Moving Stockings

What are moving stockings?

Moving stockings are the most used indicators in the technical analysis and indicate the average price at a certain point in time with respect to a defined period of time. The term mobile is used as they reflect the last average of prices while at the same time they are held together at the same length of time throughout the series.

It should be noted that the moving average is, however, a delayed indicator that does not manifest the price variations immediately, therefore we can not necessarily use it as an indication of change in the market trend. With regard to this, it all depends also on the period of the moving average. For example, an average with a shorter period of time as it can be 5 to 10 minutes, would serve to better reflect the immediate behavior of the price than a moving average with a period of 1 day.

Also, this indicator can be used by combining two moving averages of different defined times. In this way, the trader can make all the combinations that he wants of moving averages choosing those that to his taste indicate to them in a clear way signals of entry/exit of the market. These signals typically come from the crossing of one half to the other. For example, suppose you use an average of 6 periods and another of 14 periods. The purchase signal is generated when the lower-term average crosses over the higher average term. On the contrary, the sales signals occur when the shortest period moving average crosses the moving average of longer period. Many trading techniques use this simple principle but combined with other indicators to confirm the signals.

Practically all the operations platforms today incorporate the mobile stockings between their basic indicators so there is no need to calculate them. However, for didactic purposes we will indicate how it is done. Basically, two types of moving averages (MA) are used in the technical analysis described below:
Simple moving Average
The simple Moving average (SMA) or arithmetic is calculated by adding a certain amount of prices of a specific number of periods of time, dividing this result between the number of periods of time. The result is the average price in that period of time. Simple moving averages use the same weighting for all prices (all prices have the same value) and are calculated by the following formula:

SMA = SUM (closing prices)/n, where n is the number of periods.
The average SMA is the average of the prices for a certain period of time. Normally, the closing prices of each period are used for calculation, although the setting of this indicator allows you to choose others, such as the maximum price, the opening price, the minimum price, etc.
On their own, the SMA constitute a simple and easy way to soften the price movements while offering a smoother correlation between the price of a certain financial instrument and the course of time. The SMA period is the time interval on which the average price is calculated. For example, a period of 10 will cause the SMA to be calculated based on the last 10 periods of time (candles or bars of 10 minutes, hours, etc in the graph). Thus, if we are using a 4-hour graph, the 10-period SMA is calculated based on the ten previous 4-hour candles/bars (it would be the average of the last 40 hours). With this it is deduced that it is the period the factor that affects the degree of softening of any moving average, because in greater period, the more the correlation between the price of the asset and the mobile average itself. It must be taken into account, however, that the greater the slower softening will be the reaction of SMA to the different changes in the instrument prices.

In the following picture you can see how Luna Mobile average moves with the price forming a line of greater "softness that the same price (click image to enlarge):"
Exponential moving average
The exponential moving average (EMA), like the SMA serves to offer a smoother correlation between the behavior of the price and the passage of time. The difference between the two moving averages lies in the fact that the EMA calculation attaches greater importance to the latest data obtained over a given period, ie it is a weighted average in which not all data have The same value. To calculate the EMA the following formula is used:
EMA (t) = EMA (t - 1) + K * [Price (t) - EMA (t - 1)]
Where you have to:

T = current value.
T-1 = previous value.
K = 2 / (n + 1) (n = period selected for EMA)
As can be concluded from looking at this formula, the value of the previous EMA and the current price of the asset analyzed must be taken into account for the calculation of the current value of the EMA, which means that the last values ​​are having more weight in the final result in comparison With the first values ​​obtained during the chosen calculation period.

This means that EMAs react more quickly to recent and sudden changes in the behavior of the price of any instrument being analyzed, such as currency pairs, stocks, commodities and others. In this way, the most recent EMA values ​​are mitigated the possible price spikes (sudden up / down movements) that normally occur in the market regardless of their trend.

To better understand this, suppose we have the following price values ​​in the EUR / USD for periods of 5 minutes: 1.3005, 1.3010, 1.2990, 1.3007 and 1.3015. We can see at a glance that this set of prices form a series that has a growing trend. However, it can be observed that there was a downward spike in the value of the second period. An SMA gives the same weight to this peak as to other data which could produce a confusing final value that does not reflect the general behavior of the price. However the EMA would be able to provide a higher final value and therefore more updated, which would be to mitigate the effect of the peak to the low of the second data. This ultimately allows the EMA to react more quickly to recent rises and more accurately reflect the upward behavior of the data.

This graph is using a simple moving average of 10 periods and an exponential moving average of 10 periods in order to compare both. As can be seen, EMA of 10 reacts more rapidly to changes in the price movement because it is more sensitive than its counterpart, the SMA of 10 periods.

Exponential moving average vs simple moving average
From now on, the question that many traders ask is: Which is better, the EMA or the SMA?

The reality is that both moving averages have their advantages and disadvantages and can be used for various purposes. Because the advantages of one type of moving average constitute the disadvantages of another and vice versa, both moving averages can be used and combined to take advantage of their respective strengths and weaknesses. For example, EMAs typically generate more false signals because they move faster along with the price of the instrument, while SMAs, on the other hand, by reacting more slowly to changes in prices, serve precisely to avoid this. However, SMA's slowness in the face of changes in trends causes it to produce signals that are too late to enter the market, which may cause the trader either to lose good chances or enter when the movement is nearly complete Which could lead him to be trapped in a movement that turns against him. In this case, EMAs would be more useful in order to enter the market as quickly as possible once a new trend is detected.

So the decision to use one type of moving average or another depends on the trader and his strategy to operate in the market. If this trader wants to have fast market information, it is best to use a short period EMA, on the other hand if you want to have durable information about a dominant market trend, it is best to use a period SMA The most usual is that analysts use a set of moving averages over various periods of time. For example, in many cases the trader uses a long-term moving average to provide information on the general trend that dominates the market and a short period moving average that provides information on the current price behavior and allows him to determine a good point Market entry in the direction of the main trend. This point in many trading strategies is a cross of two or more means depending on the strategy used. The techniques of trading based on crosses of means are the most used by both novice and experienced traders.

Below is a chart with a series of crosses of moving averages that can be used as signals to enter the market (enlarge the image by clicking):

Japanese Sail Patterns Marabozu

This article explains the opening and closing of Marubozu patterns in Japanese candlestick charts.

Close Marubozu

A Marubozu closure has no shadow at the end. A white body will not have shadow on top. A black body will have no shadow at the bottom. In both cases, they are strong signals corresponding to the direction that each one represents and are used in an action analysis.

A white body that has a lower shadow but not at the bottom is called: a white bull Marubozu. When the days open, prices will decrease but then start to rise to end the day at the top.

The black bass closing Marubozu has a superior shadow but it does not have at the bottom. Prices go up when the day starts, then they start coming down to finish the day at the lowest. This signal indicates a bearish day and could show either a sale before the Bulls again take control, or the continuation of the downward trend.

Opening Marubozu

The Marubozu opening has no shadow extended from the opening price at the end of the body. A white body would not have shadow on the bottom and the black candle should not have shade on top. Although these signals are strong, they are not as much as the closing Marubozu.

The white bull opening Marubozu has a superior shadow but no shade to low and when the days open, prices go up all day. Then, the price closes higher than the opening price however does not close higher than the maximum of the day.

The Marubozu Black bassist of opening indicates a bearish day that worries the Bulls. With this pattern of Japanese candles, the opening of the day with prices arrives below the opening price. Then the price drops all day with a closing price lower than the opening price. However, the closing price is not less than the day.

One of the biggest mistakes of investors is that prices move based on fundamental reasons when in fact, prices move rather based on "the perception" of the fundamental reasons. The Japanese rice traders discovered it a long time ago. Why do prices go down when good events are advertised? The answer is that the anticipation of these good news was already incorporated in the price of action.

Please continue learning to identify each pattern of Japanese candles as well as what this pattern indicates what is happening in the markets.

Nihilist Trading System

Next we will present a trading system developed based on a series of customized indicators for Metatrader 4 (therefore can not be applied on other trading platforms), which was created primarily for long term time frames (4 hours), which means it can be useful for traders who prefer longer-term operations and/or do not have time to observe the market all day. , and therefore seek a strategy that requires little time of dedication.

The personalized indicators in turn are based on the ADX, one of the most used technical indicators, which serves to measure the strength of the prevailing trend in the market. In principle, the system may seem somewhat complex, so it is important for the trader to practice with a demo account before using it with a real account, so that he will be accustomed to applying the different rules for both opening and closing positions. Despite this apparent complexity, in a short time the trader will become familiar with the system and discover its value, since longer-term time frames are usually more reliable and generate higher-reliability trading signals than intraday time frames, which are more exposed to market noise.

The custom flags and the Metatrader 4 template are included at the end of the article.

System rules

-can be used to operate with any currency pair or metal spot.

-it is mainly recommended for long term time frames (4 hours, 1 day, 1 week).

Purchase signal

First histogram (ultratrend)-Color Lima.

Second histogram (UTF-1) – Lime Color or deep blue.

Third histogram (UTF-2) – Lime Color or deep blue.

Sales Signal

First histogram (ultratrained)-Red Color.

Second histogram (UTF-1) – Red or orange Color.

Third histogram (UTF-2) – Red or orange Color.

Exiting the winning positions

After having had a good profit (this is something subjective and must be determined by each trader).

The open position is left until the opposite signal is produced in the indicators.

Positions can be closed in weekly stands/resistors.

The trader can also use a trailing stop to follow the price if the market moves in favor of the position.

A fixed benefit-taking goal of 50/100/150/200 pips or more. To decide where to place the level of profit making, it is recommended that the trader be based on time frames greater than that used to open the position, for example daily or weekly.

Stop loss

Purchase positions: A few pips below the last minimum of oscillation.

Sales positions: A few pips above the last maximum of the oscillation.

General recommendations

Stay out of the market when you are about to announce a high impact news, because during these events the market does not follow any rules and a surprise can be devastating for an operation.

Keep abreast of the following price levels that can lead to changes in market management and against our positions:

Weekly stands/resistors.

Weekly pivot points.

Weekly Fibonacci levels.

Psychological levels as round numbers.

Nihilist Ultra ADX Indicator to confirm previous trading signals

The NIhilist Ultra ADX indicator is a custom histogram type indicator that was specifically designed for the Metatrader 4 platform and derives from the well-known ADX.

How to use this set of ADX?

If 5 frames in a column show the green color, this means that the movement is extremely bullish.

If 5 frames in a column show the red color, this means that the movement is extremely bearish.

If each time frame (especially time frames 5 minutes to weekly) shows green or red on all tables, this means that the signal is extremely strong and we have an excellent opportunity to enter the market, in which we can use the maximum size of position that allows us our strategy of monetary management.

This is a fairly powerful indicator that never changes color after it closes a candle, and clearly shows the strength of the trend in different time frames. For this reason, it can serve as an excellent support tool for the other system indicators.

The above image shows the template with all the system's custom indicators. You can download the set of flags and the template for Metatrader 4 in the following link:

-Download custom indicators and Nihilist system template

Micro trading technique with 1 minute graphics

This technique is ideal for those traders who only have little time to operate in the market during each session. In fact it is a strategy developed for operators who prefer to perform short-term operations in which they enter and leave the market in a matter of minutes and not hours. Normally, this type of traders, known as scalpers, use the one-minute charts to get in and out of their positions.

Traders operating on the Forex market in an intraday time frame can take advantage of the small movements that occur in the different currency pairs by observing the 1 minute candela charts.

Like any scalping strategy, it requires an active surveillance and management by the trader as it must be attentive to cut losses and take profit quickly.

As always, it is advisable to practice this strategy on a demo account before operating with real money.

System settings

The chart type and indicators for this system are as follows:

A 1 minute candle graph of the EUR/USD currency pair.

Bollinger bands indicator, with a simple moving average (SMA) or exponential (EMA) of 18 periods as the centerline.

A 3-period EMA, fixed at the closing price.

A MACD histogram with standard configuration.

Relative Strenght Index (RSI) with standard configuration.

Note: The system was originally designed to operate on the EUR/USD currency pair, but can be used to operate with other trading instruments, such as other pairs and precious metals. Other parameters can also be used in the above indicators which we will see later on.

System signals

Bollinger bands function as an indicator of impulse and market volatility. Since this is a system based in part on mobile means crosses, it is necessary that the market has sufficient impulse for the price to rise or lower with force and the operations can generate a good amount of pips. In markets with little impulse and low volatility (markets in ranges or side), this system can produce many false signals, hence we only have to use the signs of purchase and sale that occur when there is a strong impulse and high volatility (markets with strong directional movements). Based on this, we have to:

Valid signals: Wide or widening Bollinger bands, indicating high volatility and market impulse.

Invalid signals: Narrow Bollinger bands, indicating low volatility and market impulse.

The signals for this trading system are as follows:

Signs of purchase

We have a sign of purchase when:

The line of EMA 3 crosses the middle line of Bollinger 18 bands upward.

The line of the RSI (14) crosses above level 50 (bullish market impulse).

The histogram MACD crosses above the zero line (bullish market impulse).

We open the purchase position once the three previous conditions are produced. Since the crossing of the MACD histogram of the zero line is usually the last to occur, this condition can be used as a signal for opening the position.

-Stop loss: For the loss stop we can use two options:

The loss stop is placed below the minimum before the opening of the position.

The position is closed if the price falls and reaches or exceeds the lower Bollinger band, which can be used as a dynamic loss stop.

Signs of sale

We have a sales signal when:

The EMA line 3 crosses down the midline of the Bollinger Bands 18.

The RSI line (14) crosses below level 50 (bearish market momentum).

The MACD Histogram crosses below the zero line (bearish market momentum).

We open the sales position once the three previous conditions are produced. Since the MACD histogram crossing of the zero line is usually the last to occur, this condition can be used as the position opening signal.

-Stop of losses: For the stop of losses we can use two options:

The loss stop is placed above the maximum before the position is opened.

The position is closed if the price rises and reaches or exceeds the upper Bollinger band, which can be used as a dynamic loss stop.

Profit making

It is necessary to remember that you have to take small profits, because it is a trading system of scalping. Based on this, we recommend the following options for taking benefits:

The position is closed if the price moves in favor of the operation and a benefit/risk ratio equal to 1:1 is reached.

The position is closed once the EMA 3 crosses the middle line of the Bollinger bands in the opposite direction.

The position is closed once the price reaches the top Bollinger band (purchase position) or the bottom Bollinger band (sales position).

recommendations

When using the 1-minute charts you must take into account that it is a system designed to take advantage of the rapid movements of the market, since it is a scalping system. This may not be the ideal trading style for many traders.

The trader can also handle slower moving averages combinations in 1-minute charts that are more suited to your trading style, such as the following:

EMA 7 and Bollinger Bands with midline 18.

EMA 5 and Bollinger Bands with midline 20.

EMA 10 and Bollinger Bands with midline 20.

Another possibility is to apply the strategy (along with the variants indicated above) in price charts of 5 minutes, which have the potential to generate more profitable signals and are slower in price action.

Real example

The following image shows a 1 minute chart capture for the EUR / USD currency pair in which the strategy configuration described above has been applied. In this case, we can see two signs of purchase and a sale. In all three cases, both the MACD and the RSI serve as filters for the signals produced by the bullish and bearish crosses of the EMA 3 and the central line of the Bollinger Bands.

As a filter we can also use the Bollinger bands themselves as an indicator of volatility. In a period of low volatility, the bands of this indicator have little amplitude, which also indicates under impulse in the market. In the period when the Bollinger bands indicated a low volatility (see image), EMA 3 repeatedly crossed the midline of this indicator in short, bullish movements of few pips. If these crosses were used as signs of purchase or sale, they would have caused losses due to their short duration (false signals).

In the three signs of the example that produced winning operations, Bollinger's bands showed greater breadth.

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The Spinning Top

Spinning tops are depicted with small bodies relative to their shadows. These show the indecision on the part of the Bulls and bass players. They are considered neutral when trading is in a wobbly market. However, in a trendy or oscillating market, a relatively good general rule is that in the coming days, trading will probably move in the direction of the opening price. The size of the shadow is not so important that the size of the body for the formation of a spinning top.

Japanese candle patterns are clear and easy to identify, demonstrating highly accurate changes in investor confidence. The Japanese sail patterns are made up of approximately 40 investments patterns of continuation of which all have a credible probability of indicating the future and correct direction of the price movement. However, the 12 largest patterns of Japanese candles offer more than enough operating situations for most investors. There are only 12 major patterns that must be memorized but this does not mean that secondary patterns should not be considered.

In fact, these signals are extremely effective for the production of profits. However, it is shown that some of them do not often occur. To use the analysis of the Japanese candles to the maximum, all patterns including spinning top should be used and understood.

The 12 patterns of Japanese candles illustrate most of the signs. The definition of "major" means two things. First, they happen many times in price movement so it benefits the production of profitable operations. Second, they clearly indicate price investments with sufficient force to ensure the placement of an operation. The 12 largest patterns of Japanese candles are listed below and as you can see each sailing formation has a unique name. Some have Japanese names and some have English names.

The 12 largest patterns of Japanese candles are: Doji, Bullish engulfing, Bearish engulfing, Hammer signal and hanging Man, piercing Pattern, Dark Cloud Cover, Bullish Harami, Bearish Harami, Morning star, Evening star, kicker signals (bass and bull), shooting Star, and inverted Hammer.

Recognizing and understanding the psychology that forms spinning top and Japanese sail patterns will provide completely new perspectives for investors to understand the optimal times of buying and selling. The Japanese rice traders have realized that this price does not move based on fundamentals but moves based on the perception of the investor of these fundamentals the signal Doji is one of the most predominant investment indicators. It is very effective in all time periods if you use graphics for one minute, 5 minutes, or 15 minutes, for one-day trading charts, daily, weekly, monthly for amateur traders and long-term investors.

Find a market background with Japanese candles.

Again, I like to look at previous blogs and re-examine our thoughts on where the market was going to go. Below is a blog made as the rescue of sovereign debt recovered life and there were other packages of future stimulation. As the EU sovereign debt bailout returns to life and other economic stimulus packages are on the horizon, it might be time for traders to find the market fund with Japanese candles. Two things drive stocks and stock market prices. They are the fundamentals of economics and individual actions on the one hand and market confidence on the other. Both in trading and in a long-term investment, the margin of safety and the intrinsic value of the stock are good measures of the value of an action. What may seem like a promising action with a low price / benefit ratio that can be cheap when looking at earnings but the confidence of the market can make the stock remain inactive and cheap. Market confidence is a common drive from each day to day of the trader to one that is only undertaken to buy and continues to invest. While fundamental analyzes help detect a stock's value hidden in a market, it is often more profitable to find the market fund with the Japanese candles. A technical analysis of action with tools like a chart of Japanese candles is useful in the detection of new market trends and market investment.

If a trader or investor is looking for profitability with a market change, it will do well to find the background with the Japanese candlestick patterns and operate or invest accordingly. It is okay to talk about finding bargains in a low market but for how long the market will be low and for how long will a given stock be ignored by the market? Both fundamental and technical analysis are necessary in short-term trading and long-term investment. However, it is with a Japanese candle analysis that smart traders are often able to spot when the market is going to change and start to be profitable by buying in the background. To find the market background with Japanese candle analysis for both the general market and individual stock prices, traders follow stock price patterns and their representations as it is easy to read the Japanese candle signs.

Patterns of Japanese candles

Japanese_vels patterns A useful common sign is the Japanese Doji candles. This Japanese candle signal indicates market indecision. The Doji is a very short and practically level candle with long and lower tails. He tells you that the market has opened and closed in a stock at almost the same price but that the market has tested both the high and low during the trading period. This signal often precedes a leak. It is not especially useful in a flat market as it does not tell you which direction the stock market or the individual stock will go in but in a bullish or bearish market trend, it will often warn the trader of a change. In a falling market, it is a way to find the bottom of the market with Japanese candles.

After just selling $ 2.5 trillion worth of markets, many people are predicting that the market has touched the bottom. The intelligent stock investor or stock trader can not depend on the experts. He will work to find the market fund with the Japanese candles and rent later with the trading tactics of the Japanese candles.

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Levels of support and resistance

Forex supports and resistors

What makes this concept one of the most important forex indicators for the price reaction?

Once you understand the fundamental meaning of support/resistance your negotiation automatically rises to another level. What's the reason? Because there are levels in the market that have been respected for the price in the past and will be in the future, and now you can lean on it!

So you can understand the concept think about who the big market speculators are, and how and why they move the price.

The big fish of the banks and the big financial institutions are not like us, the retailers. To begin with, a large financial operations institution can hire dozens or even hundreds of merchants to manage their portfolio:

UBS ' Gigantic arbitration hall is full of professional forex traders. Meet your opponents!

Since each of these traders negotiates – potentially – in a differentiated way, the banking risk is supposedly extended by different styles, temporary frames, etc.

And, of course, the combined task of all those traders moves the market a lot, much more than we, the retailers, could ever move it. It's a real case of whales and sardines (or should we say shrimp?).

Bank traders will perform operations paying particular attention to certain levels. They may have a list of those levels, and the research departments assigned to your bank will periodically notify you of the levels of the market to be monitored.

There's evidence of this in any bank report.

Here is a sample of bank statement to illustrate:

"Daily technicals"

EURUSD – Upward

A rupture above 1.2824 would extend its most recent strength to 1.2935. The stand is in 1.2626.

USDJPY – Downward

The risk lies in checking the relevant support area at 77.91-77.66. The resistance is in 79.03.

GBPUSD – Upward

The relevant resistance is in 1.6052 – a rupture above would imply a bullish development in the Act.

The stand lies in 1.5930 ahead of 1.5882.

... and the same for all the variety of currency pairs.

Thus, forex banking traders are monitoring certain levels. They will also have to meet certain orders for their customers, if that is the nature of their negotiating role with the bank. For example, they may have to make a big sale or purchase of the yen against the dollar for a Japanese car manufacturer.

The merchant will try to obtain the best possible prices for the manufacturer, and may need to scale in position, depending on price fluctuations throughout the session or day of negotiation.

This trader can then concentrate specifically on a short-term price level that he is watching, and as the price approaches that level, he will be very careful when scaling positions for the manufacturer. Of course it may also be the case that the level you are observing represents an excellent opportunity to execute the manufacturer's order partially or totally.

Either way, when the price reaches the level, the trader can place a very large order, causing the price to bounce up or down depending on whether the order was buying or selling. This is the natural and fundamental reason why large price rebounds are produced at significant price levels: weight-dealers are looking at those levels with great interest.

You should not need an indicator of support and resistance to draw the line that crosses the logical levels of support and resistance in this graph.

Here we see the price dropping to the left of the screen. The blue line symbolizes a level of support/resistance still unconfirmed. When the price breaks for the first time that level downward, it makes a brief retest (the first arrow) and then decays. Subsequently, the price touches bottom and begins to ascend.

When it returns to the Blue Line – the level of resistance – fails not once or twice, but three times before breaking it and opening its way up. This is the first sign that an old price level has become a support/resistance level.

The price moves away then from the Blue line up before returning to check it again. This behavior is tremendously usual, and it makes up the fundamentals of negotiating all levels of support/resistance so sought by the traders.

Notice how the price makes a retest of the area surrounding the blue Line twice, and moves twice upward. This reconfirms that the level marked by the Blue line is a significant level of support/resistance and the negotiators will know how to recognize it.

There are many reasons for an arbitrary price level to become a support and resistance area. Factors such as round numbers, pivots, etc ... contribute to that. Or it may simply be that, for one reason or another, this price zone was an area in which a huge volume of negotiations took place in the past. Since then, the market "remembers" this area and the price will tend to react every time you see it.

Why is this happening?

Imagine you had sold a very large order of currency pair AUDUSD to 0.9590 cents. You bet the price wouldn't exceed that level up. But you were wrong, and the price took strength and went up to 0.9650.

Now you are 60 pips below, if you're still in the negotiation. You're probably in trouble. You will be praying that the price returns to your entry level – 0.9590 – so you can leave the operation without loss. And this is the essential and fundamental dynamics of the performance of support/resistance levels.

Because, imagine now that the price falls to your entry level. You're out of the operation. How? Buying a couple of currencies. If your purchase order is large enough it will cause the price to bounce upward. You will have practically removed the price of the old resistance level that has now become-thanks to you-in support. The support/Resistance line has gone from resistance to support. Is it simple or not? Yes it is, and tremendously effective.

The levels of support and resistance constitute, by far, one of the best forex indicators for the negotiation of the price action. It is also one of the crucial concepts for any trader, so mastering it will guarantee your progress as a trading in Forex markets.

However, although it seems simple, it is an area that offers great richness of potential analysis, much more than a single Web page can cover. There are several free resources available on the Web, although – as is the case in most cases-your content is at the height of your gratuity, and if you want quality material you will have to look for payment resources.

If you do with all the information given in this course you will be able to easily configure your own system of negotiation of support and resistance.

Japanese Candles – Doji

Japanese Sail Patterns – Doji

DojiLa Signal Doji is one of the most relevant signs of Japanese sail patterns. It clearly indicates that bullies and bass players are in equilibrium or in a state of indecisiveness. When it appears at the end of an extended trend, its implications on which the trend is about to end are considerable. The Japanese say that always when this signal appears, it is always perceived. In other words, when a Doji appears at the top of a trend, especially in an oversold area, you must be prepared to close your operation. On the other hand, when this signal is seen at the bottom of an extended pessimistic trend, it is necessary to buy signals the next day to confirm the investment. If not, the weight of the market could hold to the minimum of the trend.

The Doji signal is made up of a candle. It is formed when the opening and closing occurs at the same level or very close to it in a specific period of time. This simply forms a cross.

As shown in the illustration above, the horizontal line represents the opening and closing that occur at the same level. The vertical line represents the total trading range during this time. When viewing this signal is overbought or oversold conditions, (overbought or oversold conditions can be defined using other indicators such as stochastic); It becomes a very high probability of investment situation. When the signal appears, it is proving that there is currently indecisiveness in the extreme part of the trend. It is important to note that this indecision can be represented in a few variations.

Criterion for the Doji signal:

Opening and closing are equal to or almost equal.

The length of the shadow should not be overly long, especially when this view at the end of the trend.

Doji Signal Improvements:

A disparity from the closing of the previous day is set for a strong investment movement.

A large volume during the day of the signal increases the chances that a day of escape has occurred although it is not a necessity.

It is more effective after a long sailing body and usually an exaggerated daily movement compared to the normal daily trading range seen in most of the trend.

The recognition and understanding of the psychology of the relationship of Japanese sail graphics will offer completely new perceptions to investors to understand the optimal times to buy and sell. Japanese rice traders have realized that prices do not move based on fundamentals but move based on the perception of those fundamentals by the investor. The Doji signal is one of the most predominant indicators of investment. It is very effective in all periods of time, if we use graphs of 1 minute, 5 minutes, or 15 minutes for a day of trading or graphs daily, weekly and monthly, for impulsive traders or investors in the long term.

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Trend tracking trading strategy based on the ZIGZAG indicator

Next we will explain in detail a trend-tracking trading strategy which makes use of simple concepts and that most have heard on multiple occasions. This system is based on a simple and concrete theory and in a single implementation – A winning combination that should be the main feature of any good trading system.

The system does not use complex technical indicators or several tools that end up reloading a graphic and make it difficult to read as other systems, which although capable of producing good results, are not the most suitable for beginner traders. The only real care that is required is in the drawing of the trendlines as we will see later.

As always, it is recommended to test this system in a demo account before using it to operate with real money in a live account.

System settings

Recommended currency pairs: can be used in any currency pair as well as in other markets, such as metals prices and indices.

Recommended time frames: the most appropriate time frames for this strategy are 30 minutes, 1 hour, 4 hours and 1 day.

Technical indicators: Only a modified indicator for Metatrader 4 called SwingZZ (the ZZ is zigzag) is used which can be downloaded free of charge on the Internet. This indicator is useful because it allows to identify previous maximums and minimums of the price movements, which act as levels of support and resistance, making it a useful tool for this strategy.

You can download the indicator at the following link:

-SwingZZ indicator for MT4

The trendlines used in the strategy are plotted using the maximums and lows determined by the SwingZZ indicator.

System rules

Sales positions

Identify the general trend in the time frame we are going to operate. First we must have an overview of the market that gives us a guide on what it can do in the long term. For example, when we are going to operate in the 1-hour time frame, it is recommended to analyze the daily time frame and also the 4-hour graph to visualize an obvious trend, a channel, or a congestion zone in these top time frames. In this way, if there is a congestion, for example, we keep out of the market until a breakdown occurs and a trend is established. Using the SwingZZ, you draw trendlines in the daily time frame and/or 4 hours and then change to the 1-hour time frame. In the time frame we are going to operate we also identify trend lines and mark them.

We place a sell stop, at least 5 pips below the minimum of the candle that touches or intersects the bearish trend line. The trend line may be the trend in the time frame D1, H4 or H1.

The order is placed when the Candele closes.

Note that we should wait aque the price approaches the trend line or quite close to this before placing the sell stop order.

A stop loss is placed at least 5 pips above the most recent oscillation maximum. The stop loss should be used in accordance with the monetary management practices of each trader and its risk tolerance.

The Obtjetivo is placed just within the minimum oscillation level.

Operation Management: If the operation moves in favor of the trader, it can move its stop loss up to 5 pips above each subsequent lower price peak (higher lower).

Buying positions

For purchase positions only the rules described for the sales positions are reversed:

Identify the general trend in the time frame you want to operate.

Place a Buy Stop 5 pips above the maximum of the candle that reaches or intersects the trend line. The order is placed when the candle closes.

Put a stop loss just below the most recent minimum.

The Obtjetivo takes place just within the previous maximum level.

Operation Management: If the operation moves in favor of the trader, it can move its stop loss up to 5 pips below each subsequent higher lower price (higher bass).

Sales Operation Example

The above image shows a 4 hour graph of the USD/JPY currency pair, in which we can see sales operations that we could have done using this strategy, and that may have been quite profitable.

First we see the lines of trend bearish (red lines) that connect the lowest high indicated by the Swing ZZ. Since the general trend is bearish, we must look for sales opportunities.

The yellow horizontal lines indicate the points where you can place sell Stop at least 5 pips below the closing of the candle that intersects the trend line.

We can notice how the target prices for the operations are placed near the previous price lows.

The price has tried to break the bearish trend line on several occasions but has not succeeded.