Forex Probability Indicator

I’ve been following the development of FerruFx’s Probability Meter for trading Forex with MetaTrader 4.  To be quite honest, I find this to be a pretty brilliant tool for those of us who like to see in BOLD colors which way to trade.  This tool could easily keep you out of the most disastrous trades by shorting a currency that is clearly strong or buying a currency that is weak.  The Probability Meter will show you not only the direction of the trend but how strongly it is moving in that direction.

Basically, how this indicator works is the user must determine whether or not the individual indicators within the chart align.  The creator says that 75-80% is a  good trigger for an entry, but without a doubt other things should be considered like Fib levels and pivot levels.

Example how you can trade with the Probability Indicator from FerruFx: “attach the Meter on M15 and the 2TFs below (M5 and M1). First, the 2 additional indicators on the 3 TFs must agree. Then watch the numbers of the 3 others indicators (doesn’t matter which TF because the number will be the same). If these numbers are about the ones i suggested in the explanation above, then the Global % would be close to a good entry point. 75% seems to work well but with experience we’ll all find our % which we are confortable with.”

 The Probability Indicator works with the following currency pairs:

EURUSD
GBPUSD
AUDUSD
USDJPY
USDCHF
USDCAD

EURJPY
EURGBP
EURCHF
EURAUD
GBPJPY
GBPCHF
AUDJPY
NZDUSD
NZDJPY
AUDNZD
CHFJPY
EURCAD
AUDCAD

The indicator by itself is only $67.  Check out Forex Forums for a discussion on the Probability Indicator.

Protected: Trend Follower 5min System Notes

Using DiNapoli Levels in Forex

Published at (www.mo4forex.com) My notes on the significance of DiNapoli levels in Forex trading. I recently came across a site made for and/or by Joe DiNapoli, a name I’ve heard thrown around and a name an indicator in MetaTrader4 fhat I have seen and tried out a few times in the past never really knowing what it did or the signficance it had on Forex Trading. This post is a brief outline of the things I’ve learned about trading DiNapoli levels and why they are indeed a great indicator of where price movment might reach. Read more

RSI (Relative Strength Index)

RSI stands for Relative Strength Index. The RSI measures the markets activity as to whether it is over bought or over sold. It gives a trader an indication as to which way the Market is moving. It is important to note, that this is a leading indicator and thus allows one to see what the market is about to do and then act accordingly. The higher the RSI number, the more over bought it is and conversely the lower the RSI number, the more over sold it is. It is a great leading indicator for the micro and macro reversals in the forex market. In the example avove, RSI is in the middle window and I have made two red lines to indicate when the pair has been overbought or oversold, respcetively, I put my lower line at 20 even though most exeprts say put it at 25. Here I’ve used RSI on a longer time frame, but for swing trading, you might want to drill down to 5 or 1 minute charts (or 50 to 100 tick charts).

Got this advice elsewhere, please someone verify if this helps in Forex, I can see it does but have little indication why these settings are the best.

By using an RSI on the 1 minute chart set at a period of 18 and overlaid on the bottom of your charts tend to give the best entry signals. This can also be applied to the 5-minute chart as well. The two significant entry numbers are 25 and 75.

RSI does not (and I believe CAN not) be an accurate way to find the top and bottom of a move in Forex. Sometimes an overbought market in Forex (after a move upward) will be followed by retracement (or a correction downward) in order to gather momentum so it will continue its trend upward. Conveersely, an oversold market in Forex will be followed up by a retracement upward and gains momentum and goes down further, continuing the downtrend.

Drawing Fibonacci levels will help the most at this stage to determine possible retracement levels. In the example above, I’ve used the trend lind approach to find entries and exits in addition to reading the RSI indicator.

Stochastics with Forex

Trading Forex with Stochastics Indicators (www.mo4forex.com’s Forex Notes)

I remember Stochastics from when I dabbled in trading stocks a few years back. I didn’t quite grasp the importance of Stochastics back then but I now realize they are one of the most helpful technical indicators in finding which direction the Forex market will go. I do believe I used them incorrectly when I first started out trading back then, but this time I was determined to use Stochastics to my advantage, so I sought out in depth explanations and modifications to this indicator. The stochastic indicator is a momentum oscillator, which can often indicate a pair’s upcoming strength or weakness in advance of a reversal.

What Stochastics does is calculate the current close price relative to the high/low range over a period of time that you can set and displays this result in the form of 2 lines. The %K line Is the main line and is usually displayed as a solid line. The %D line is a moving average of the %K and is displayed as a dotted line here.  In the example to the right it’s in the bottom window, it’s the real wavy looking lines in red and blue.  If we compare price movements with stochastics, there’s always movements up and down, but its those big moves we want to try and catch, which is why I’ll explain below, I’ve learned you can’t just trade using this one indicator if you want better odds.

· %K line is more sensitive than %D
· %D line is a moving average of %K
· %D line gives the trading signals

The three types of stochastics are Full stochastics fast stochastics and slow stochastics.
Slow stochastics is a smoother version of fast stochastics.
Full stochastics are even a smother version of slow stochastics.

How To Read Stochastics:

Buy when %K falls below the oversold level (below 20) and rises back above the same level.

Sell when %K rises above de overbought level (above 80) and falls back below the same level.

Many experts will say reading stochastics and applying them to Forex trading, only works when the market is flat or ranging. Understandibly, in a strong uptrend or downtrend, a reading on Stochastics might not always result in tren reversals, simply because a strong uptrend will always have retracements at some point, and reading Stochastics literally on each wave up or below the overbought/oversold levels can only be indicitave of a temporary movement. It’s important to note when the market is an uptrend then Buy Signals will always have greater probability for wins. The opposite is true in a downward trending market, we’ll want to find opportunities to sell instead of buy. ALthough counter trend trading on a longer time frame is profitable for many people.

The chart below is an example of what I’ve been taught to look out for, multiple indicators of a possible reversal in trend. Here I could have tried a coulpe of things, but keeping to the Stochastics aspect, we see that the %K line flip and rise above the 80 level (#1 Indicator), simultaneously we see the top of the trend channel be tested (#2 Indicator). Now, if I just jumped right into a counter trend trade, I’d experience a few pips in drawdown AND possibly get scared out of the trade when that retracement that breaks the channel line. RSI also indicates the pair is overbought (#3 Indicator) and if I had drawn a tren line in this move up, it wouldn’t have been broken until that second little move up is over, indicating a safer place to enter (#4 Indicator). So with all of these indications the price might reverse, I still did not enter this trade, to my own detriment, simply because I am scared out of counter trend trading by alot of people who have failed miserably at it. Including myself. But when I (you) take the time to sit down and analyze the charts for multiple indicators, we can ultimately become better traders on our own terms.

On the other hand, we could always trade with the trend, in which case we’d look for places this pair is oversold, this is when the stochastics fall below the oversold level [the red line in the chart above] and returns near to the same level.

When the market is trending down we will only look for overbought conditions (when the stochastics rise above de overbought level [above 80] and falls back below the same level. This isn’t rocket science once you see it take place a few thousand times

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