Charting forex moving average
Time frame: could be any, suggested 1 hour, 4 hour or daily. If price charting forex moving average down approaching lower Bollinger band – the corrective wave is in progress.
Once the price touches the lower Bollinger band – the correction will most likely be over and a new wave should follow. If price retraces up approaching the upper band – the corrective wave is in progress. Once the price touches the upper band – the corrective wave will most likely be over and a new wave should follow. Summary: Bollinger bands indicator can help with Elliott Wave count: to find impulsive waves, as well as search for patterns in during corrective waves, however, it’s not recommended to build trading solely around the Bollinger bands, as you’ll get many losing trades. Use the method to count Elliott waves, and then apply additional analysis to make trading decisions.
John Bollinger, the developer of Bollinger Bands, says you should always use an indicator with the bands for confirmation. He has a website that is dedicated to Bollinger Bands and the forex market, BBForex. In the BB tutorial there are rules to use when trading the bands that will keep you on the right side of a trade. The charting program on the site is excellent–worth looking at.
Volume confirms the strength of a trend or suggests about its weakness. A rising volume indicates rising interest among traders, while a falling volume suggests decline in interest. Extreme Volume readings — Climax Volume often highlight price reversals. Points where market trades on high volume are the points of strong support and resistance. Volume is the second most valuable data after the price itself. Large volume signifies that there is large number of market participants involved, including financial institutions.
Small volume tells that there are very little participants in the market, neither buyers no sellers have any significant interest in the price. In addition, no financial institutions will be involved, thus a market is going to be moved only by individual traders and so the move will be weak. Volume helps to learn about the health of a trend. When price is going up and volume is decreasing, it tells traders that a trend is unlikely to continue. A downtrend is strong and healthy if volume increases as price moves lower and decreases when it begins retracing upwards. When price is falling and volume is decreasing, the downtrend is unlikely to continue. Price will either continue to decrease, but at a slower pace or start to rise.
To understand the nature of spike in volume before a trend reversal, traders need to know how the data for volume indicator is gathered in Forex. Forex volume cannot be measured precisely as it is done, for example, in Equity market, where every share traded equals 1 volume, and selling 200 shares means 200 in volume. Forex by nature cannot count how many contracts and what sizes of contracts were traded at any given time, because the market is wide and decentralized. As it moves up and down volume adds up. When volume rises, it means lots of participants are actively selling and buying currencies.
When volume spikes at certain price level, traders know that there was lots of interest shown by traders to that price level. If there is a lot of interest, it means the level is an important one. This simple observation of a volume indicator allows identify important Support and Resistance levels, which would certainly play significant role in the future. Climax Volume — traders should look for clues from the price itself. Single volume spikes only bring price to a halt. A lot of stand-alone average volume spikes occur during fundamental economic announcements on daily basis.
News can cause spike in volume for a single day and then volume disappears again. Reversals, however, happen not over one day but a series of days. If higher than average volume stays on the market for several to many days a huge volume spike — volume climax — will crown a point of market reversal. Volume indicator helps to validate all kinds of breakouts. When market is consolidating on a low volume, a sudden pick up in volume would signify that a breakout is due. Breakout occurring on rising volume is a valid breakout, while a breakout that caused no interest from traders as it is happening on a low volume is more likely a false one. Trend lines and other breakouts are validated or voided the same way.
We’ll compare the weeks, not individual days. 3: volume is lower than previous weak, confirming that there is still very little interest in buying the pair. 5: Both sides lost interest as the market drifts sideways on low trading range. 6: market finally finds dome buying interest as the week ends on higher than previous week volume. Buyers seem to be going active. 9: Volume picks up again once price finds its uptrend. Market ends trading on a lower volume.
11: Even Sunday was busier than usual. The new week market begins with an attempt to rise higher, however volume suggests that the interest to the upper side is much lower. 12, 13 and 14: market attempts to move upward, but volume decreases, signaling that the trend is no longer healthy and a change is coming soon. 15 and 16: some interest arises among traders as the market moves to the downside, Sellers anticipate that this is a moment of a trend change, a volume of new Short orders come. 17, 18 and 19: as the market attempts to rise, volume drops, telling that there is no interest to the upside. 20, 21 and 22: volume picks up again as Sellers take over. A pause on week 21 with a sharp rise in price is met by even higher volume on week 22.
29, mid 30: sideways pattern pause the trend and the volume with it. 50 MA helps to identify volume spikes and climax volume. A single day volume spike on a low or average volume is considered high when volume bar exceeds 50 MA of volume 3 times. When high volume stretches over several days span, then volume must 2 times exceed 50 MA for 2 days in a row. I don’t know about such indicator in Forex. How does this indicator determine volume?