Momentum Divergence in Forex

An ailment that many traders suffer from when they are in a live trading environment is called "analysis paralysis," where you are trying to take in too much information in deciding when to trade and in which direction, and you either overload your charts with indicators that you don't fully understand or you try to read every single piece of news on your news feed and try to determine what it means. In all areas of life people will encounter problems when they try to overcomplicate things, and so the solution to this for your trading is to find a trading strategy that is simple and logical, and will not give you a headache or make you feel paralyzed and unable to act. One such strategy is called "momentum divergence," and all you need is one indicator on your price chart.
The first step is to pick the currency pair and the time frame that you are comfortable trading with. Some people like to use short-term charts and hold open positions for 5 minutes to 2 hours, while other like to hold their trades open for 2 hours to 2 days or longer. Your personal preference will determine what the time frame on your chart will be. After you are settled on a specific chart to find signals from, you will want to add a momentum indicator called a "stochastic oscillator" which will be displayed below the active price data and should come standard with every charting package out there nowadays. This is a purely technical analysis-based strategy, so you will not be needing your newsfeed or economic calendar for this.
A momentum indicator measures the rate at which prices are moving now relative to the rate at which prices have been moving in the recent past, and the result is an indicator which tells you whether current market conditions are overbought or oversold. The reason this can be such an important thing to know is because the foreign exchange market is not exchange based; in an exchange-based market such as futures or commodities you can have access to price volume data, but there is no way to compile this data on the Forex market so the closest thing is a momentum indicator. Typically the momentum indicator will move in sync with the price data itself, so the line drawn by the actual chart and the line on the oscillator should match up closely.
The reason this strategy is called "momentum divergence" is because you can identify trading signals by finding those times when the price data does not correspond with the oscillator graph. The term "divergence" refers to those times when prices move opposite of momentum, which means that prices continue to rise even though momentum has started to fall or momentum is rising and the price is still falling or moving sideways. As you might understand by now, since a momentum indicator is the next-best-thing to price volume information, when there is a change in momentum but no change in price it can tell you beforehand whether the exchange rate is likely to go up or down.
To use this strategy you will want to follow your chart and look for one of two setups: Either the price is continuing to rise but momentum is falling, or the price continues to fall but momentum is rising. Your entry signal will be when you have identified a setup where you feel thst there is a large move in the price momentum that has not yet been translated into actual price movement, and your exit signal will be when you see the indicator exit overbought or oversold territory.
The oscillator itself conveys a value of 0-100, where over 80 usually indicates overbought and below 20 usually indicates oversold. If you decided to buy the currency pair because you saw momentum on the rise but no change in the price level, you would want to set a reasonable stop-loss and then hold the position until you see it cross into overbought territory and sustain the upward movement, and then exit when the oscillator crosses back down over the 80 mark. If you decided to sell the currency pair, then you would follow the same process and wait for the signal where you see the momentum moving lower but no change in the price. Then you would hold until the oscillator goes below 20 into oversold territory to continue the price movement and then exit when it crosses back above the 20 mark.

3 Simple Technical Analysis

First you must understand the basics of Candlestick Charting and Technical Analysis. We will not go into a detailed explanation here, for our purposes it is important to understand and recognize the use of the Hammer and Inverted Hammer. Always using the following candle for confirmation, these can be used as indicators of a change in direction.
Second, we add Bollinger Bands with a Moving Average (MA). These can be used to measure the highness or lowness of the price relative to previous trades. Bollinger Bands consist of:

• a middle band being an N-period simple moving average (MA)
• an upper band at K times an N-period standard deviation above the middle band (MA+K*sigma)
• a lower band at K times an N-period standard deviation below the middle band (MA-K*sigma)

On most charting systems the default values for N and K are 20 and 2, respectively. Similarly, the same period is used for both the middle band and the calculation of standard deviation. This is where you will replace the value of K from 2 to 2.5. I know this may seem like a common change to utilize but you would be amazed at how few traders actually make this change and opt for the standard values. By changing the value of K from 2 to 2.5 you are providing for a broader range, which will give you a more meaningful reading of direction and momentum.Finally, we add the Relative Strength Index (RSI). The Relative Strength Index (RSI) is a financial technical analysis momentum oscillator measuring the velocity and magnitude of directional price movement by comparing upward and downward close-to-close movements. The divergence between RSI and price action is a very strong indication that a market turning point is imminent. Bearish divergence occurs when price makes a new high but the RSI makes a lower high, thus failing to confirm. Bullish divergence occurs when price makes a new low but RSI makes a higher low.
My suggestion for meaningful technical trading is very simple...to utilize the RSI at the entry levels of "30" and "70" and the exit levels of "60" and "40". This is guaranteed to lead to more accurate and technically sound trading opportunities. And will also help to take some of the hesitancy out of your trading decisions.

Fores Trading Secrets-Trade Divergence

Divergence is a simple Forex trading strategy that can make you consistent profits if used properly. Divergence essentially refers to the price action gauged against an oscillator indicator such as Stochastic, RSI, CCI, or MACD. Divergences are employed as leading indicators, since they provide early warning signals that the market is about to change direction. A major advantage of using divergences in Forex trading is that trades are usually executed near the bottom or near the top; thus, there is less risk in comparison to potential reward. Divergence trading can be applied in both bull and bear market.
The main aim of divergence traders is to see higher highs and lower lows forming on the charts. When the price of a currency pair is making higher highs, then the oscillator ought also to be forming higher highs, and if the price is making lower lows, then the oscillator ought to be forming lower lows. And, if this is not taking place, then it implies that the oscillator and the price of the currency are diverging from one another. This is what is termed as "divergence". Therefore, divergence is an invaluable technique for identifying a weakening trend or an imminent change in trend.
There are two types of divergence: regular and hidden. Regular divergence is normally employed in spotting trend reversals. For example, if the price of a currency pair is forming lower lows in a downtrend but the oscillator is forming higher lows, then this is regarded as regular bullish divergence, and price is expected to start climbing the charts. On the other hand, hidden divergence is normally employed in spotting trend continuation. For example, if the price of a currency pair is forming higher lows in an uptrend but the oscillator is forming lower lows, then this is regarded as hidden bullish divergence, and price is expected to start rising.
Just like any other strategy in Forex trading, divergence cannot be used alone. It is possible for divergence sometimes to give false signals; therefore, combining them with another strategy will greatly minimize the risk of loss while trading. Trading decisions should not solely be based on this strategy. Importantly, divergences do not take place very regularly in the Forex market, so if you spot any, you should maximize on the opportunity. If you are able to grasp this simple Forex trading strategy, you will make massive profits in the business of trading currencies.

Using Bollinger Bands in a Trending Strategy

One of the best forex indicators is Bollinger Bands. They are very simple to use, they are free, and they are extremely reliable. At just a glance, you can tell if the market is trending or stuck in a range. You can tell if the market has hit extreme prices or if it is about to explode.
So I want to show you a simple trading strategy that relies heavily on Bollinger bands. And, oh yeah, it makes pretty good income from forex!
Identifying a trending market with Bollinger bands is very simple. If the market is trending up, price will walk up the upper band. If the market is trending down, price will walk down the lower band.
Bollinger bands plot a moving average in the middle, and the extreme bands are formed by standard deviation lines around that moving average. Now don't be scared by the algebraic term standard deviations. You don't have to know how to calculate them - the indicator does that by itself.
Normally, the standard deviation for Bollinger bands is set at 2. For this strategy, you want to change it to 1. Just go into the settings of the Bollinger indicator and change the number 2 to 1. This will help you identify trading opportunities better.
Now that you have changed the standard deviation, you will notice that the extreme bands are now closer to the moving average. This is exactly what you want.
Now look for any candle that closes outside the bands. When you see this, enter a trade in the direction of the closing candle. Your stop loss will go on the other side of the candle.
So, in an uptrend, you will place your stop below the candle that closed above the upper band. In a downtrend, you will place your stop above the candle that closed below the lower band.
Your take profit should be twice as much as your stop loss. For example, if your stop loss is 25 pips, then your take profit would be 50 pips.
Pretty simple, right? Not hard at all, and that is the way most profitable trading strategies are - simple.

How Successful The MACD Indicator

Regardless of your Forex strategy, have you ever entered trades and shortly afterwards wished you hadn't? The information that follows will hopefully cut down greatly on the number of trades that cause you anxiety!

The MACD (Moving Average Convergence Divergence) indicator can add a degree of certainty to your Forex strategy.

As with any indicator, it is too risky to enter trades on this signal alone. However, as we will see, used with caution on higher time frames, it can help confirm you are going in the right direction and that your trade is higher probability.
Taking MACD Apart
Let's take MACD apart and describe it's component parts.
The default MACD on most charting packages sets 2 EMA's (Exponential Moving Averages) at 26 and 12 days.
This is represented by a colored line (color varies according to charting package) which crosses a different colored 9 EMA often termed the trigger line.
When MACD (the 12/26 EMA) crosses above the trigger line (9 EMA) upward momentum is indicated and vice versa.
A center line, or zero line, often called the water line is also shown in the MACD indicator. When MACD is above the water line an upward trend is indicated, when it is below the water line, a downward trend is indicated.
MACD also includes a histogram, small vertical lines that appear above or below the zero line, not unlike mountains and valleys in appearance.
MACD is a lagging indicator which follows price action.
The histogram is an indicator of MACD. So watching the histogram can give you an early indication of where MACD is going. The height of the histogram can be a good momentum indicator.
Using MACD As A Safety Indicator
How can you use MACD to your advantage?
If you want to be very cautious in your Forex strategy, going only for high probability trades, then pay attention to MACD on the 4 hour and 1 hour charts.
Some traders will only enter a trade when the 4 hour and 1 hour MACD's are going in the same direction. This will mean a lot less trades but the ones you do take are likely to be profitable. (Agreement of the two MACD's is used in conjunction with other indicators, not by itself.)
MACD on the 1 hour chart is particularly powerful. If you want to stay out of trouble and avoid trades you might later regret, NEVER trade against the direction of the 1 hour MACD. To do otherwise is not necessarily foolhardy if you know what you are doing.

But for the newer, less experienced trader, only trading long when MACD has crossed up, or short when MACD has crossed down on the hourly chart when your other favorite indicators line up, will make for a higher success rate with your Forex strategy. It will also save you much anxiety and heartache!

Income Forex Secrets Review

People are always telling tales of income forex secrets strategies and how they have the winning formula, however they seldom deliver the goods. What I am going to disclose to you in this article is a formula that I know the professionals don't want you to know and many have been trying to keep under wraps. It is more of a long term trading strategy with expectations of 500+ pips hence its name system 500.
This so called secret forex income formula requires a degree of knowledge for you to understand its method. Some experience with charts and EMA's is required, the rest you can pick up in the following paragraphs. You are required to set your charts to a 4 hour time frame and have a duplicate chart of a daily time frame.
On the chart this secret forex income formula requires these settings; Bollinger bands set to MA nbr periods 20, and standard deviation 2, for top middle and bottom bands. You should set 4 Exponential MA's on each chart, 1 set to nbr 2 no shift, colour this one blue. The next should be set to nbr 6 and coloured black. The next should be set to nbr 12 and coloured green, finally 1 set for nbr 34 and coloured red.
When the candles have pierced the bollanger bands, either top or bottom, we are looking for the trade to reverse. We now use the EMA's to confirm the change of direction once the black crosses the blue and that both cross the green on the 4 hour chart we can start looking for previous price action. Once pervious price action is suppressed, look on the daily chart to see if the EMA's have started to cross, If so enter the trade on a new high on the 4 hour chart with a 60-100 pip stop loss.
In this secret forex formula the trade should now of crossed the red EMA and heading in the right direction adjust your stop loss so that eventually you are using the red EMA as a stop on the 4 hour chart and then as it progresses look to use the red EMA on the daily chart. Your exit strategy should be for the EMA's to cross back over the red EMA on the 4 hour chart. Good Luck with this monster when it works you will be looking at 500+ pip trades.

200 EMA Forex Strategy - For Beginners

Are you a relatively new trader looking for a solid forex strategy?

A challenge facing many new traders when developing their forex strategy is the ability to identify the overall trend for intra-day trading.
The 200 EMA (Exponential Moving Average) can solve the problem.
The 200 EMA is one of the most popular indicators of all time with Forex traders the world over, and for that reason alone is worth noting due to the psychological effect on the market place price can have when hovering around the 200 EMA.
Using The 200EMA Strategy
To use this very powerful Forex strategy, create charts on 3 time frames:

• 4 hour
• 1 hour
• 15 minute

Now plot a 200 EMA indicator on each chart and, as a suggestion, color it red, for easy visual impact.
Preferably tile the 3 windows containing your 3 charts into a vertical fashion so you can see the 3 time frames next to each other. It will squeeze up the information on the charts somewhat but for the purpose of this strategy that doesn't matter.
Now scroll through the various currency pairs you like to trade.
If you prefer to trade only pairs with a smaller pip spread, they amount to about 9.
They are:

• EUR/USD
• GBP/USD
• USD/CHF
• USD/JPY
• EUR/JPY
• USD/CAD
• AUD/USD
• NZD/USD
• EUR/CHF

What you are looking for is any currency pair that bucks the 200 EMA on the 15 minute chart.
So for example, look at the EUR/USD pair and note the position of price relative to the 200 EMA on the 3 time frames.
If price is well above the 200 EMA on the 4 hour chart, well above the 200 EMA on the 1 hour chart, but BELOW the 200 EMA on the 15 minute chart, price is bucking the trend.
The overall trend is up, price has temporarily gone against the trend and is currently in a retracement.
Using the fundamental trading principle of "buy the dips in an uptrend", "sell the rallies in a downtrend", look for a suitable entry point.
In the example given above you would look for an opportunity to buy the EUR/USD, perhaps watching for a candle signal that price has exhausted it's downward momentum, bucking the 15 minute chart 200 EMA and will soon resume it's upward momentum.
This is an easy exercise and it can be done once or twice a day, taking just a few minutes.
Watch For Price Bucking The Trend
Once you see price bucking the 200 EMA on the 15 minute chart, whereas it is on the opposite side on the 4 hour and 1 hour charts, sit up and take note. Watch carefully and grab the opportunity to get in and make some pips.
After a little practice you will see how extremely powerful this simple Forex strategy is - certainly deserving a place in your trading tool kit.

Free Forex Buy and Sell Indicator Works?

Known as the single biggest market in the world today, forex o foreign exchange market is the most sought after business venture nowadays. With a market that opens 24-hours, its process entails a link between the values of currency of one country in connection to the other. Considering this basic concept of forex trading, it will require to utilize all the financial tools to guarantee successful investment.

One of the financial tools that can be used to identify opportunity in forex trading is the free forex buy and sell indicator. This is high recommended for active forex traders as it illustrates the fluctuation of prices in the forex market which will help you track the rise and fall patterns.
A free forex buy and sell indicator will eliminate most commonly used speculation approach when trading in forex. It offers you concrete facts to use as basis of your analysis in trading. It provides also with historical data on the various currency trends that you wish to trade.
You can scour the internet and you can available many free forex buy and sell indicator. These sources in the internet will provide you the customer software as an indicator tool whether it is advisable to sell or to hold on the currencies you are currently trading. Whereas, there are also some websites that offer free forex buy and sell indicator such as business4profitsystems and swing currency. Just make sure to evaluate thorough these sites and look for the streamline that is best suited to your needs.
Aside from this mentioned free forex buy and sell indicators, there are also indicators that requires a minimum fee. Of course, it is a fact of life that freebies are always inferior in terms of quality and package compared to paid forex indicators. It is expected that paid indicators have wider options and better functionalities. One of the recently launch application that is gaining popularity is Forex Auto Pilot. Like the name itself, it is auto pilot hence it is automated trading application that will allow the system to trade any time as long as your computer is open. Your only part in this auto pilot application is providing the range of details wherein you wish to trade.
A free forex buy and sell indicator can be of great help if you able to include this application in your trading activities. The most important job of the buy and sell indicator is to identify the right time to buy or to sell in forex trading.
There are indeed a lot of options to look for free forex buy and sell indicator. This is recommendable especially for novice in the field of forex. Downloading these free forex buy and sell indicator can be used as a tool to study the price trend until you are thoroughly familiar with the ins and outs of the forex trading.
The options for free forex buy and sell indicator is unlimited. However it is worth remembering the features, package and services of a freebie items will never be the same with paid forex indicators.

Free Forex Robots Really Go?

Forex robots are programs which automatically enact and end trades on your behalf. They do this by reacting to changes in the market. There are a number of different options on the market these days, which begs the question to the free forex robots out there work well enough for you to be interested in them?

Briefly to expand on how forex robots work, they again automatically enact and end trades for you, and they do this 24 hours a day. This is a major advantage to have, particularly in the forex market, given the fact that this market occurs over a number of international locations, meaning that it never closes as a whole. So, to be truly successful, it only makes sense that you need to know what is happening in different areas of the market for much of that 24 hour span.
Forex robots work for you for that full span, constantly analyzing market data and looking for trading opportunities, working offensively and defensively. So they both enact trades when they feel that they'll make money from a particular area of the market as well as follow those trades and go short on them once the market fluctuates out of your favor. This technology is especially helpful because no emotions or guesswork factors into your trades this way, every move the program makes is always in a direct response to how the market fluctuates.
In answering the original question posed, do free forex robots work, I've tested a number of robots both pay and freeware and unfortunately many of these free programs don't trade competently enough and typically end up losing more than they take in. The major difference in the pay programs out there is that they respond to changes more quickly and effectively so that you stay on the winning sides of your trades more often.