Trading Strategy, Using Technical Analysis Indicators

INTRODUCTION

There are a number of indicators that can be used for technical analysis. But working out how they work and gaining experience using then in real life could take a life time. This trading strategy is based using a number of indicators. MACD, Moving Averages, Parabolic Sar, Stochastic and ADX indicators.

ABOUT THIS TRADING STRATEGY

  1. Can be use as a  bullish strategy in up trends or vice verse as a bearish strategy if in down trend.
  2. This strategy focus more on entry points.
  3. This strategy isn’t reliable if intending to enter in an expanding trend.

TIPS

  • One of the main things that a trader should understand is that in the financial market, when trading, if one opportunity is missed,another will come.
  • A trading strategy by itself cannot warranty success. Success in trading come from discipline, patience and a realistic profit target and/or expectations.
  • Have a watch-list (equities, commodities, Indexes, etc) so that you could always find an opportunity. The watch-list shouldn’t be to long, other wise is unmanageable.
  • Perfection an strategy and stick to it.
  • When you start regretting not holding on to your trade a bit longer or you feel you are expecting to little. It means that you are doing something right. It is time to go into next gear.

TECHNICAL BACKGROUND

MACD: It is commonly used to anticipate cross signals. Like this, spotting possible changes in the strength, direction,and duration of a trend in a stock’s price. Conventionally  when the indicator (MACD) is falling below the signal line, it is a bearish signal and when the indicator (MACD) rises above the signal line is a bullish signal.

I prefer to read it when the cross over takes place at the top or at the bottom rather than over the middle line. Moving Averages: Are the average value of a security’s price over a period of time. Commonly is set to 11, 22, 50, 100  and 200. And give an indication of  the general direction of a trend.

The moving average by itself isn’t a good reliable indication of a define change in trend. Parabolic Sar: It is used to identified trend and price range within the trend. Stochastic: Stochastic Oscillator signal a phase in which prices are likely to move.

When the indicator is high, signals a possible overbought market or if it is low, a possible oversold market. ADX: Is an indicator of trend strength. When the indicators crossover, it signal a possible technical change in trend.

STRATEGY (Bullish)

When the indicators are positioned as shown in the chart bellow, it is a bullish signal. To trader’s discretion, a buy-long order can be placed.if:

  1. Technical indicators in the daily, 4 and 1 hour charts are positioned in similar position as shown in the charts bellow. Always check the 15 min and 1 min chart as it could be good to enter when all chart are indicating a buying signal.
  2. A new up trend (long or short) has started.  The stronger the trend the more profit can be expected. Use Parabolic Sar to determine if a new trend has formed.
  3. Is the signal convincing.
  4. An exit point is in order along with a stop loss. Always know how much are you expecting to profit. Be realistic. In trading it is better to underestimate than overestimated.
  5. Know how much you will be happy to lose (risk).

trading_strategy_chart_four_hrs

trading_strategy_chart_one_hr

STRATEGY (Bearish)

When the indicators are positioned as shown in the chart bellow, it is a bearish signal. To trader’s discretion, a Sell-short order can be placed.if:

  1. Technical indicators in the daily, 4 and 1 hour charts are positioned in similar position as shown in the charts bellow. Always check the 15 min and 1 min chart as it could be good to enter when all chart are indicating a buying signal.
  2. A new down trend (long or short) has started.  The stronger the trend the more profit can be expected. Use Parabolic Sar to determine if a new trend has formed.
  3. Is the signal convincing.
  4. An exit point is in order along with a stop loss. Always know how much are you expecting to profit. Be realistic. In trading it is better to underestimate than overestimated.
  5. Know how much you will be happy to lose (risk).

short_trading_strategy_chart_daily_hrs

Daily Chart
Bearish Signal

short_trading_strategy_chart_four_hrs

Four Hours Chart
Bearish Signal

short_trading_strategy_chart_one_hrs

One Hour Chart
Bearish Signal

MONITORING

Close your position if it reach your target. Don’t be greedy. Many more opportunities will come. Monitor your trade. In many circumstances,  due to fundamental factors (News, announcement or economic events) technical signals fails, therefore, the trade might need to be cancel or closed early at a loss.

Let’s get started...

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