see, This technique will help you to determine when to buy and sell, which are the support and resistance levels, where are the trends moving, and how strong is the signal. Although not one single chart is without flaws, this technique is often used by traders worldwide and can prove to be an asset to you.

Always remember to make sure that you follow your money management strategy and you will see success implementing this technique.

How to "Fibo" yourself to amazing results

The Fibonacci strategy should be an integral part of every Forex trader toolbox.

This strategy is based on a number sequence (1,1,2,3,5,8,13 etc) invented in the 13th century by Leonardo of Pisa, also known as Fibonacci. This number sequence creates what is commonly known as the Golden Mean. The Golden Mean is calculated by is using the ratio of every number to the next number which is 0.618. When using every alternate number the resulting ratio is 0.382. The Fibonacci strategy uses these ratios to calculate Retracements and what is commonly known as the Fibonacci Profit targets.
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Now, the question is, how do these retracements and profit targets are applied to a chart? What you want is for these numbers to be plotted between the Swing High and Swing Low. A Swing High is the highest point on your chart for the time-frame you chose/setup. Conversely, the lowest point on your chart for the time-frame you are using is called a Swing Low. Once you know where these points are, you can plot the Fibonacci traces on them. By plotting it this way, you will get the most likely support and resistance levels of a trend. These “plot” results on your chart are called a ‘trace’.

These plot results create the Fibonacci Retracements and Fibonacci Profit Targets. In essence, Fibonacci Profit Targets are mini resistance levels and the Fibonacci Retracements are mini support levels.

To chart the Fibonacci Retracements just choose a Swing High and a Swing Low. your charting software will do the rest showing you the Fibonacci levels or mini support levels if you will. If you are a new trader, the recommended directional move is 25-30 pips or a little more and, in an uptrend, your buy signal is in the 50% or the 61.8% level.
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The Fibonacci Profit Targets are, by default, an extension of the Fibonacci Retracements. The profit targets are most of the time above the retracement levels. Treat these levels as mini resistance levels and get out of the trade when these levels hit. If you are using a 15-minute chart, the trend will stop progressing at the 1.362 level.

Tip: The 1.362 level is not accurate if the trend is really strong. Use oscillators to determine the strength of the trend.

When you combine the Fibonacci strategy with oscillators and other indicators, you will be profitable 50-60% of the time. As a rule of thumb, risk 10-15 pips on a Fibonacci trade, and take 40-50 pips as your profit. This simple strategy can generate great profits for you.
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These 5 techniques will make you a successful trader

The top five techniques that successful traders use to identify where support and resistance lie are Fibonacci Levels, Pivot Points, Moving Averages, Trend Lines, and Chart Patterns.

Fibonacci Levels: Set your Fibonacci to 23.6%, 38.6%, 50.0% and 61.8% as support and resistance levels. These levels will help you determine when the price swings low to high or high to low. Tip: Many traders only trade when the price breaks out of the 61.8%level, which means a reversal of trend.

Pivot Points: This indicator is commonly used by breakout traders or range-bound traders and is based on the previous period. Simply put, prices above the pivot are bullish and prices below the pivot are bearish. To use pivot points, identify the upper resistance or lower support levels and target profit at S1, S2 or R1, R2 respectively.
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Moving Averages: This is the most commonly used indicator. A good setup for this indicator is to set your EMAs (Exponential Moving Average) at 200, 100, 62, and 23. Under this setup, you will see the price bouncing off the EMA support and resistance. When the price breaks through the EMA channel, most of the time that means that the price broke through the resistance of support level and you can enter a trade.

Trend Lines: As the name suggests, trend lines show in which direction or trend the market is moving. By drawing trend lines, you can determine both how long to stay in a trade and, also, when to exit or reverse your trade.

Chart Patterns: Knowing chart patterns and how they can help you predict price direction is critical to every trader. Chart patterns come in many different shapes. Some examples are triangles whether they are ascending or descending, double top or bottom, head and shoulders, and reverse head and shoulders.

Once you master these techniques, you will start making more profits when you trade.
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What is the best time to buy and sell the market?

What is the best time to buy and sell the market?

Here are the top 3 factors that any trader must be aware of.

1. Moving averages

A lot of traders watch the moving averages for areas of support and resistance. Some use simple moving averages while others prefer exponential moving averages which are weighted towards more recent activity in the market. I can’t say that this is a reliable enough trading method for me to want to adapt it as my means of identifying support and resistance.

I do like to watch a 12 period exponential moving average (12ema) on any time frame though. It seems to act well as a region of balance between buyers and sellers and price activity does tend to hover around this moving average a great deal of the time. Any market that has traded well away from the 12ema though is probably getting ripe for a turn. It’s also very common to see a market retrace to the 12ema line then continue in the direction of the trend. Any strong breaks through the 12ema usually mean the trading will continue in that same direction.

2. Fibonacci based retracements

It’s part of every trader’s arsenal to know about Fibonacci based retracements. The most notable are the 38.2%, 50% and 61.8% retracement levels although there are other retracement levels that are not based on Fibonacci such as 86.6% which is derived from the square root of three. We can find support at areas of old resistance and vice versa. This happens fairly often so it needs to be on a trader’s radar. It’s not a guarantee of course that all areas of support will become resistance but add this concept to your awareness when reading a chart. The past tends to repeat itself in one variant or another.

3. Gaps in the market

While not necessarily areas of support and resistance, gaps in the market can mark important points on a chart. There is a well known phenomena that gaps on a chart will sooner or later be filled. This simply means that price action will often trade into the area of the gap, effectively closing or filling it. The warning here is that sooner or later may mean much later so don’t expect this phenomena to be reliable on your chosen time frame. Failed attempts at closing the gap signal market weakness and you can expect a strong move in the opposite direction.

Probably due to the fact that we chart market activity in graphical format we are somewhat trained to think of support and resistance as being horizontal or parallel to the time axis. Support and resistance can also be seen in other ways if we break out of the horizontal mind-set. For example support and resistance are often found on the drawing tool known as Andrew’s Pitchfork. Also known as the median line this tool was reputed to have been the instrument whereby its creator amassed a large fortune from trading.

A forex trader’s best weapon is the long and diligent study of market behavior with particular emphasis on analyzing and forecasting where probable future areas of support and resistance may lie. Good luck and happy trading.

Article Support and Resistance in the Forex Markets is by BRUCE WILSON

The Best Money Making Strategies for 2018

Many investors think that defining their risk to 2-3% per trade and calculate the distance for the stop loss and the pip value in every trade is money management. This is an important part of a money management strategy, but there is a lot more in it…

So, how can we manage money correctly?

1) Fixed $ Amount in draw downs

This money management strategy is helpful for recouping quickly from losses, the trader will trade a % of the account when successful but will trade a fixed amount when an unsuccessful trade hits:


10.000$ 2% risk = 200$ RR= 2:1 GAIN= 400$

10.400$ 2% risk = 208$ RR= 2:1 GAIN= 416$

10.816$ 2% risk = 216$ RR= 2:1 LOSS= 216$

10.600$ FIXED A= 216$ RR= 2:1 LOSS= 216$

10.384$ FIXED A= 216$ RR= 2:1 GAIN= 432$

10.816$ 2% risk = 216$ RR= 2:1 GAIN= 432$

11.248$ 2% risk = 224$ and so on…

It takes you only one trade to recoup completely from two losses.

2) Compounding

Compounding is a very powerful long term money management strategy. Basically reinvesting the gains of each successful trade and avoid making withdrawals for a relatively long period of time will boost your account like you never imagined!

3) Segregated capitals

This concept allows a more aggressive trading approach.

The trader split his total trading capital in two, one for risk and one for safe.

The risk account is the 5% of the total trading capital, the rest 95% is in a separated safe account. The trader will only trade with the risk account (5% of total trading capital), but will risk 15-20% of the risk account. Each time he doubles the account he recalculates the 5% of the total invested capital and re-split the money equitably in the two accounts.

Implementing one of those Forex money management strategies or mix a few of them will allow you to maximize profits and minimize losses the best way possible.

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3 Little Known Commandments of Trading Success

Learning how to trade forex successfully and being a full time forex trader is a lot more than analyzing forex charts, then jumping in on your forex investment. There are plenty of currency traders that are successful for a short period of time and then fall apart and lose their edge.

As a professional and full time forex trader myself, I’ll like to share the 3 cardinal rules as a personal advice to help you sustain your career as a full time forex trader.

1. Check your economic calendar

It sounds like something that should be obvious, but you would be surprised at the number of currency traders who forget to simply check the economic calendar each and every morning to make sure that they don’t miss out economic data releases. If you want to avoid a situation where you spend all day trying to find a good investment opportunity and then have it fall by the wayside because of this, go to a site like the Forex Factory each and every day before you jump into the action.

2. Use economic forums to your advantage

When you are trading, forex forums can serve two purposes for you. First, they’re going to provide you with a productive way take a break during slow periods of business. The life of a full time trader can be very boring. Second, you’re going to have a way to discuss forex trading intelligently with other like-minded individuals as you’re rarely going to be in a situation where someone else in your household could even care what you are talking about.

3. You work hard for that money, now make it work for you

Forex trading is not the only place where your money can grow. Once you have established yourself as a successful trader, pull some of that money out and put it to work in other areas. You may decide to buy some investment properties or dive into a separate market and allow your money to grow in other ways. It also serves to diversify your portfolio.

To learn how to trade forex successfully using a simple, time-tested and proven forex trading system, instantly download my FREE 56-page “Forex Trading To Riches” ebook at [] now.

The author, Daniel Su, is the founder of [] where you can get free premium forex trading tips and resources. Daniel Su specializes in teaching real people how to trade the Forex market for long term financial success.

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Top Forex Trading Strategies: Scalping With Martingale Insurance

In addition to the first of our Forex trading strategies, there is another advanced strategy that can be added to scalping on the currency market. This strategy is known as the martingale strategy and can be combined with a good scalping method for better success.

Here’s how it works. Instead of using tight stop losses on a typical scalping strategy, you won’t have to give up all of your earlier profits every time you get stopped out. Instead, employ some restraint and don’t buy into your trade too heavy in the beginning. Save some firepower for later on if the trade starts to turn bad.

To make this clearer, think of the typical scalping strategy. Traders set their stop-losses to about 10 pips. Then the general rule of profit is only one to one-and-a-half times the spread. Setting your target to such a low level as 2-5 pips is not that profitable. In addition, a ten pip stop loss can kill 3 or 4 good trades. Instead, it can be useful when you find yourself in trouble to increase the amount on your trade. Keep the same direction but enter into the trade again. Here you can give yourself a chance to be wrong and then still get out with a 10-20 pip profit later on.

Let’s look a little closer. If you remember, you may have already determined how to find a long term trend with the first advanced strategy you learned in ‘Scalping With Alignment of Trend.’ Now you are going to add a Martingale strategy and this will move your average position back to a better price each time your intuition proved to be wrong. This advanced strategy makes it more likely that the market will now turn in your favor because you have both a long term trend in your favor and a better average position from the Martingale insurance.

If you were correct to begin with, you won’t need to add to your position with any Martingale strategy. You will simply take an initial profit of 10-20 pips and this can be very nice. Still, when you are wrong, you may also wait as the market makes a typical correction. Then you can increase your position after you find yourself 15-25 pips in the negative. Just “double down” as they say in Vegas and watch how your position improves!

Of course, you always need to keep your humility. Save your last piece of ammunition for further down at 40-50 pips. You may end up with three units at an even better price and it won’t be long before the market turns back in your favor.

Remember, you were really only scalping so don’t get greedy when things turn back in your favor. Get out at a 10-20 pip profit and call it a successful trade! You will also have to remember your humility in the rare cases when a 3-unit position still shows signs of a complete turnaround. Sometimes the market simply turns against the long-term trend and you will have to accept a fairly big loss below 30-40 pips. Make sure and get out after the long-term trend has changed.

Regardless of the pain you experience in the occasional loss, you will find that you are using a strategy that still works over the long term. You will also enjoy steady profits each month and learn to determine short term and long term trends with more accuracy. This is only one of the many Forex trading strategies that can really help you to make scalping a more profitable means of day-trading.

Kishore M:
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Like to share with you in-depth & applicable forex strategies instead of superficial forex knowledge. Trained over 100,000 forex students around the world on forex trading strategies & fx day trading strategy. Watch profitable fx trading strategies video here:

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