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MACD settings for intraday trading

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In this article we developed one test, where we created one intraday profitable strategy, and than we and then we 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

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

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

Signal Line Crossover

The signal line crossover of MACD shows that the acceleration direction is undergoing change. The average velocity of the MACD line when it crosses zero indicates that the direction is being changed.

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

The tool is used for the identification of moving averages which indicates a new trend if it is bearish or bullish. The main goal of trading is to find a new trend as that is 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 it is used for the calculation of 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 be used for the calculation of the moving average which would be used for the difference between the slower and faster moving averages.

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Basic MACD settings

As an example, if one were to come across the default setting of the MACD parameters that are 12, 26, 9, these would be interpreted as:
Fast EMA period: The 12 previous bars are represented by 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 which get drawn do not reflect the price moving averages but rather are the difference of the moving averages between both of the moving averages.

When a slower moving average is plotted, the original line would be smoothened further, this helps provide one with a much more accurate line. The difference between the slow and fast-moving average would be plotted by the histogram.
The divergence is the point where one would notice the two moving averages moving separately and the histogram will start to get bigger since the faster-moving average would be moving away or diverging from the slower moving average.
The histogram would get smaller as the moving average start getting closer to one another. This is referred to as convergence since the faster-moving average would be getting closer or converging 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 for you to know what it can exactly do for you.

MACD for Slow and Fast Moving Averages

As the fast line crosses under the slow line, a new downtrend would be identified. One would be able to notice that the histogram would disappear temporarily as the lines cross. It is due to the difference in the lines when the cross is zero.
Furthermore, when the downtrend starts, the histogram would get bigger as the fast line would diverge or move away from the slow line. This is an indication of a solid trend. Let’s have a look at the examples.
Let’s look at an example for better understanding.

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, Donchian channel).
3) Important level indicator. We have our indicator based on previous high 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 bullish MACD cross or zero line cross AND price touch important level AND the price is in a bullish channel. Stop loss is the last swing important level. Target the next level.

SELL if we see bearish MACD cross or zero line cross AND price touch important level AND the price is in bearish channel. Stop loss is last swing important level. Target 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 longterm strategies) are a combination of SMA10, SMA50, SMA100, and SMA200 but you need to change the chart time frame for each strategy. For example, for the longterm strategy, you will use a combination of SMA10, SMA50, SMA100, and SMA200 on H4 or daily or weekly chart. For intraday trading, you will use m30 or m15 or 1-minute chart.

Trade with the help of MACD

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

Crossover Example of MACD

MACD does have a drawback and that is the fact that they tend to lag behind when it comes to price since it is just the historical prices 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 fact, it is still one of the effective tools used by most traders.

Indication of Changes in Stock or Forex Trends

The MACD series with the help of different periods EMAs are able to indicate the changes in stock trends. Normally, the fast EMA would respond much quicker as compared to 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 that is filtered of the price which is the derivate of the input with regards to the time in signal processing. Velocity is the term for the derivate as used in technical stock analysis. It would estimate the derivatives just like how if it had been calculated. The difference in the time constants would be discovered with the use of 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 that is of low pass.

Furthermore, the average series can also be thought of as a derivative estimate, for further smoothing would be done by the additional low-pass filter. The difference of the average series and the MACD serried would represent a measure for the second price derivate in connection to the time. The estimate would have an additional gain factor that would be equaled to the filter constant of the signal and have an additional lag.

Classification

MACD could be classified as an APO (absolute price oscillator) as it does not deal with percentage changes but instead with moving averages of the actual prices. PPO or a percentage price oscillator would compute the difference of 2 moving averages of the price on the other hand and divided by a longer moving average.
The PPO will calculate the changes that are relative to price and the APO would show smaller 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 ones that are of different prices.
Long term trends are ignored by DPO (Detrended Price Oscillator) which are another member of the price oscillator family. Instead, short term patterns are emphasized.

Trading Interpretation

EMAs highlight the current changes in stock prices. The MACD is able to gauge the changes in stock trends by comparison of the different lengths of the EMAs. The difference of the average that is 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.
There are some traders which 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 line or the MACD line as well as the stock price.

Signal-Line Crossover in our tests

It happens when the average lines and the MACD cross meaning that when 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. Different approaches are used by analysts to find the right results.We chose our trading rules. You can make any test using its own strategy. Each strategy will have false signals.

Thoughts

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

Can You Make a Living Trading Forex ?

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Introduction

In this article I will describe why I do not think that do people can earn a lot of money trading currencies for a living if they start with small amount of money. This is just article for thinking and I hope you think different than me…

Trading forex for a living

Trading forex for a living

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So you’ve decided to start a career as a Forex trader, living off forex. Your first 3 questions will be:

1) Does anyone make money trading forex?
2) How much do forex traders earn?
3) Does forex really work?

Can forex be traded for a living ?

Congratulations, you’ve taken the first steps towards a reward – both personally and financially – career.

But there are a few things you should know before you get going and put your money down on the table.

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And even if you think you’ve thought of everything we ask that you take a pause and read this article.

We’ll not only tell you three things that we think every beginning Forex trader needs to know but also we’re telling you this because we don’t these three tips are emphasized enough to beginners.

That’s because you can make a lot of money on Forex, but you can also lose a lot of money on Forex.

In fact, no matter how sophisticated a trader is, he or she will lose money one day. Your goal now and always is to limit the amount of money you do lose on Forex.

That might not sound as exciting as telling you about how much money you COULD make or better question: Can I make money trading forex?

Yet we know for certain that if you don’t follow some baselines that your story will end up a tragedy. Such is the nature of trading foreign currency, but it is doesn’t have to be.

We don’t want to rain on your parade, we want to make sure it happens.

Before you make your first trade, read these three tips that will tell you what you need to know about trading Forex before you spend a dime:

Don’t Expect to Become a Midnight Millionaire and start making living trading forex from the first day !

do not except to become millioner in forex

Probably the first misconception you need to dissuade yourself from immediately is the idea that trading Forex will make you instantly rich.

It won’t.

Don’t get us wrong. After years of sustained trading success and astute financial management, you can make a fortune off of trading Forex.

That takes a long time which is why Forex is a game for those with the patience to do it.

But, wait, you’re thinking, I have a lot of initial principal to invest.

After all, the more money you have to risk, the more money you can make, right?

You might even be thinking that you have enough training to know better than some general advice article, but you’d be wrong. The more you risk the more you will lose. If you’re just starting out, you don’t want to begin with losses. Losses over your career are inevitable, but they should be as small as possible and contained.

Don’t risk all of your capital at once and certainly don’t rely upon a “tried-and-true” strategy or a “surefire way” to make millions.

There is no better tried-and-true strategy than a sober, collected approach to trading.

Large Amounts of Initial Capital Can Lead to Enormous Losses with Short Periods of Time

Of course, you might think that this piece of advice is a no-brainer tip.

But, again, you’d be surprised how many traders disregard this advice. Whether it is because of a rushing bull market or emotions getting in the way of reason, risking a lot has huge rewards yet, in Forex, it can have devastating consequences.

First of all, this approach stems from a day trader’s mentality with stocks and securities.

Forex is not a stock or security, it represents the exchange differential between two fiat currencies.

The predictive mechanisms for a currency’s value are almost as vast as the ocean itself and the factors that impact a currency’s value are equally voluminous and nearly impossible to comprehend alone.

Many traders have developed strategies and metrics that they like to use but those that tell you they just “know” when something is good or bad are not trying to obfuscate the issue or hide some unique strategy from you.

This is because, even in the best conditions, you will be wrong and you might be wrong more often than not. The key is to balance losses with huge gains, not recover from huge losses with depleted capital.

Never risk it all and, in fact, be conservative about how much you spend.
never risk it all in forex trading

You can always regroup after a small loss, but a huge loss might be enough to drive you out of the market.

And things can change in a heartbeat in Forex.

So we have to emphasize again: No matter how certain you are of your skill, strategy, or market conditions, a smart risk leads to a future. Dumb risks can ruin it.

It’s that simple.

One tool that every beginning Forex trader needs in their arsenal is the Speculative Sentiment Index or SSI. It is basically a measure of how many people are long or short for each currency pair being traded.

My personal opinion – Can I make money in forex trading or Forex Lies ?

If you think that you can put $500 and make to be $ 5 million dollars in a few years – No. This is a small probability event. There are no holy grail or some strategy that you can follow and earn money in the trading industry. After 11 years of trading, working for several prop companies, I can for sure say that it is a very small chance to succeed in and trading industry with small capital. I believe in Prop trading, manage big portfolios and 10%-20% gain per year.

Percentage of the profit needed to recover a loss

Why I think like this – see Table above this text. This is the most important table for every trader who trades for a living. It shows the percentage of the profit needed to recover a loss.

Example 1 :
You risk 1% of your portfolio. If you trade and after few months you have 10% loss you can recover as same as you made loss. So after 11% gain, you will be break-even.
Example 2:
You risk 5% of your portfolio. If you trade the same positions as in Example 1, after a few months you will have a 50% loss. So after a 100% gain, you will be break-even.
Example 3:
You risk 9% of your portfolio. If you trade the same positions as in Example 1, after a few months you will have a 90% loss. So after 900% gain, you will be break-even.

Can you make a living trading forex ?

Trading for a living might be seen as a risky adventure that no one should go on by some persons who think having a job offers more security; but for others there is nothing secure about working for a boss who can have a change of heart and fire you at any time. These persons will constantly learn about the many ways in which they can be the best trader so they can make a lot more money than the salary they would be getting if they had a job.
Having a job puts persons in a position where they will always be job seekers until they retire, being an investor/ trader means you will constantly be looking for and finding opportunities to earn a lot more than what the job offers. You will be putting yourself in a position to be the boss as you can constantly improve your ability to earn, by simply learning more about the skills you’ll need to increase your investment. You can look at the many earning opportunities you will have when you become a trader.

Do people make money in forex? Yes, but can they be successfully several years in the future not just a few months?

Proprietary Trading- the Pros, Cons and More Important Information

There are day trading firms that offer traders to trade with a pool of capital instead of their own money in an arrangement that helps all the parties involved to benefit. You’ll be entitled to a cut of the profits that are generated through trades. However, there are challenges that make it difficult at times for persons to generate profits.

When proprietary day traders do a few trades a day for bigger gains or many small trades per day, you can work as a contractor for them. If you have been making profits and you are seen by persons as an experienced trader, you can work from home with these proprietary trading firms, but before you have earned that reputation you might still be hired by these firms. During this time, you will be asked to pay for training, as the firm uses this method to eliminate persons who are not serious about trading.

You will need to decide on what your own preferences are so you can put yourself in the position you want to be in. You will think about the type of trading you are best at and find ways to improve your knowledge about that way of trading so you don’t waste time learning about everything when you could be earning and becoming more experienced in one area.

Technology has caused a change in the way persons can work for these firms and there are persons who work for firms while they are with their children at home; as markets can be accessed with ease.

However, it can take several months before you are experienced enough to earn a living from trading, so if you are in a job it is not good for you to leave it too quickly.

It is important for you to make a trading plan or business plan
You can run a search for the proprietary trading firms in your area and start learning more about them if you are planning to work with them in the future. You will be choosing between two model types. One that takes 20 to 50 percent of your profits; or others that takes a little of your profits and gives you up to 90% of your earnings after you have used your own money to trade.
You can also be hired by a company to work on their trading floor and you’ll be trained and given a salary plus bonuses. As a prop trader you’ll be working up to eight hours per day or you could work from home for 3 to 4 hours, it all depends on what is needed. However, these firms make a profit by charging fees for software, seats, training and more.


Finding out what markets you’ll be trading in depending on your capital and interests.

Persons who want to become traders will benefit from working for a trading firm as they will have access to more trading capital than they would have on their own, they will be surrounded by traders who can help them to become profitable, they won’t need to worry about having a balance that is too low to trade in stocks, they will have access to training from professional day traders at a cost, reduced commissions when it is compared to what other day traders face.
New traders are always in need of training and it is best for you to be trained by persons who produce successful traders. You should do some research as you constantly pay attention to your likes and dislikes, as well as the time you can spend on trading, the markets you want to trade in, your personality and circumstances. When you know what is available to you, you’ll be putting yourself in a position to make better plans after you decide what trading method suits you best.

Forex for a living and psychology of trading

When you are willing to do what it takes to overcome the many challenges and learn about the psychology of trading, by remembering that fear and greed are two emotions you should avoid because they will have a negative impact on your ability to make profits; you will also need to know about trading strategies and risk management techniques, how to bounce back after a trading loss, to pursue profits so you will be one of the experienced traders who earn a living by trading as a proprietary day trader.

Even though firms are now online as they reduce their costs and you won’t be sitting among experienced traders when you are starting to trade, chat rooms and Skype are useful tools but getting answers for your questions might be difficult, competition for seats on a physical trading floor is now higher than before, retail day traders access trading platforms and internet speeds rival most proprietary resources, the fees charged to traders by some firms could reduce your profits and be a deterrent.

Other Trading Options
Persons who do full-time trading and have advanced degrees and a lot of experience are not confined to working in investment banks and you don’t need a lot of expendable time and a huge amount of capital to start trading.
However, it is possible for persons who are not university graduates to start trading and get on the path that leads to wealth creation.
Persons can trade independently by choosing the easiest and flexible ways by including trading in their daily lives, trading from their homes
Even though trading stocks from your home is a very capital intense arena as the lowest equity requirement for the trader who are designated day traders are $25000 and this amount will have to be maintained. If the balance should go below the prescribed amount the trader will not be trading until the lowest amount needed is restored when money or securities are deposited in the account.
New traders need to be aware of all the markets, as a lower barrier-to-entry that requires less capital can be a better option sometimes.
The currency markets or forex markets offer a number of alternatives these days. There are times when traders can open accounts for as low as $100 with leverage, meaning a huge amount of funds can be controlled with just $100, during the week the market is now opened 24 hours per day. Persons who are not able to trade during the day time can trade when it is convenient for them.

Who trades forex for a living? For me, only people who develop strategy, figure out market inefficiency and then make forex trading as a business. This is the only approach that can give consistency in trading results during the long term period in trading.

Last Question – How much do forex traders earn ?

When you work for a prop company average trader who manages $100 000 accounts can earn an average of $1000 per month. It is around 1% per month. So when you earn $2000 you need to split and share money with Prop company. Senior Traders manage more than 1 million dollars in smaller companies and in large corporations they manage much much more.

If you are a trader and trade your own money and if you risk more than 2% of your portfolio based on several data from brokers – you will in 94% all of the time lose money instead to earn money. I worked 1 year as affiliate manager for one reputable broker and I saw that from 3 000 traders that I tracked in one year all 98% of them had bigger losses than the profit in the end.

Brokers are not guilty – risky traders are!

The Contract for Difference (CFD) Market

The (CFD) or contract for the different markets can also be entered with low requirements and it is best for persons who want to get involved with trading to do extensive research and learn about what has caused this market to expand. An electronic agreement between two persons doesn’t need to own the asset that is being used, is a CFD. Gains are captured for a fraction of the cost of owning the asset.
The contract allows room for profits and losses to be earned, but the CFD contract can be used to trade in the foreign exchange (forex) markets, even though the assets are never owned by the traders. There is speculation on the underlying stocks or indexes as its movements are mirrored so that profits or losses are reaped in this way.

If a trader does not have a lot of money, this way of trading can be beneficial.
You can educate yourself on the risks involved in this way of trading as you build a trading plan that is strong.

Conclusion

However, you should remember to always strive to be the best trader. As you continue learning from the best as there is no other way for you to continually increase your profits and reduce the impact of the issues that would be seen as a deterrent. Always remember it is easy to quit when you suffer a loss, but you can always learn more and become one of the professionals who are earning huge sums of cash every day.

You can earn money as a trader trading from your home. But remember that risk is something that can be your biggest mistake. Prop company traders for me have a great advantage because they can manage a larger sum of money and have small controlled risk.

How Many Pips Does Eurusd Move Daily

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The average true range or ATR is the average daily movement for any currency pair. How many pips does EURUSD move daily? The average daily range for EURUSD on date 02. March 2020. is 59 pips. EURUSD, the most heavily traded currency pair in the world, had an average daily movement from 34 pips to 72 pips in the year 2019. In March 2015. was the highest average daily movement of around 194 pips.

All these numbers we got from ATR Average True Range indicator.
EURUSD volatility from 2015 till 2020

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As we can see in the last 5 years EURUSD volatility is lower and lower each year. The average range is important because it helps traders to make stop loss and targets on the right level and to calculate projected profits and loss in a better way.

For the previous ten years, most of the time the daily average had a rate of over seventy pips. In fact, there have been long periods as well where the rate was over one hundred pips.

At the commencement of the year of 2019, the EURUSD experienced a drop to a rate of under sixty pips and has predominantly remained at that rate. This has caused the day trading of the EURUSD to become more problematic when such rates are indicated on the EURUSD volatility chart.

This has become more difficult as a result of there being fewer movements to view. Concerning the EURUSD, It is much more difficult to engage in jumping into and out of trading efforts while securing a profit in such instances of taking into consideration the spread as well as the commissions.

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There has been the offsetting of this issue via lower spreads being offered by some brokers at a rate of 0.1 pips. As a result, small moves are easier to notice. You are truly at more of a disadvantage when the spread is larger.

It is important to give consideration to volatility in the realm of day trading, as this can have a high impact on the manner in which traders make their trades and the number of profits they achieve from their trades. In addition, it is highly likely that those who are new to the world of trading do not realize that the EURUSD has over its history been traded under many different results. Also, the traders that have more experience for at least a few years may tend to struggle in relation to the regular decrease in the volatility pertaining to the EURUSD pair.

With this being the case, it is wise to examine the aspect of the volatility of the EUR USD at this present time. It is important to then use the statistics that are presented in order to help with one’s own personal trading efforts.

The volatility of the EURUSD can be seen by the day of the week as well as the hour of the day. We wrote recently an article about best trading time for EURUSD in GMT time zone. If this is the case, you can personally adjust the chart to suit your time zone. See Figure below:

eur usd forex time - eur usd opening hours sessions cycle

It is common for the hours that possess the predominant amounts of movement to be from seven in the morning until four in the afternoon. This is in correlation to the market in London. Then there may be an uptick in the movement of the market of New York around one in the afternoon. If this is the case, if your time happens to be after the movement, you should conduct trading from seven in the morning to four in the afternoon according to the time zone presented on the chart in order to experience the least EURUSD volatility and the best profits.

How Do You Trade Fibonacci Expansion Levels ?

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Fibonacci Expansion Levels

Fibonacci Expansion Levels are lines in technical analysis, calculated as the percentage between high and low price, which can be drawn above the highest high or below lowest low price level. Fibonacci levels are always projection levels.
Fibonacci Expansion Levels or Fibonacci Extension levels follow the same logic as Fibonacci retracements.
The most common levels used for Fibonacci Expansion levels are 1.618% and than 2.618% (some traders use 123.6%; 138.2%, 150.0%, 161.8%, 200% and 261.8%)
The most common levels used for Fibonacci retracements are 23.6%, 38.2%, 61.8%.
retracements and expansion fibonacci levels

Main Facts about Fibonacci Expansion (Extension) levels and Fibonacci retracements

When it comes to technical analysis, the term that refers to any area of resistance of support is known as a Fibonacci retracement. It will also use a horizontal line in order to point where there might be resistance or support and each of those levels will be labeled using percentages. That percentage amount is a pricing amount that has moved and been retraced. The levels that happen within Fibonacci retracements are 78.6%, 61.8%, 38.2%, 23.6%, while even though it may not be official 50% can be used.

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This is considered to be useful due to it being able to show highs and lows between different price points and this creates the known level between the selected points.

For instance, if the price started out at $10, and it suddenly drops to $3.82, then it has done a retrace and this percentage is a retraced 38.2%, which is a number of the Fibonacci retracement. These particular sets of numbers can be found everywhere in nature, so it is believed that these particular numbers are relevant within the financial market.

Formula Used to Find the Fibonacci Expansion (Extension) and Retracement Levels
An indicator will not have a formula, so whenever a trader applies an indicator to charts and two points are picked, once selected, the lines that are drawn will show the moving percentage.

For instance, if there is a price that goes from $15 to $20, and the two prices are what have been selected to find the indicator, then simply multiply the amount difference between the two prices by the Fibonacci Retracement percentages to find the levels. Therefore, you would take $20 – ($5 X 0.5) = $17.50 and so on.

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If a trader wanted to calculate the levels, you would follow the formula listed above and use the percentage of a particular price range that has been selected.
However, many ask where these particular sets of numbers originate from. They are all based on what is known as the Golden Ratio.
If a person was to create a specific number sequence that began with the number zero, then added one, and eventually just continuously adding the first two numbers, this string of numbers would just continue indefinitely. For instance, it would look something like this:

0+1 = 1, 1+1=2, 1+2 = 3, 3+2 = 5, 5+3=8, 8+5 =13, 13+8=21, 21+13 = 34, 34+21=55, 55+34=89, and it would continue on just like this. The sums would make up the entire string of numbers and would go on indefinitely.

All of the levels are going to come from this string of numbers, however, this excludes the first very few numbers so when the string is going, if the number is divided by the number that comes next, you will end up with the level numbers. However, taking time to carefully explore these options, a person would notice that all of these percentages, except for 50% will be considered to be a true Fibonacci number as 50% is not seen to be an official percentage. All of these percentages will be based on math calculations based on this particular number string.

Another interesting thing about the Golden Ratio, is that 1.618 or 0.618 can be located within galaxy formations, historical architecture and artifacts, shells and even in sunflowers.

What Do the Levels Say?

The Fibonacci retracements are able to be used in order to find out the levels of stop-loss, help to set target prices and place entry orders. If a trader notices that a stock is moving up and after it moves it ends up with a 61.8% retrace and then it begins to bounce once again. Because the bounce was considered to be at a level on the Fibonacci scale, and if the trend stays for a long time, then a trader may decide to buy. This means that a trader could create a stop loss within the 78.6% level or 100% where it originally started.

These levels can also be utilized in various types of technical analysis. For instance, they are seen in the Elliott Wave theory and Gartley patterns. After a price has moved down or up significantly, when a price starts to retrace its path, which it seems to always do, these analyses will find the retrace and notice that it reverses to certain levels.
These levels are often at a static price that will not change often, unlike a moving average. In order to easily and quickly identify price levels, a static nature will be needed. This allows investors and traders to react and anticipate when a level may be tested. The levels will often be an inflection point, which may indicate where a price action could be expected, whether it be a break or a rejection.

How Do You Trade Fibonacci Expansion Levels?

The simple strategy is to use the highest high and lowest low and add Fib levels using MT4 platform :
fibonacci levels insert from metatrader

If you pick Fib. levels retracements or Expansion levels you will get in both cases expansion levels. Expansion levels tool will give you only 2 most common levels for your target.

So your strategy can be for SELL TRADE :
Step 1: Pick low and high on the chart.
Step 2: If you see that the price on hourly close is below 61.8% Fibonacci retracement than make SELL trade.
Step 3: Put stop loss on High Price.
Step 4: Set your target to be either 161.8% expansion level or 200% expansion level or 268.1% expansion level.
fibonacci expansion target

OR you can cut a small number of lots on each target and move stop loss whatever you like.

See this strategy for sell trade on the image below:
how to trade fibonacci expansion levels example for sell trade

Differences Between Expansions (Extensions) and Retracements levels

The Fibonacci extensions are the percentages that go back to a trending direction while the retracements are the percentages that pullback. For instance, if you have a stock that increases from $5 all the way up to $10, but then it goes back down to $6.75, then it is considered to be a retracement, but if that price happens to increase up to $16, then it is called an extension.
Level Limitations
Even though retracement levels can show where a price may potentially find resistance or support, there are not any assurances that this particular price will stop at that point. This can be seen as a reason as to why a trader should look for other signals that may be utilized, such as prices bouncing off of a particular level.

Another argument against a retracement level is that, due to there being several levels, the price could possibly reverse near one of these levels and this can happen a lot more often than it would not. The overall problem being that a trader could possibly struggle to locate which one that would be useful during any retracement that may be happening at that point and is being analyzed.
The Key Takeaways
An indicator connects two points that a trader will view as being relevant, which is often a low and high point. Once an indicator has been selected and drawn on the chart, these levels will be considered as fixed and will not change. The percentages that are provided will be locations where pricing may reverse or stall. A trader should not solely rely on the levels. For instance, it is detrimental to assume that a price will reverse after hitting a particular Fibonacci level. It could, but then it may not.

A Fibonacci retracement level can be used to show areas of interest that may show potential. If traders are looking to buy, they will watch to see if price stalls at a Fibonacci level and wait for it to bounce off that particular level before they decide to buy at all.
The ratios that are the most commonly used will include 78.6%, 61.8%, 38.2%, 23.6%, while 50% is seen to be an unofficial retracement level. These percentages will show how much of a previous move was made, whether it be retracted or corrected.

The Best Indicators For Day Trading – Case Study

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We are looking for the best indicator for intraday trading! So we created a poll and give our top traders to vote. Our email list is more than 10 years old and all our traders are experienced traders. We asked them to pick 3 top indicators for day trading. We know that traders like to combine several indicators when they trade. This is one of the best studies for day trading that we created using our contacts (email ist).

Step 1: What indicators to use for day trading? We made the list of best trading indicators for day trading.
It is important to engage in the discovery of the top day trading indicators in regard to the particular approach that you apply to your day trading efforts. This means that it will be necessary for you to conduct testing on several of them individually. Then it is also a good idea to conduct testing on them by combining them. For example, you may decide to continue using four that tend to be evergreen or you otherwise may consider switching off based on the asset that you wish to trade and based on the conditions of the market for that day.

LMFX PAMM

In the first step, we asked our traders to give suggestions. Then we made the list and created a poll in Google forms :

best day trading indicators case study list

Technical indicators for intraday trading need to have simplicity. In all situations in regard to forex trading, futures trading or day trading stocks, it is preferential to ensure that you apply simplicity in the realm of the usage of technical indicators. You may realize that your preference is to view only a paired combination of indicators for the sake of considering points of entry as well as points of exit. It is advised to apply the usage of only one such indicator within the context of each category in order to prevent distracting and needless repetition.

Below are text about day trading indicators, some major tips on how to use technical indicators for day trading.

Indicators to use for day trading are:

Trading made simple


1. Simple moving average indicator

The simple moving average indicator is implemented for the sake of providing an identification of the direction of a price trend at the present time while disregarding any spikes of short term prices. Thus, the moving average indicator tends to engage in combining the price points for a designated time period. Then it performs the division of this price point by the identified number of points of data in order to form the representation of a singular trade line. The simple moving average can be used not only for long term positions – it can be used as one of the forex day trading indicators as well.


2. Exponential moving average

The exponential moving average is recognized as being another kind of moving average. But it is different from the simple moving average in that the exponential moving average tends to grant more weight to current points of data. This results in the data seeming more responsive to the deriving of new information. When this indicator is combined with the implementation of other indicators, exponential moving averages can aid traders in the confirmation of key market moves and can provide a gauging for the legitimacy of these market moves.

3. Stochastic oscillator

A stochastic oscillator is categorized as being an indicator that performs the comparison pertaining to a particular closing price in relation to an asset in correlation to the range of the prices of the particular asset over an extended period of time. This displays the momentum of the trend as well as the strength of the trend. There is the usage of a scale with a range from zero to one hundred. When the reading is under twenty, this tends to indicate that the market is oversold. A reading that is higher than the rate of eighty indicates that the market is overbought.

4. Moving average convergence divergence

The moving average convergence divergence is regarded as an indicator that engages in the detection of changes concerning the movement via the application of comparisons pertaining to two moving averages. With this being the case, this type of indicator has the power to aid traders in the identification of opportunities for buying and selling around levels of support and resistance.

5, Bollinger bands

A Bollinger band is seen as being an indicator that grants the provision of a range considering the trading norm of the price of an asset. The current volatility is indicated via the increasing and decreasing of the width of the bands. When the bands are closer to one another, this is perceived to indicate that there is a lower level of volatility. But the level of volatility is recognized as being higher when the bands are further apart.

6. Relative strength index

When traders desire to engage in the identification of momentum, the relative strength index is a great option to use. This indicator is also used in regard to market conditions as well as signals of warning pertaining to price movements that are regarded as being dangerous. The relative strength index is indicated via the use of numbers between zero to one hundred. When an asset has a rating of seventy, this is usually considered to be overbought. On the other hand, when it is noted that the asset tends to sit at a rating of thirty, the asset is perceived as being oversold.
RSI indicator is one of the best momentum indicators for intraday trading as well for breakout strategies.

7. Fibonacci retracement

When you hear the term Fibonacci retracement, this refers to an indicator that has the power to be able to engage in the pinpointing of the degree that a particular market under surveillance will progress against its own recent trend. It is noted that a retracement is recognized as occurring in such instances that there is a dip in the market that is temporary. Further, this is also referred to as being a pullback. When traders believe that the market will soon move, they generally apply the usage of the Fibonacci retracement in an effort to gain confirmation if this is so. This is due to the fact that this aids in the identification of plausible rates of support as well as resistance, which could denote a trend that is upward or downward.

8. Ichimoku cloud

The Ichimoku cloud is categorized as being a rather technical indicator. This is based on the premise that this indicator engages in the identification of levels of support as well as levels of resistance in regard to the realm of trading. Yet, it is further realized that this indicator also engages in the estimation of the momentum of price points and grants traders a provision of signals in order to aid them in making decisions about their trades. It is interesting to realize that this indicator is a one look chart in regard to equilibrium determination, which is what the name of this indicator means. This is the reason that this indicator is implemented by many traders who are in need of much information from the provision of one singular chart.

9. Standard deviation

Standard deviation is an indicator that is used to aid traders in regard to the measuring of the size of the moves of price points. This allows them to engage in the identification of how plausible it is that the price of the trade will be impacted by volatility in the future.

Standard deviation is recognized for conducting comparisons of recent movements of price points in correlation to the historical movements of price points. A majority of traders tend to hold the perception that large moves of price points occur after small moves of price points and small moves of price points happen after big moves of price points.

10. Average directional index

The average directional index demonstrates the strength of a trend in pricing. It is based on a range of zero to one hundred where a rate of more twenty-five is regarded as being a trend with good strength. On the other side of the spectrum, a rate of under twenty-five is seen as a drift. This information is useful to traders to help them to realize if a trend that is either downward or upward will probably continue to proceed.

11. Murrey levels

Murrey levels are levels created from Gann’s theory. In this strategy, the trader knows that some areas are better for trend and some better for the breakout. You can download free Murrey levels indicator and learn more here.

The best indicators for day trading case study results

There are 654 traders who answer this survey in the last 12 months. Results show that there is no proof that some indicator is better than others in trading habits. The most important indicator for intraday trading based on survey results is the RSI indicator with 17% of votes.

survey results for the best indicator for day trading

Discussion about indicators

On your price chart, you can engage in the combining of sets of indicators that contain two each in an effort to seek points of initiation and to exit a trade. Take into consideration, for example, that you can combine RSI as well as the convergence and divergence of the moving average in an effort to provide the suggestion as well as the reinforcement pertaining to various signals for trading.

Conditions that have undergone the process of being overbought or being oversold can be suggested by the usage of the relative strength index, which in abbreviated form is referred to as RSI. This can be achieved by conducting the measurement of the movement of the asset’s price. J. Welles Wilder Jr. is attributed as having created this indicator. He made the suggestion that the momentum should achieve a level of 30 in relation to a scale from 0 to 100. He stated that this is indicative of the overselling of an asset. This means that this presents a buying opportunity. He mentioned that a level of 70 percent is indicative of the overbuying of an asset, which means that this is also an opportunity for selling or even short selling.

Then with the application of the usage of Wilder’s levels, there can be the continued trending to an increased price of the asset for an extended period of time, whereas the RSI tends to provide the indication that the asset was overbought or oversold. Because of this reality, it is preferred to follow the RSI only in such cases that there is the conformity of its signal in relation to the trend of the price of the asset.

Indicators do not predict market future prices. Indicators only remove noise in time series data set, give the edge for traders, a better picture of chart, important levels. Anyway, there are no rules – which indicator is the best or which intraday indicator settings are the best for trading. Each trader needs to stick to his/her strategy and enjoy trading as passion and business.