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How to Calculate Swap Points? – Swap Points Formula

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An exchange rate swap is an agreement between two parties to exchange a series of payments over some time to fix the exchange rate between two currencies. Parties involved in a forex swap agree to exchange a set amount of one currency for another at an agreed-upon date in the future. The most common use for swaps is to fix the value of a foreign currency payment stream for a business or individual.

Forex swaps can also minimize the risks associated with foreign currency fluctuations. For example, if a company has income in a foreign currency but needs to pay bills in its home currency, it can enter into a swap agreement with a bank or other party to lock in the exchange rate and minimize its risk. Swaps can also be used to speculate on changes in currency rates.

This article will write about calculating swap points and their importance in forex trading strategies.

As we wrote in our article about the Forex swap fee:

What is a forex swap fee?

Forex swap fee or forex rollover represents the interest traders can earn or pay on positions held overnight on the Forex market. The swap fee can be applied if traders have the positions at the daily rollover point, which is 00:00 server time or “tomorrow next.”

An extended swap fee will be applied when traders keep long positions open overnight, and swap short will be applied when traders support short positions open overnight.

A forex swap is an essential part of the foreign exchange market. It represents the interest traders can earn or pay on positions held overnight. The swap fee can be applied if traders have the positions at the daily rollover point, which is 00:00 server time or “tomorrow next.” An extended swap fee will be applied when traders keep long positions open overnight, and swap short will be applied when traders support short positions open overnight.

forex swap example

Swap Points and Their Value in Forex Trading Techniques

Fx Swap points or currency swap points are the difference between the spot rate and the forward rate in currency pairs indicated in pips. Usually, this is carried out for a specific type of currency pair which you want to trade.

Within this, a financial concept called Interest Rate Parity is used to calculate the points. This concept reveals that after investing some money and after getting the returns for different foreign currencies, you have to compare with the interest rate without a doubt.

Forward dealers using this concept identifies swap points in Forex currency trading simply by considering the advantage or the net cost when borrowing and lending currency mathematically over a period covering the forward delivery and spot value date.

How to Calculate forex Swap Points?

The swap point calculates the cost of exchanging one currency for another.

To calculate a swap point, you need to know the spot and forward rates. The spot rate is the current market value of a currency. The forward rate is the price at which two traders agree to exchange currencies in the future.

Formula 1= Lot x Contract Size x Current Price x Long/Short Interest / 360.

Formula 2 = pip value x swap rate x number of nights /10

forex swap formula example

To calculate a swap point, divide the forward rate by the spot rate. This will give you the number of swap points needed to exchange one currency for another.

How to calculate Swap Points using Forward Prices?

To be able to calculate the based currency of the forwarding rate with the U.S dollar, the equation below can help you:

Spot Price x (1 + Ir Foreign) / (1+Ir US) = Forward Price

Where “Ir Foreign” means the rate of interest for counter currency, whereas “Ir US” indicates the rate of interest in the United States; using this equation, you can calculate the swap points; now you can get:

Forward Price – Spot Price =Swap Points

Spot Price x (1 + Ir Foreign) / (1+Ir US) – 1)

Swap rate calculation forex example

To calculate the swap rate for 1 lot and 1.3 price level in forex, you need to do the following steps:

Swap rate = (Contract x [Interest rate differential. + Broker’s mark-up] /100) x (Price/Number of. days per year)

Swap Short = (100,000 x [0.75 + 0.25] /100) x (1.3000/365)

Swap Short = USD 3.56.

Rollover Swap in Currency Pairs

To understand the equation and how it works for rollover swaps, you must carry out a practical example for calculating the fair value.
Knowing Interbank’s deposit rates for each currency pair you want to deal with is extremely important. You have to understand the predominant terms based on the period of the Interbank. After learning the terms, you can compute the swap points for the currency pairs you want to deal with by creating the base currency with the U.S. dollar using the equation above.

You can calculate the rollovers by discovering the currency pairs’ interest rates. Knowing the rollover from the delivery date to the following day, where you can carry on doing business in the foreseeable future, is undoubtedly one of the best examples of a rollover swap.
You can also make and crank out money using the interest rate of currency pairs you buy and keep them for a long time if the interest rate is 0.25% U.S. Dollar for a short period. Because the interest rate is 5% for the Australian Dollar for the short term, the currency held is short, and you have to pay the currency pair’s interest rate.

A variation in the interest rate of 4.25% of currency pair is annualized in the rollovers. And you adjust to the specific time frame by implementing the tomorrow/subsequent swap rollovers for 1 year if you aren’t trading with rollovers.
Keeping an overnight position for a short AUD/USD, there will be a variation in the interest rate of 4.25% annually divided by 360 for a dealer as a rollover fee. Plus, a rollover period of one day is represented by 30/360. And a day rollover swap is defined by tomorrow/subsequent rollovers.

You’ll get the currency pairs’ rollover fee by multiplying the transaction’s sum with the interest rate for tomorrow/ next period. And by converting the currency into AUD/USD to get a fair value price, retail brokers usually charge the rollover fee in pips.

Holding an extended position to get the sum equal to the AUD/USD dealers would try to roll over for a long-term deal. But because of the Forex broker agents’ downward offer, the amount received will be less. To find more answers read articles about “Usage of basis swaps for hedging.”

Swaps free brokers list
On our website, we promote mainly swaps-free forex brokers. Please visit our page, where we list top forex brokers.

The Best Time Frame for Support and Resistance

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Support and resistance levels are the critical thresholds where the market trend is most likely to pause and change course. This may be a particular price/price field. Interpretation of support and resistance depends on the period of a dealer. To support the price pattern, it is better to use it in combination with other metrics, such as Fibonacci retracement ratios, moving averages, trendlines, etc. However, based on price, assistance and resistance levels may be traded.

In the previous article, we defined support and resistance levels in forex:

What is the support level?

Support level represents a hypothetical price level or price area supporting or holding up prices and signifying more forex buyers than sellers. Support is often viewed as a “price floor” because traders hypothetically expect that price change direction and begin to rise based on past performance.

What is the resistance level?

The resistance level represents a hypothetical price level or area consolidating, declining new high prices,  and signifying more forex sellers than buyers. Resistance is often viewed as a “price roof” because traders hypothetically expect that price to change direction and begin to fall based on past performance.

Support and Resistance Levels in forex trading

A support level is when consumers move in and get more competitive, stopping the price from falling. Because of the lower price, selling pressure reduces as the price drops for support, and consumers become more competitive because of these lower rates. The support mark will inevitably be breached, and the price will fall below it. Then the price will become the potential standard of resistance. A resistance level means sellers move in to become more competitive and prevent rates from soaring. Buying demand reduces because of higher costs, and sale pressure rises as price rallies against resistance. Ultimately, a resistance barrier will break out, and the price will climb above it. This price would be the potential support level.

See an example of how former resistance becomes support:

Support and resistance in forex trading

The Best Time Frame for Support and Resistance

The best time frame to draw support and resistance is M30 for day traders, H4 and Daily for swing traders, and Weekly and Monthly for long-term traders. However, professional traders use all chart time frames to add significant levels for any trading asset.

The best time frame to draw support and resistance lines is M30 for day traders, H4 or Daily for swing traders, and Weekly or Monthly for long-term traders. Support and resistance levels are essential in technical analysis because they indicate where buyers and sellers may have previously assembled in large numbers.

So usually, traders determine the best time frame for support and resistance based on strategy type, such as:

  • The Best time frame to draw support and resistance for intraday trading is M30. However, if the market is too volatile, you can use H1 or H4.
  • The Best time frame to draw support and resistance for swing trading is the H4. However, you can use a Daily chart if the market is too volatile.
  • The Best time frame to draw support and resistance for position trading is the Weekly time frame. However, you can use a Monthly chart if the market is too volatile.

 

Support levels are typically found at significant price lows, while resistance levels are usually at significant price highs. These areas represent potential turning points for a market, as many traders will buy or sell at those levels based on their own beliefs about whether the market is likely to continue rising or falling.

No one-time frame is best for finding support and resistance levels. Instead, it depends on your trading style and the type of market conditions that you are trading in. For example, if you are a short-term day trader, you may want to use a shorter time frame like M30 to capture quick moves in the market. Likewise, if you are a swing trader looking to hold longer-term positions, you may want to use a larger time frame like H4 or Daily to get more out of your trades.

In addition to using different chart time frames for support and resistance analysis, it is also important to include multiple types of indicators when drawing these lines. For example, some traders prefer using trendlines instead of horizontal lines since they capture both up-and-down trends more effectively. You can also add Fibonacci retracement levels or moving averages to help confirm where previous price movements were likely supported or resisted by large groups of buyers or sellers.

Ultimately, the best way to find support and resistance levels that work well in your trading strategy is through practice and experience. As you become more familiar with how various markets move over different time frames, you will be better able to identify key price points where other traders may be waiting with orders ready to buy or sell based on their expectations about future movements in the market.

Let us analyze one example using forex charts with support and resistance levels.

On the EURUSD chart using the H4 time frame, I added the daily low, daily high, monthly low, and monthly high.

support resistance daily and monthly low and high

On this weekly chart, the high is almost equal to the daily high. Usually, one price level can be high or low in trading for several different time frames. For example, if the current price is the highest high for the last 30 days, this level is at the same time daily, weekly and monthly high.

The higher time frame means a higher impact of support or resistance level. For example, a monthly high affects trading more than a daily high. In that case, if the price breaks the monthly price high, we can expect a more significant movement than if the price breaks the everyday high price.

Professional traders use all chart time frames to add significant levels for any trading asset. For example, famous trader Michael Boutros on his chart, adds all kinds of previous highs and lows, Fibonacci levels, Andrews Pitchfork indicator, channels, and trendlines. See the chart below:
Michael Boutros chart example

Gold price analysis – chart created by Michael Boutros, the intraday trader

 

As you can see, this professional trader added high and low prices for 2016 and 2018 (a few years ago) on the same chart. On his chart (analysis for 18. February 2021.) are yearly support and resistance levels, weekly support and resistance levels, and monthly support and resistance levels. He added basic levels using multiple time frame analyses. So, all time frames are necessary for this trader, although he is an intraday trader.

Traders’ charts have several degrees of support and resistance at every period to enter and exit the market. The importance of support/resistance is all about the trading period, whether the deal is long/short, and the number of times the graph indicates the importance of a specific price or region.

As a trader, you must decide which thresholds are most crucial for your trading plan and for particular time frames. For instance, it would be more relevant than a daily chart to recognize support/resistance on a weekly chart, which would be more beneficial than an intraday chart. There is generally little relevance to intraday support and resistance ranges if you are a short-term swing trader.

Note perception is somewhat arbitrary, and market actions can help decide the move at various stages. Indicators promoting understanding of the levels establish primary and minor support or resistance levels.

How to identify key price levels in forex for support and resistance?

The key support and resistance levels can be:

  1. Previous low and high (previous daily low, daily high, monthly low, monthly high, etc.)
  2. Trendlines
  3. Fibonacci levels
  4. Pivot point levels
  5. Price channel
  6. Andrews Pitchfork channel
  7. Supply and demand areas
  8. Moving averages
  9. Custom indicators

 

People are surprised when they see that the moving average can be used as a support or resistance level. A widely used analytical measure is moving averages. It helps in smoothing the uncertainty and assists in understanding and validating price behavior perception. Moving averages can be implemented to validate or facilitate the knowledge of support or resistance levels and evaluate primary levels for continuity and reversal of patterns.

Simple and exponential are the two typical moving averages being used. 

  • Simple – It takes the closing rate over a fixed time duration and calculates the moving average offered to every rate point with equal weight. It gives a later signal than a moving average of exponentials.
  • Exponential – It takes the closing rate measured for a particular time; the moving average is calculated by assigning greater weight to the existing price points. It gives a signal earlier than a simple moving average.

Moving averages can be used, like any other technical indicators, combined with other indicators. Usually, traders use Moving averages with periods 10, 20, 50, 100, and 200 as support and resistance levels. The longer the duration, the greater its future value of it. A moving average of 200 periods would have a more significant impact than a period of 10.

A change in signal from the 200 moving average would be less significant than a daily chart on an intraday chart. Markets are dynamic, and history does repeat itself. Like that, moving averages are active with their usage at any given time or chart.

It would help if you decided about the period you are attempting to trade– short, moderate, or long term to determine which period you can choose. The short-term intervals are 25 or fewer days, the mid-period is 25 to 100 days, and last but not least, long-term periods are said to be 100 to 200 days.

With practice and persistence, you will soon master the concepts and will be able to trade with confidence. 

Conclusion

The main idea is not to describe how we can determine and draw support and resistance levels. The main goal of this article was to explain that all time frames were necessary for trading decisions.

Day Trading as a Side Hustle! – Why I Do Not Like Day Trading?

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Numerous individuals may have information about the benefits of day trading as a side hustle but may not have considered trying it out to see how it works. If you are interested in day trading, you may want to consider trying day trading after reading this article. Do you think you could get a reward from day trading?

Day Trading, in theory, can be a side hustle because expert advisors can trade traders instead. However, I think day trading is too risky because many trades during the day can make too fast a loss of equity.

Day trading may not be for just individuals searching for a side hustle but for individuals interested in putting resources (assets) into day trading and getting great returns after a long time. For individuals considering day trading as a side hustle, the accompanying information below should aid in your decision-making.

Before you start trading, see this risk Table below:

loss and gain how to recover

What is Day Trading?

Day trading requires purchasing an asset and selling it within 24 hours. Day traders or investors may use foreign exchange and stock markets to navigate trade, and it can be pretty standard to use short-term trading techniques to finish a transaction.

Individuals involved in day trading to make a living may use traders’ tools such as price charts by setting the price chart to the shortest possible time increase to get a closer look at short-term price moves. Although, some techniques may require making use of tools outside price charts.

Day Trading Strategies

A few essential techniques used by experienced day traders include:

  • Range trading: This technique works on the tracking level and resistance support to make a trade. Range trading requires a decent understanding of the price range the stock would move to.
  • Scalping: A technique that exploits minor price moves for the day. Using the scalping strategy, the trader will buy excess assets for less than the retail price, after which the trader will sell them to other individuals willing to purchase the support at the retail price.
  • High-Frequency Trading: This technique frequently utilizes bots that can slither markets, searching for potential open doors that match the bot’s client’s measures. The bots continually search out short-term market failures to benefit from a high-speed sequence of trades.
  • News-Based Trading: This strategy can be considered one of the most efficient techniques since it exploits genuine news that impacts an industry or organization. Professional traders make use of news-based trading to their advantage. For example, If a company should release a quarterly report and it turns out better than expected or acquired another solid operating company, which may lead to the company’s stock increasing, or if the company releases a gloomy report or the company had to file for bankruptcy, this may lead to the stock tank.

Day trading is active trading in which traders attempt to profit by buying and selling financial instruments on the same day. Different day trading strategies can be used depending on the asset being traded, time frame, market conditions, and trader preferences.

Some popular day trading strategies include scalping, range trading, and high-frequency trading. Scalping involves purchasing security and quickly selling it again for a small profit. Range trading involves monitoring price levels to identify potential breakouts or breakdowns to capitalize on short-term price changes. High-frequency trading uses computer algorithms to execute large numbers of trades at very high speeds, potentially allowing traders to profit from even minor price fluctuations.

Risk tolerance, market knowledge, and trade psychology are other factors to consider when choosing a day trading strategy. Traders should select methods that best match their risk tolerance and level of market knowledge to achieve the best results. Additionally, staying focused, disciplined, and patient when using any day trading strategy is essential, as these qualities will help traders successfully navigate the often volatile and stressful world of day trading.

Can Day Trading Be The Ideal Side Hustle?

In my opinion, day trading is not the perfect side hustle because of the following:

  • You risk money to earn money, and only 5% of traders can achieve profit as traders.
  • Day trading usually leads to overtrading and high commissions.
  • The maximum annual profit of best world day traders is 20%, so if you want to earn $1000 monthly, you need at least $60 000 investment. 

 

Day trading is a type of investment activity that involves buying and selling financial assets on a short-term basis. While day trading can be a risky way of making money, many people have found success with this approach as a side hustle, using the income generated from their trading activities to support themselves. At the same time, they pursue other interests or work in other professions.

Several factors make day trading a perfect side hustle. First, it can be done from anywhere, so long as you have access to a computer or mobile device with an internet connection. This means you can set your schedule and work when and where you want, giving you great freedom and flexibility.

Second, day trading is relatively easy to get started with. All you need is an online brokerage account and basic market knowledge. Suppose you are willing to invest the time and effort to learn about investing strategies, market trends, economic indicators, and other vital concepts. In that case, it can become successful at day trading relatively quickly.

Finally, since day trading does not require a huge initial investment or ongoing fees like other forms of financial investing, it can be relatively affordable for anyone who wants to try it as a side hustle.

While there are benefits to pursuing day trading as a side hustle, some potential downsides should be considered before jumping into this investment strategy. For one thing, the fast pace of day trading means keeping up with market fluctuations throughout the day can be challenging. There may also be periods when market conditions are unfavorable for profitable trades – meaning that your investments could suffer losses even if you have made good decisions with your trades in the past. Another possible downside is the risk of incurring high levels of debt due to frequent losses on your trades – which could make it difficult for you to pay your bills or meet other financial obligations while trying to build up your portfolio through day trading.

Overall, whether or not day trading is suitable for you will depend mainly on your risk tolerance and willingness to take on risks as part of your investment strategy. If you are looking for an easy way to earn extra income but don’t want too much risk involved, then choosing another side hustle might be a better option than trying out day trading as a side business venture.

 

Day trading issues for side hustle traders are:

  • Missing opportunities because of a day job
  • Getting lower returns due to not being a full-time day trader.
  • There is no availability of sophisticated trading tools like analytics programs, newsfeeds, price tickers, and headline tickers.
  • The constant buying and selling of assets make it tough to realize the long-term profit that powerfully operating stocks can bring.
  • To begin day trading with the impression of making fast money.

 

Be Knowledgable About Day trading Fees and Risks.

Being excessively connected to a particular asset might be a risk for beginner day traders. This is primarily a worry when trading asset classes like cryptocurrency. Newsfeed bots can turn up a lot of social media chatter from individuals who have invested too much in a specific cryptocurrency or digital token. For example, when the Bitconnect Ponzi scheme flopped, Individuals who fell into this trap lost a massive load of cash.

Fees and Taxes ought to likewise be thought about while day trading. For instance, Etrade charges customers $4.95 per trade for clients making at least 30 trades per quarter. You’ll likewise need to pay taxes on every capital profit from trading. All of these parameters will automatically decrease the profits made from day trading.

 

Conclusion

The truth is many individuals who could have attempted to dive into day trading as a side hustle will surrender after a couple of bad trades. If you don’t feel good taking risks with your cash or don’t want to take the effort to build a strategy, you may opt for another side hustle that involves less or no risk.

What is Order Block in Forex? – Order Block Trading Strategy

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Retail traders are increasingly active in anticipating price fluctuations and considerate marketplace subtleties. Twenty to thirty years ago, central banks and economic organizations could influence markets without ordinary traders knowing. Retail traders may now join the large guys and utilize block orders with advanced trading platforms and tools. This article explains forex order blocks, how to recognize them, and the order block dealing technique.

What is Order Block in Forex?

Order blocks represent high-volume orders from big trading institutions such as central banks.  On the trading chart, order blocks can be seen as high volume supply and demand areas that can create strong bullish and bearish trends.

what is order block gbpusd example

Trading blocks on charts are areas of high or low demand or supply.  These “blocks” are special orders that financial firms and central banks employ to buy and retail valued possessions that ordinary people may put to practical use.

Please watch my video about Order Blocks:

Central banks usually divide their orders into chunks. Then they continue in this manner until they have completed their mission. If a central bank has to acquire 500 million euros with US dollars, they may do it in more than 3-5 transactions.

Furthermore, they frequently employ complex orders to conceal their market participation. For instance, even though they have a thousand, they place a single order on the buy or sale side. Because of this, reserve banks may achieve their aim without increasing market volatility or dramatically altering prices, as it is confidential information for other traders.

Examples of Order Blocks in Forex Trading

As we’ve already discovered, order blocks are groups of orders placed by central banks, governments, and big trading institutions.

For example, important economic news or intervention represent typical order blocks like on EURCHF:

order block example eurchf

With the help of market data at level 2, you may spot them if they consistently place large orders without considering the pricing. Buying a significant quantity of an asset within a tight price range is standard practice for central banks. Please read more in our article on how banks trade forex.

trend trading distribution - Bank trading strategy phase

Let’s assume, though, that you’re only accessing market Intelligence, Level 1, and relying heavily on trade charts to understand the underlying structure of the market. This calls for the analysis of price charts to determine if we are in an aggregation or dispersion phase. A bullish order block is the first, while a bearish order block is the second.

Bearish USDCHF Order Block

Suppose a central bank is entering the market to sell the counter currency and enhance the value of its currency as part of the reverse currency war. This USD/CHF (U.S. Dollar/Swiss Franc) example serves as a bearish order block.

In two days, US and Swiss increased their interest rate in the middle of June. The Swiss central bank surprises the market with the first rate hike since 2007.

USDCHF order block example bearish trend

 

The use of order blocks is a novel trading approach that may be implemented by investors seeking market direction. By revealing what banks and other financial organizations intend to do in a specific market, it can help traders predict the direction prices will go.

How to determine Order Blocks on the chart?

  • Use volume indicator

Combining volume indicators is another critical consideration when implementing order block trading techniques. The goal is to identify whether or not a significant actor accumulates the asset in question inside a specific supply or demand zone and whether or not the accumulation phase is characterized by high volume.

We’ve already shown that order blocks provide the impression of a ranging market, but it doesn’t imply that every range is an order block. Therefore, a volume indicator should be used to verify that the trade volume is abnormal to guarantee the content is an order block scenario.

  • The range expands in direct proportion to the magnitude of the shift.

In the dissemination or accretion stage, markets frequently engage in lateral trading before shifting in the initially anticipated direction once the pile-up is completed. Remember that whenever anything like this happens, the more extensive the series, the more profound the movement will be.

Since this is the case, the Wyckoff graph arrangement and market structure are required. The trader will join the market as soon as the price cessations through either the conflict or the support level.

Bear in mind that in several situations, central banks and large institutions seek to lengthen the range period so that they can finish their purchase at roughly the equivalent level of charges and avoid dealing with significant instability and trending marketplaces. Because of this, they want to maximize their chances of finishing their purchase at the same level price.

  • Order blocks do not occur every day.

You may safely believe that order blocks are not something you can look for or use in your forex trading strategy. No one can predict when central banks or other significant participants will enter a market, and you won’t receive any warnings before they do. As an additional note, order blockages are a very uncommon occurrence.

As a result, you shouldn’t make order blocks the foundation of your trading strategy; instead, include them in your system and employ them as you gain experience spotting order blocks in the market.

Order Block Practical example

In September 2022, there was a considerable GBPUSD drop, and this pair almost hit the 1.00 price level. RSI for GBPUSD was below 20 on the daily chart.

gbpusd on 28 septembar

Bank of England decides to do bank intervention:

bank of england intervention news story

After this news, there was a significant bullish daily trend on GBPUSD and several trading blocks. GBPUSD price went up:

gbpusd recover price after intervention

 

Cons and Pros of the Order Blocks in forex

Order Blocks Advantages

  • Excellent tool to find strong trends
  • The ideal combination of fundamental and technical analysis.
  • You get information from governments and banking institutions

Order Blocks Disadvantages

  • Hard to detect Building Blocks
  • It would help if you had a technical and fundamental reason

Forms of sequential building blocks

In trading, there are two distinct kinds of order blocks, each corresponding to a specific order type.

  1. Bearish order block
  2. Group of bullish orders

1. Block of bearish orders

After a price range or block has been broken, a bearish order block will occur if a bearish impulsive wave has begun to build. Once the worth moves back into the bearish order block area, we will initiate sell orders.

2. Group of bullish orders

A bullish order block has formed when an up-trending impulsive wave occurs after breaking a range-bound market structure or block. We’ll start placing purchase orders with institutional traders as soon as the price moves back into the order block zone.

Large organizations and banks are watching order block zones closely, as we know. Orders from large trading firms tend to be placed in these areas. These price ranges should be remembered so that we will be prepared to make trades after the charge inevitably yields to these areas in the prospect. In the event of order blockages, I have outlined a primary criterion for opening purchase and retail orders below.

Put an awaiting purchase boundary order some pips beyond the bullish order block area on the chart when it appears. Setting a stop loss order for some pips underneath the region is recommended.

Place a stop loss order above the zone and a pending sell limit orders a few pips below it when a bearish order block zone appears on the chart. Remember that this is an essential order placement procedure. In the financial markets, this is not a strategy. Advanced technical tools, risk assessment, and psychological aspects of trading make up a trader’s approach.

As a trader, how can I map out a block zone for my orders?

Recognizing the price range or price block on a chart is the first step in drawing an order block.

  • Follow this by circling the extremes of the pricing range.
  • Make a horizontal line that extends between the order block’s high and low points. We can use this space as a chokepoint for incoming orders.
  • It would help if you always tried to make purchases and sales within this order block area.

Retail traders feel disappointed when their approach fails. A failed deal may not represent incompetent traders or understanding. Sometimes they lose due to liquidity issues. Institutional traders have the most significant edge in the crowded FX market. They can control market pricing with a substantial market cap. What should ordinary investors do?

Order blocks can boost your trading. Many individual investors succeed with this method to avoid liquidity searches and increase their chances of success. It may be forward-looking if you could find order blockages and use them in your dealing approach. It’s everything here.

Order blocks relate to the aggregation (when bullish) and dispersal (when bearish) of orders after fiscal organizations and banks. It reveals where established agents stack orders afore entering the marketplace. These entities are the fundamental price drivers of the market; thus, understanding their strategies will help you make trading judgments.

Using an approach that integrates institutional trader behavior may improve your odds. Institutional traders deal in large volumes. They should organize wisely. They spent countless currency on market analysis to improve trading results. Executing a large order is a new difficulty for them.

Every purchase order must have an opposing sell order. Due to their large orders, institutional traders may have trouble finding a counterparty to fulfill them. Financial institutions and other businesses sometimes divide orders into slighter agreements and carry them out in stages.

A bank needs to buy EUR 100 million/USD. Liquidity limits the market to $20 million. The bank may acquire an additional fifty million dollars in the second stage and thirty million dollars in the third. They may execute orders at the desired price without chasing the worth or disturbing the market. When $100 million is traded, the price typically jumps.

Order Blocks vs. Supply/Demand

Order blockages and supply/demand are controversial. Some sites say they’re the same. Order blocks are a form of supply/demand range. They think placing order blocks in the array association zone produces supply/demand zones. This precisely doesn’t seem right.

supply demand area forex

Supply/demand occurs in the commodities market, where maize, wheat, and soybeans are traded. When supply is low, prices increase; when demand rises, prices decrease. Forex isn’t like this.

Forex price movements seek liquidity above or below recent highs and lows. However, financial organizations heavily impact currency values, which adjust the value to appropriate locations so they may make orders. Once the price exits the order block region, it’s not because supply or demand is growing but because significant players shift it to the opposed section of the liquidity pools to retail their possessions.

Order Block and COT report

Retail traders must grasp what institutional traders do in the marketplace. The commitment of Traders (CoT) report is used for this. You should declaim the information, discover essential bits for your profession, then connect the dots. The report doesn’t include intraday activity; therefore, it’s not useful for temporary investors.

what we can check in COT report

Order blocks offer you a greater understanding of what organizations are undertaking since you can see their traces in the digital world. You’ll mark more innovative trading selections with the speedier procedure. Order blocks may be employed in many marketplaces and dealing tactics; thus, they’re valuable for numerous traders.

Finding order blocks on the chart is the first step in learning how to practice them in your dealing system. In the work of large organizations and banks, order blocks can be seen over more extended periods following a market association. Generally, consolidation zone candles are more minor than Order block candles.

The best way to monitor what big trading institutions do in the forex market is to monitor the COT report.

Watch for a bearish candle before a significant bullish advance to detect order blockages in a bullish market. Once you notice order blocks, you can change them contingent on the price’s direction. Not every order blocks are lucrative and likely. Observe some qualities to determine if an order block is worth employing.

crude oil cot report

If this criterion does not exist in the graphic representation, the chance of the order block is minimal, and you should reconsider your analysis in light of this finding. First, you should look for a merging array where establishments are buying (a bullish order block) or selling (a bearish order block), and then you should examine price variations.

cot report spread example

As soon as the rate arises in the opposite direction of the order block, it would help if you drew a rectangle beginning at the order block’s high and terminating at its lowest, extending its scope so that it spans the portion of the graph on the right. Ensure the price stays above the order block’s middle range.

Higher-frequency events

Higher-level temporal scales can give you a more comprehensive picture of price movement and a greater understanding of order blocks. After a strong up and down motion, blocks of order arise. After the worth exits the order block region with significant momentum, it retraces to collect market orders. If this circumstance lasts too long, the market is wandering. To what extent the price must deviate from the order block before a reversal is permitted is not specified. Still, a more extended period may assist you in viewing the better picture and deciding what to do next.

After a market shift, follow the trend.

Pay attention to bearish order blocks if the market arrangement changes and the tendency turns negative. You should enter a short position with a target price under bullish order blocks. The inverse is also true with this principle. If there is an improvement in the market’s structure, traders should look for liquidity pools that can overcome bearish order blocks and concentrate on bullish order blocks.

Conclusion

Overall, order blocks are the most efficient method for spotting and following the requests of financial organizations and banks. I strongly advise traders to familiarize themselves with and use this naked chart trading strategy in their approaches. Doing so will do wonders for your dealing profession.

In conclusion, order blocks are an excellent instrument for determining which aspects of market activity have the most significant impact. And central banks frequently participate in the foreign exchange market to influence the worth of their currencies, which positions them as substantial participants in the market. Even though this strategy is quite effective at taking in present market statistics, there is not a widespread agreement on how exactly order blocks should be put into dealing coordination.

The most prudent thing is to have this trading method close and put it into practice routinely whenever you identify accretion or dispersal zones brought about by the acts of central banks and other essential entities in the marketplaces.

After a significant purchase by a central bank or investment bank, most traders will wait for the price to break between the resistance and assistance levels before entering a position.

Although the foreign exchange market is regionalized, it is commonly recognized that central banks substantially contribute to ” deploying ” their exchanges’ values. All at once, central banks must preserve the constancy of their currency’s exchange rate, which means they cannot put a large order on the market that would scare away other market players.

MACD Settings for Intraday Trading – Best Parameters for MACD

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In this article, we developed one test, created one intraday profitable strategy, and then varied the values of the MACD settings parameters in several combinations. We wanted to see what is the best MACD settings for intraday trading.
basic MACD settings in Metatrader

Standard MACD settings (12,26, 9) have the following parameters:

  • (12) – ‘Fast line’ or the 12 periods EMA (exponentially weighted average)
  • (26) – ‘Slow line’ or the 26 periods EMA
  • (9) –  ‘Signal line’ or  the 9 periods EMA

The Best MACD Settings for Intraday trading – Case Study Video is presented below:

Moving average convergence/ divergence or more commonly referred to as MACD for short, moving average convergence/divergence is an indicator for trading, created by Gerald and used for various stock price technical analysis types. It was developed in the last period of the 70s.

MACD has been designed to help reveal the trend duration, momentum, direction, and stock price strength. The oscillator or the MACD indicator is a three-time series collection calculated with data from historical prices; it is typically the price of closing. The three series are the divergence series, a difference between the average and signal series. The other two are the signal series and the average series.

To use the MACD indicator correctly, use the MACD MT4 2 lines indicator.

The best MACD settings for intraday trading

The best MACD settings for intraday trading are default settings MACD parameters EMA 12, EMA 26, and EMA 9 based on forex.in.rs research on the M30 minute chart. The study was done on 9 MACD settings combinations. The best MACD settings for swing trading are default settings MACD parameters EMA 12, EMA 26, and EMA 9.

Macd settings for day trading analyzed the standard setting for MACD is the difference between the 12- and 26-period EMAs. Our research tried combinations for greater MACD sensitivity and tested a shorter short-term moving average and a longer long-term moving average. MACD(6,35,6) is more sensitive than MACD(12,26,9) and can be a better MACD setting for weekly charts. When traders use M5 or M15, or M30 chart time frames in day trading, the best performance is obtained using standard MACD settings for day trading (12,26,9).

Signal Line Crossover

The signal line crossover of MACD shows that the acceleration direction is changing. The average velocity of the MACD line when it crosses zero indicates that the direction is being changed. You can read a review about the Two-line MACD indicator for mt4 and make a free download on our page: Download MACD Indicator with Two Lines for MT4.

How is the MACD Indicator Used for intraday trading or long-term trading?

The tool is used to identify moving averages, indicating whether a new trend is bearish or bullish. The main goal of trading is to find a new trend, where one will find the most money and have a piece of the pie.

MACD Chart


The MACD charts show three different numbers being used for the settings. The first number is for the periods and is used to calculate the faster-moving average.
The second number of periods is used for the slower moving average. Finally, the third number is for the number of bars, which would calculate the moving average and differentiate between the slower and faster moving averages.

Basic MACD settings

As an example, if one were to come across the default setting of the MACD parameters that are 12, 26, and 9, these would be interpreted as:
Fast EMA period: The 12 previous bars represent 12 of the faster-moving average.
Slow EMA Period: The 26 previous bars are represented by 26 of the slower moving average.
Signal SMA period: The 9 previous bars are represented by 9.

Vertical lines would be plotted and are referred to as a histogram. When it comes to MACD lines, there is a misconception. The 2 lines that get drawn do not reflect the price moving averages but differ in the moving averages between the moving averages.

The original line would be smoothened when a slower moving average is plotted. Further, this helps provide one with a much more accurate line. The histogram would plot the difference between the slow and fast-moving average.
The divergence is when one notices the two moving averages moving separately. The histogram will become more significant since the faster-moving average would move away or diverge from the slower-moving average.
The histogram would get smaller as the moving average starts getting closer. This is referred to as convergence since the faster-moving average would get closer or converge to the slower-moving average. This is the entire process of the Moving Average Convergence / Divergence.

Now that you have understood what MACD does, it is time to know what it can do for you.

MACD for Slow and Fast Moving Averages

A new downtrend would be identified as the fast line crosses under the slow line. One could notice that the histogram would disappear temporarily as the lines crossed. It is due to the line difference when the cross is zero.
Furthermore, when the downtrend starts, the histogram gets more significant as the fast line diverges or moves away from the slow line. This is an indication of a definite trend. Let’s have a look at the examples.
Let’s look at an example for a better understanding.

MACD settings to use outside MetaTrader

If you want to analyze charts using MACD, detect trends, and develop free trading strategies without coding, you can use the Trendspider platform.

MACD with two lines using Trendspider

Our MACD intraday settings using Expert Advisor tests

Indicators :
1) MACD with several settings
2) Channel (we used our indicator, but you can use any channel indicator, for example, the Donchian channel).
3) Important level indicator. Our indicator is based on previous highs and lows, but you can use Pivot points or Fib levels.

Rules :
We created several combinations and created BUY and SELL rules on 30 minutes chart :

BUY if we see a bullish MACD cross or zero line cross AND the price touch a significant level AND the price is in a bullish channel. Stop loss is the last important level swing. Target at the next level.

SELL if we see a bearish MACD cross or zero line cross AND the price touch an important level AND the price is in a bearish channel. Stop loss is the last important level swing. Target at the next level.

In the first test, we used 30 minutes chart and basic MACD settings. Then we repeated several tests with different combinations :
macd intraday settings and profits. Our tests.

Important fact:
You can combine the moving average strategy with MACD. The best moving average crossover for intraday (or long-term strategies) is a combination of SMA10, SMA50, SMA100, and SMA200, but you need to change the chart time frame for each strategy. For the long-term strategy, you will use a combination of SMA10, SMA50, SMA100, and SMA200 on H4 or a daily or weekly chart. For intraday trading, you will use m30 or m15 or a 1-minute chart.

The best MACD settings for 5 minute chart

The best MACD settings for a 5-minute chart are parameters 24, 52, and 18. They showed 5% better performance than default settings 12,26,9.

The best MACD settings for 15 minute chart

The best MACD settings for a 15-minute chart are parameters 24, 52, and 18. However, this setting is only a few percent better in our case study than the default setting 12,26,9.

This setting is the best for small time frames. For example, the best MACD settings for a 2-minute chart or 1-minute chart will be higher periods than default settings. Higher periods analyze more number of minutes and give provide robust solutions to price volatility.

The best MACD settings for 30 minute chart

The best MACD settings for the 30-minute chart are default settings parameters 12, 26, and 9. Our research didn’t find any statistically important significance when comparing default settings and varied value combinations.

The best MACD settings for 1-hour chart

The best MACD settings for the 30-minute chart are parameters 24, 52, and 18, and default settings parameters 12, 26, and 9. Both settings showed similar results. However, we recommend standard settings for 1-hour chart trading.

Trade with the help of MACD

As there are 2 moving averages with different speeds, it would be quicker to react to the price movement for the faster one than the slower one. Whenever a new trend is discovered, it would be the last line to be the first to react, and it would eventually cross to the slower line. When the fast line begins to diverge as the crossover starts, it will move away from the slower line, and a new trend would be indicated as being formed.

Crossover Example of MACD

MACD has a drawback, which is that they tend to lag when it comes to price since it is just the historical price average. One would expect a bit of lag as the MACD represents the moving averages of others, and it is, as such, smoothed out by one another. Despite this, it is still one of the practical tools most traders use.

Indication of Changes in Stock or Forex Trends

IN the MACD series, with the help of different periods, EMAs can indicate the changes in stock trends. Usually, the fast EMA would respond much quicker than a slow one. Subtle shifts can be revealed in the stock trends with the help of the divergence series.

Mathematical Interpretation

The MACD is a measure filtered by the price, which derives the input regarding signal processing time. Velocity is the term for derivate as used in technical stock analysis. It would estimate the derivatives just like how they had been calculated. The difference in the time constants would be discovered using filtering by the 2 low-pass filters.

Just as it would have been filtered by an EMA of a single low pass exponential filter, MACD can be seen to approximate the derivative through calculation. The time constant would equal the sum of two filters’ time constants, which one would multiply by a similar gain. The MACD derivative would be estimated through the approximate filtering of the equivalent of an EMA filter of low pass.

Furthermore, the average series can also be considered a derivative estimate, for further smoothing would be done by the additional low-pass filter. The difference between the intermediate series and the MACD serried would represent a second price measure connected to the time. The estimate would have an additional gain factor equal to the signal’s filter constant and additional lag.

Classification

MACD could be classified as an APO (absolute price oscillator) as it does not deal with percentage changes but with moving averages of the actual prices. PPO or a percentage price oscillator would compute the difference of 2 moving averages of the price divided by a longer moving average.
The PPO will calculate the changes relative to price, and the APO will show more minor levels of lowered price securities and greater levels of the higher price securities. When one compares the oscillator values of various securities, a PPO would be preferred, especially for different prices.
The DPO (Detrended Price Oscillator), another member of the price oscillator family, ignores long-term trends. Instead, short-term patterns are emphasized.

Trading Interpretation

EMAs highlight the current changes in stock prices. The MACD can gauge the changes in stock trends by comparing the different lengths of the EMAs. The difference between the average claimed by the MACD and the MACD series helps reveal the shifts in the direction and the strength of the stock trends. It might even be necessary to correlate the indicators of the MACD to signals such as the RSI power.
Some traders would attribute importance to the MACD line that crosses the 0 axes and the MACD line that crosses the signal line. The importance is also due to the disagreements between the different lines, the MACD line, and the stock price.

Signal-Line Crossover in our tests

It happens when the average lines and the MACD cross, meaning that the divergence would change its sign. The interpretation of this would be that it would be recommended to buy as long as the MACD line crosses over the average line. These events indicate a trend in which the stock would accelerate towards the crossover.

False Signals in our tests

It is possible for there to be false signals, just like any other forecasting algorithm. It would be prudent to apply filters to the signal line crossovers. Analysts use different approaches to find the right results. We chose our trading rules. You can make any test using its strategy. Each strategy will have false signals.

Thoughts

We think that the best success we can get is using standard basic MACD intraday settings because most “big dog” traders and institutions use these settings. Our test got similar results, but basic settings made the best results.

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