M5-Two-Way-Confirmation-Strategy

Forex Trading Strategy #2 (Parabolic SAR + ADX)

Link:
http://forex-strategies-revealed.com...trategy-adxsar

This Forex trading system is an another simple discovery; and hundreds of such discoveries can be made when traders are there to learn and experiment.

Forex ADX Indicator Explained
June 17, 2010 by Kelvin

Riding the trend is one of the most profitable trading strategies you can have as it is a good way of producing high risk reward ratio trade and the best way to find out the status of the trend is to make use of the forex adx indicator.

So Why ADX Indicator?
If you have been reading my blog, you will know that I have written an article to help you identify the trend of the market using various forex trend indicators like the moving averages. The moving averages are still a good way to tell the trend but they are unable to give you a value for the trend and this is where the ADX indicator comes into play.

What Is ADX Indicator?
It is an indicator that is made up of a single line with value ranging from 0 to 100. You may think that it looks like an oscillator but it is uni-directional. Unlike the oscillator which tells you that the market is moving up when it is pointing up and the market is moving down when it is pointing down, the ADX is only meaningful when it is pointing up and that’s why it is uni-directional.
If you take a close look at the picture below, you will find that the adx will point up when you are in a good uptrend as well as a downtrend.

How to Use the ADX Indicator?
I personally use it to tell whether the market is trending or ranging. As stated in the earlier part of this post, the ADX has a range value from 0 to 100. When it is moving below the 25 level, it is telling you that the strength of the market is very weak. What usually happens at this time is that the market is in consolidation and will most probably be moving in a range.
When the indicator moves above the 25 level, it is telling you that the trend is strengthening and the larger the value, the stronger will be the trend. However to have a better understanding of the trend you are in, you need to combine the direction of the indicator together with its value.

Sign of a Strong Trend:
You are in a strong uptrend or downtrend when the ADX indicator is pointing up and moving above the 25 level.

http://www.forexindicator.org/wp-con...ng-Uptrend.png
Strong Uptrend

http://www.forexindicator.org/wp-con...-Downtrend.png
Strong Downtrend

Sign of a Weak Trend:
You are not in a strong trend when the indicator is pointing down and moving below the 25 level.

http://www.forexindicator.org/wp-con...-of-Market.png
Weak Trend

Other Uses of ADX Indicator
1) Divergence: Besides using the ADX indicator for telling the strength of the trend, you can also use the divergence of this indicator to warn you of possible retracement or reversal. If you have entered a LONG trade and you see the ADX making lower highs while the price make higher highs, this is a good time to exit your trade as a retracement or a reversal is going to occur.

http://www.forexindicator.org/wp-con...Divergence.png
ADX Divergence

2) Breakout Strength: You can also make use of this indicator to help you trade breakouts. The problem with most breakout traders is fake out which is the false movement of the market leading most inexperienced traders to enter a trade and then stopped them out by reversing the movement.

http://www.forexindicator.org/wp-con...e-Breakout.png
Validating Breakout

With the ADX indicator, you will now be able to check if a breakout is valid or not. When you see the price breaking out of a pattern or trend line, you can immediately check your indicator to see if it is pointing up and moving above the 25 level. A valid breakout will be formed when the ADX indicator is pointing up and moving above the 25 level and an invalid breakout will be the opposite.
I hope that you find this indicator useful for your trade and eventually integrate it into your trading plan.

http://www.forexindicator.org/forex-...explained.html

USDJPY, M5, 2011 June 07

USDJPY seems to move in a tight range. Why not making 10 pips alongside?

DI- value over 25, Stochastics at the bottom by hitting the DPV (80.15).

Long @ 80.14

Target: mR1 80.24

Next good chance to go long at mS1 80.04 once again.

LCrudeJul11, M5, June 07

Long @ 97.83

see #44

Confirmation?

You could take a look at M1 at first and later at M5.

see #44

Confirmation at M5

...but I go out at 98.60 just now.

Profit: + 77 pips

Sometimes it could be better to follow the confirmation at M1 and go out of the market when M5 are signalizing the confirmation if the volatility are getting stronger and market seems to be choppy. 77 pips for trading the M5 chart should be superabundand.

see #43

Exit @ 80.25 (mR1)

Profit: +11 pips

Really good work you are doing here!!!

Thanks a lot dynel14.

I hope it works out well for you!

Fxcube

Silver, M5, 2011 June 07

Long @ 36.72

Stop Loss @ 36.40

Target @ 37.00 (mR1) / 37.27 (DR1)

Note: M30/H1 could go up but H4 could also go down. Be careful and switch at M1 from time to time, please!

see #50

Confirmation.

You could also go out at 36.80 (Candle is hitting the EMA21 at M5 - but 8 pips seems not so much) or set a Trailing Stop or a Stop over the break even point.

I hold the Long further on and trail the stop loss at 36.62 (10 pips under the entry point).

Stop Loss @ 36.62

see #50 and #51

By switching at M1 in between you could monitor the micro movements.

Exit at 36.74 due to the fact that the EURUSD are turning down.

Profit: +2 pips.

It's better to throw overboard some decision (see #50) sometimes, in particular when trading after London Close Time. Next chance will come. You have only to wait for it!

This is my kind of dynamical trading with Forex Strategies by any standards.

What I have to do is to adapt it on my trading style and my trading personality and at my actual experience level.

see #52

For all other traders who were staying in the trade.

Target is hit @ 37.00

Profit: + 28 pips

USDJPY, M5, 2011 June 07

May be we could trade the range at USDJPY once again.

Higher ADX Value with deep down Stochastics.

Long @ 80.10

Target @ 80.25

EURUSD, M5, 2011 June 07
EURUSD, H1, 2011 June 07

Several practical arguments for an Enter Short.

You could also design some support and resistance lines in the frame which could signalize one more powerful argument for your entry (or exit) decision.

DR2 1.4699 was nearly reached (H 1.4695).

Short @ 1.4687

Target @ 1.4639 (DR1).

Global View:
H1 point out an ADX Divergence and a Stochastic Divergence.

If M15/M30/H1 would running down > Targets @ 1.4598 (DPV) / 1.4538 (DS1)

So switch between the timeframes (M1, M5, M15, M30, H1, H4) to get a more global view. M5 trades seems to be often embedded in higher time frames.

Convinced by the euro rally?
Jun 7th, 2011 by admin.

Risk sensitive currencies continue to be pulled in either direction by risk and aversion trading strategies. There seems little conviction in investors’ actions, with some currency moves remaining modest. Even with a strong Euro retail sales print (+0.9%) and a German factory orders release this morning (+2.8%), price action remains tentative as the EUR extends this morning’s rally. 1.47 option barriers are expected to slow the ascent. However, it’s the dollars demise that is providing most of the momentum even as the EUR enters overbought technical territory. The EUR feels it wants to stall and sputter. The US$ is weaker in the O/N trading session. Currently, it is lower against 13 of the 16 most actively traded currencies in a ‘whippy’ session. Yesterday, with little data to chew on and a historical trend to uphold, where the first trading sessions after an NFP release tends to be the quietest session for the month, currency moves were modest. The EUR did happen to wobble ever so slightly on the fear of eventual Greek debt restructuring and the prospect of an investor run on other sovereign debt of financially distressed Euro-zone countries. In reality, there are many lingering unanswered questions that should prevent significant upside to the EUR in the short term. Some German officials remain unconvinced about the Greek bailout plan, referring to it as a whitewash solution. The Greek ‘populous’ opposition continues to grow stronger and contagion remains an ongoing concern. Combined these create an immediate opposition for an extended EUR rally. The dollar is lower against the EUR +0.69%, GBP +0.61%, CHF +0.18% and higher against JPY -0.11%. The commodity currencies are mixed this morning, CAD +0.54% and AUD -0.07%. Yesterday’s data has done little to alleviate the loonies woes. The currency is trading close to its yearly lows due to its strong trade association and proximity to the US. Canadian building permits plunged yesterday (-21.1%), wiping out nearly all of this years gains and has analysts questioning the strength of the Canadian construction industry. The trend for building permits and housing starts remains in negative territory and certainly does not support a rate hike by Governor Carney next month. However, Canadian Ivey PMI blew all expectations out of the water (69.1 versus 57.8), a very strong print that balances out the more recent subdued indicators such as building permits. Last week, the BoC kept their key interest rate unchanged (+1%) and said they will raise it ‘eventually’ as the economy recovers. Policy makers indicated that the recovery is ‘proceeding largely as expected’ and that any rate increases would be ‘consistent with achieving the +2% inflation target’. The Canadian bulls who read the BoC’s communiqué as being hawkish should be happy that they are getting better levels to own the currency. The loonie is being subjected to the pull of either risk or risk aversion trading strategies. Longer term strategists will wait for this Friday’s employment report before committing to longer term trading positions. Most investors continue to look for better levels to own the loonie (0.9770). The RBA surprised markets earlier this morning with a slightly dovish monetary policy statement after holding rates steady. They kept rate unchanged for a sixth straight meeting as signs of slower growth from the US and China dimmed prospects for an acceleration in domestic employment. The RBA would ‘assess carefully’ the outlook for inflation at future meetings. Analyst’s note that Governor Stevens in his statement softened the tone of the penultimate paragraph by replacing the concern that ‘over the longer term inflation can be expected to increase’ with a more specific ‘inflation will be close to target over the next 12 months’. To date the RBA has also relied on the currency’s strength to tighten monetary conditions. The market does not seem too down beaten by the recent data releases, especially after the RBA had signaled recently in the Statement of Monetary Policy that an anticipated fall in the first quarter growth is likely to be temporary and forecasts a strong rebound to +4.25% in the fourth quarter. Traders are betting that there is a 60% chance of a rate hike in the third quarter. Aussie yields are still the highest in the G10 and always look attractive. The expected mix of trade surpluses and rising capital inflows should provide support for the currency on these much deeper pullbacks for the time being (1.0693). Crude is higher in the O/N session ($99.28 +0.22c). It was no surprise that crude prices would come under further pressure this week after Friday’s disappointing US employment number. The commodity has been extending last week’s decline ahead of tomorrow’s OPEC meeting in Vienna. It’s expected to be a contentious affair. Some analysts believe that if quotas remain on hold it would provide the excuse to add a $3-5 premium to a barrel of crude. The current global data suggests a falloff in economic activity and a decrease in demand, but if this happens OPEC will only have to tighten their supply. Last week’s EIA release showed that supplies rose +2.88m barrels to +373.8m, the highest level in two-years. Analysts had expected supplies to fall by -1.6m barrels. Continuing the streak, gas inventories increased for a fourth-week, climbing by +2.55m barrels to +212.3m versus an expected gain of +900k barrels. In contrast, distillate stocks (diesel and heating oil) fell-976k barrels to +140.1m, the lowest level in two-years. Big picture, the oil demand-supply situation is relaxed, and there’s no danger of any shortage. In theory, lower global interest rates should help the commodity which competes with yield-bearing assets for investors’ cash. However, the US driving season has begun and consumers will speak with their wallets. All eyes remain on OPEC’s actions, if any. Gold remains better bid on speculation that borrowing costs in the US will remain low after economic data signaled that the recovery may be faltering, hurting the dollar and boosting the appeal of precious metals. The weaker dollar sentiment is creating a positive metal scenario. Low rates are going to be dollar negative and gold positive. Strong buying recommendations from Goldman and Morgan Stanley have also been good enough reason to drag the commodity higher this month. The yellow metal is being used as a store-of-value and trades like a currency. The metals bull-run is far from over with speculators continuing to look to buy gold on deeper pullbacks ($1,549 +$1.90c). The Nikkei closed at 9,442 up+63. The DAX index in Europe was at 7,135 up+50; the FTSE (UK) currently is 5,881 up+18. The early call for the open of key US indices is higher. The US 10-year backed up 2bp yesterday (3.02%) and is little changed in the O/N session. The market is pricing in some concession ahead of this week’s US funding requirements, specifically concentrating on the long end of the curve. US 10’s trading sub +3% has many wondering is Q3 around the corner. Yields seem to want to print new yearly lows daily. The US government will auction $32b of three-year notes today, $21b of 10-year debt tomorrow and $13b of 30-year bonds on Thursday. The Market should not expect too much of a back up given the recent data and as traders increase speculation that Bernanke and company will hold its target rate for overnight lending at virtually zero into next year. The market will have to wait to get some bad news on inflation before giving up on this bull bond scenario even as we piggyback record low yearly yields.

http://www.forexinfousa.com/convince...uro-rally.html
http://www.forexinfousa.com/category/forex-live

AUDCHF, M5, 2011 June 08

Long @ 0.8887 (mS2)

May be wait till the next station S2 Line 0.8861 or hedge the position and buy later again.

I'm in the trade just now.


Global View:
Weekly 2011.03.13 (L 0.8639).
Monthly 2008.10.01 (L 0.6934)

LCrudeJul11, M5, 2011 June 08

Long @ 98.11

Target: 99.40

See #56

Stochastics shows a slightly divergence. Trades are putting out of the market and take the profit with.

Exit @ 1.4647

Profit: + 40 pips