Reblog: Why I Ditched Technical Indicators (And Why You Should Too)


While the article talks about Forex, the underlying concept applies to stocks as well.

technical-indicators

Technical indicators are no doubt a favorite topic in the financial markets. They can range from a simple moving average to a complex array of algorithms.

It doesn’t matter whether you’re trading stocks, commodities, futures or any other market; technical indicators are a common theme.

Useful? Well, that’s another matter entirely.

But of all the financial markets, Forex is arguably the worst offender of overutilizing indicators. Proprietary languages like MetaTrader’s MQL have made it relatively easy for newcomers to design anything imaginable.

Other trading platforms offer similar languages. There are even businesses that do nothing but custom code indicators for clients.

And if you ask me, it’s closer to being part of the problem than the solution.

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Reblog: Inverted Cup and Handle Pattern: A Bearish Technical Trading Indicator


Inverted cup and handle patterns can be identified by their large crescent shape followed by a less extreme, upward retracement. The entire pattern usually takes within 3 to 6 month to develop. These patterns are meant to serve as being indicative of a bearish reversal.

Below is a chart of the EUR|USD foreign currency pair showing an example of an inverted cup and handle pattern:

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Reblog: MACD – How to use the MACD correctly


The MACD is a momentum and trend-following indicator that is based on the information of moving averages and, thus, ideal to act as an additional momentum tool and momentum filter for your trading. In this article, we will explain what the MACD does, how it helps you analyze price and how to use it in your own trading.

First, let’s take a look at the individual components of the MACD indicator:

MACD Line: The MACD line is the heart of the indicator and it’s the difference between the 12-period EMA and the 26 period EMA. This means that the MACD line is basically a complete moving average crossover system in just one line.

Signal Line: The Signal line is the 9-period EMA of MACD Line

MACD Histogram: MACD Line – Signal Line

In this article, we focus on the MACD and the signal line in particular. The histogram is derived from the other two components of the MACD and, thus, don’t add as much explanatory value to overall MACD trading.

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Reblog: The ABCD and the Three-Drive


The ABCD

Let’s start this lesson with the simplest harmonic pattern.  So what could be more basic than the good old ABC’s? We’ll just pop in another letter at the end (because we’re cool like that), and we’ve got the ABCD chart pattern!  That was easy!

To spot this chart pattern, all you need are ultra-sharp hawk eyes and the handy-dandy Fibonacci tool.

For both the bullish and bearish versions of the ABCD chart pattern, the lines AB and CD are known as the legs while BC is called the correction or retracement. If you use the Fibonacci retracement tool on leg AB, the retracement BC should reach until the 0.618 level. Next, the line CD should be the 1.272 Fibonacci extension of BC.

Simple, right? All you have to do is wait for the entire pattern to complete (reach point D) before taking any short or long positions.

Oh, but if you want to be extra strict about it, here are a couple more rules for a valid ABCD pattern:

  • The length of line AB should be equal to the length of line CD.
  • The time it takes for the price to go from A to B should be equal to the time it takes for the price to move from C to D.

Three-Drive

The three-drive pattern is a lot like the ABCD pattern except that it has three legs (now known as drives) and two corrections or retracements. Easy as pie! In fact, this three-drive pattern is the ancestor of the Elliott Wave pattern.

As usual, you’ll need your hawk eyes, the Fibonacci tool, and a smidge of patience on this one.

Bearish Three-DriveBullish Three-Drive

As you can see from the charts above, point A should be the 61.8% retracement of drive 1. Similarly, point B should be the 0.618 retracement of drive 2. Then, drive 2 should be the 1.272 extension of correction A and drive 3 should be the 1.272 extension of correction B.

By the time the whole three-drive pattern is complete, that’s when you can pull the trigger on your long or short trade. Typically, when the price reaches point B, you can already set your short or long orders at the 1.272 extension so that you won’t miss out!

But first, it’d be better to check if these rules also hold true:

  • The time it takes the price to complete drive 2 should be equal to the time it takes to complete drive 3.
  • Also, the time to complete retracements A and B should be equal.

Here’s a forum thread discussing the ABCD pattern and a trade setup with the three-drive pattern.


Reblog: Why investors pay attention to the death cross


Key Takeaways

  • A death cross is a technical indicator that occurs when the short-term moving average of a security such as a stock falls below its long-term moving average.
  • The onset on a death cross can signal a bear market is on the horizon.
  • Investors can utilise death crosses to help identify low-price entry points into the market.

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Time To Be Cautious and Raise Cash As Market Crash Is Imminent


The original article appears on www.rakesh-jhunjhunwala.in and is available here.

Time To Be Cautious & Raise Cash As Market Crash Is Imminent: Technical Analysis Expert

Nooresh Merani, a leading technical analysis expert, has issued a warning that the steep rally in stock prices is on the verge of reversing into a steep crash. He advises that we should exercise caution and take some money off the table so that we will have better buying power when the crash does come.

Common sense tells us that whenever there is a steep rally or a steep crash, there is always a reversal at some stage.

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