Stochastics with Forex
February 4, 2008
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 
Bond Spreads In Forex
February 1, 2008
Bond Spreads in Forex Trading
Forex Killer Showing Promising Results (So Far)
January 30, 2008
New Forex Killer Review (mo4Forex.com) After a month of using Forex Killer I’ve concluded that it does actually make me pips, but the losers are unfortunately outweighing the winners in terms of pips lost vs gained. 
I will enter trades looking for a 30-50 pip profit (not including the spread), and set an equal stop loss (or a stop loss near a point of resistance) So, while my winning trades netted over 5800, my losers accounted for 3700 in losses. Hardly a killing. In fact I feel a little roughed up myself, but alas, I have seen the err of my ways. Instead of just blindly trusting Forex Killer, you really need to use your brain and do your own analysis on the pair. I know for a fact that news spikes didn’t affect my positions opened with help from Forex Killer’s signals. Also, I used smaller lots for more of the winners and there were some larger lot trades with more of the losers. I deduced that Forex Killer entered me into losing trades because I read the signal near the end of a trend, which still indicated a strong buy or sell signal, but was soon to retrace or reverse, and with the stops I had set for many of them 30, 40 or 50 depending on the pair and situation, I would have a $500 losing trade versus a $100-200 winning trade. So even though I had a 3:1 success rate, the pips gained/lost ratio is much tighter. But, that alone should not turn me, or you, off to this software, my trading method just needs to be tweaked. I thought it would be useful to bring up and see if anyone else had a similar account of trading with Forex Killer.
In total, I have made 48 winning trades and 16 losing trades with Forex Killer. Now, demo conditions are not indicitive of what live conditions might be like, so keep this in mind. Also, note that these results will be different for everybody, there’s just no possible way 2 people can enter the same trade time and time again, so, results will vary. My Detail Statement graph reflects my trading all month, and about mid way I started to use Forex Killer, so you can see how much my trading improved. To repeat, that graph has my own manual trades based on whatever I thought was a good trade, often times a loser for me, on this demo account at least. The graph does speak for itself though; This was not a hypothetical backtest, these were real trades made on a demo account, but real trades noneheless, and for my losses to be wiped out and to see a $3000 gain thanks to Forex Killer’s advice really convinced me to keep trying at it. Even though the often tedious task of entering in one price at a time takes its toll, the signals have proven to be quite accurate and on more pairs than originally suggested by the software developers.
It seems trading GBP/USD was the biggest loser for me, short and long trades were about even in terms of winners/losers. EUR/USD was the second worse and USD/CHF came in third in terms of losers. But like I said, winners outweighed losers 3:1 exactly.
Now, I’m trying out some more trades today and so far things aren’t looking good, 4 losers at once right now and will probably hit their stops. Actually I am down $800 as I type this to you on Forex Killer signals, so things don’t always work, of course.
Addendum— 3 hours later
I was wrong about not trusting these signals, and my least favorite pair earned me $1200 in profits, 120+ pips on two seperate trades, and also another winner in USDCHF and EURUSD. So all of those trades I thought were about to be losers are now winners, all closed except the one big trade on GBP/USD, I set a 25 point trailing stop loss and am 10 pips away from my target!
Forex Programs and Products List
January 23, 2008
I felt very inspired the other day when I ran across all of these lists for brokers and indicators, and felt my blog was lacking in that department. So, I put together a list based on ForexBrokerComparison’s list of Forex Alerts, Indicators, Ebooks, and other Software.
Some of these I will earn a slight comission on, but since I am not endorsing or promoting them through reviews, I am not biased. I am just offering plain hard facts as presented by these programs, price, reported pips per month earnings, etc. I’ve noticed that most “Ebook” strategies are $97 one time fee. What the heck is with a $97, why not $99 or flat $100. I suppose the significance of the $97 reflects an amount that’s universal to most online marketers at which they believe they will attract the most customers and maximize profits. Most of the ebook systems are this price, certain indicators are cheaper, but are a monthly expense for you. You need to be the judge on what is going to earn you the most for the least amount of effort/money. I’m not saying you shouldn’t put an effort into your Forex Trading, I do believe it is wise however to not waste hours trying out systems during which time you can be dedicating to things that make you money, or other trivial things like your family and friends…
Ok, even talk, please enjoy this list, and keep in mind its a work in progress. Some day, I envision it being 1000 programs deep, because, as you know, there are 1000′s of Forex Signal Providers, Forex Ebooks and Lessons, Forex Mentors, Forex Indicators, Forex Expert Advisers and other Forex related software on the market… they ALL can’t be profitable, and they all deserve to be looked at with a magnifying glass. Also remember I don’t endorse any of these programs even though I may have tried them and still use them (like Forex Killer), this is just an informative list for your own educational benefit.
Please comment below in this post about any errors and omissions to the list, because pages on my blog can not accept comments. Click Here To Visit The Forex Programs and Products List.
New Year New Forex Signals
January 2, 2008
Well it’s officially 2008. NASDAQ just tanked, oil hit $100 & poised to go higher, and Pakistan is in turmoil. Other than that, things couldn’t be better. My new year’s resolution is to try a new Forex Signal provider every other month and see which one will make me the richest faster (or perhaps poorest). Some of the Forex Signals I’d like to try out for myself include
- TEAM APHID’s Team Aphid Bird (TAB)
- 5Dimensions Forex System
- ProForexIndicator’s Cable Indicator System (CIS)
- ProForexIndicator’s Premier Indicators
- Jeff Park’s Octave
- ForexSoft’s Series of Indicators including GoldNStream
Now, if you have already tried any of these and they don’t work, please give me a heads up in the comments below, you’ll save me time. Otherwise, I’d really like to test the effectiveness of these various signals for myself, as some of them have good reviews, and some bad, but none all bad.
ProForexIndicator is an indicator service I am familiar with from a few months back, I wrote a blog post about my trial period with them, and it was profitable for the most part. But what struck me odd was I had profits on some days where they themselves reported losses, which didn’t exactly turn me off to the service, but make me question how I could read their signals one way (someone with not much Forex experience) and they read it another. This same company has also recently put out “PREMIER SIGNALS” for GBP/USD and USD/CHF, which are sent to your mobile and email. I already asked if this is based on their Cable Indicator System, they said no, it’s completely different. So, I know the Cable Indicator System is very effective, has some losses, but they are greatly eclipsed by it’s wins. I’m looking to see if the same goes for their new system as well, seeing as the past performance data shows they’ve made a considerable amount of pips over the past year. I am skeptical though about any backward testing, anything can be manipulated or sugar coated to squeeze in pips here and there, but I’m not saying this company is dishonest, there’s just no telling about the honesty of ANYONE’s statistics and revenue reports, just first hand knowledge. Stay tuned for full reports on this system.
Forex Signal Review Site
Another website I found useful, and it’s free (for the most part) is collective2.com, a site where forex indicators are reviewed in forward testing and with real money. Team Aphid is one of the premier signal providers. ForexProIndicator is not on this site at all, is that a bad thing though?
Think of us as an independent “trading system auditor.” We’ll investigate which trading systems are profitable. Then you can set up your own personal hedge fund, and have trades placed automatically in your brokerage account. A growing number of brokers are C2-compatible: OptionsXPress, OpenECry, FXCM, Gain Capital, IFX, FuturesBetting, Interactive Brokers…
At first glance Collective2 seemed amazing, but it does have a lot of resemblances to ZuluTrade, which isn’t so great, especially the whole automatic trading functions. Will you ever wake up to an empty account? Who knows. You need to do the research yourself, but I will say that Collective2 does help you weed out some losing indicator services that you might not have the ability to do yourself. As you can see, December was an awful month for most indicators, it’s a tough month to make money in, especially with longer term trades, scalping is another story. Collective2 allows people to make comments about systems, but again, who knows whos saying what and if it’s true, I think we’ve run into this problem with some other Forex review sites.
