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Forex Trading the ADX Indicator Video

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Forex trading the ADX indicator
Forex trading the ADX indicator - ADX indicator Forex

Forex trading the ADX indicator can lead to success in trading, but only if you know how to interpret the ADX indicator Forex properly. One of the biggest advantages is that it measures both Forex trend and the strength of that trend in one indicator. When traded as taught in the video below, it can be one of the Forex trading strategies that work in real trading.

Enjoy this Forex trading tutorial abut the ADX strategy.

Let me know if this video on Forex trading the ADX indicator was helpful to you. Leave a message in the COMMENTS section at the bottom of this page. 

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VIDEO TRANSCRIPT

Welcome to this video on Forex Trading the ADX indicator. A very very popular indicator and I will tell you how I look at this. One of my trading mentors loved the ADX indicator Forex. And there are some great things about it, and some shortcomings like most indicators. There are no one indicator that makes you money, or that is the magic pill. So let’s take a look at this very honestly and see what’s good about it, what’s bad about it.

The basic thing is that here is your ADX indicator Forex strategy line, the black line. And then you have got your dm positive, dm negative. I am not going to go in all the details of what that is. Just understand I made it green for going up, red for going down, and one of the signals, the primary signal is when the ADX line actually gets above the threshold. Most people put that at 20. Some will put it down at 15. There’s pluses minuses to both of those. But that’s supposed to signify is that one is below 20 or the threshold number if you make it 15. Then the market is just choppy, going sideways in that trending.

The idea is that, so here we get it moving above 20. The problem you could see is by the time it does move above the 20, yeah I guess you are kind of, no, I wouldn’t even call that a trend really but really started all the way back here. I could even say it started all the way back here and this is one of the shortcomings of Forex trading the ADX indicator.

FOREX TRADING THE ADX INDICATOR

It’s always measuring a trend from going below 20 to above 20. Even a downtrend. Even a downtrend. So when it goes from above 20 to below 20 like here that does not mean a downtrend. That means it going back into choppy territory, non trending. What now you could be, when it goes above 20, that could be an uptrend or a downtrend, and you can look at that and see that by price action, or if you want, you can look at the dm, the plus dm or the minus dm and see how they are related.

If the plus dm is up, above the down dm and then it’s an uptrend. That’s a rudimentary understanding but problem is that it is a unidirectional indicator.

So for example if we back up here, alright this is supposed to be indicating a downtrend. So ADX indicator Forex gets above our threshold of 20, the red line is above the green line and it kind of is in a downtrend. It’s moving down a little bit but you can see the signal occurs here, and that was not the optimal time to go short because the market continues to go up a little bit and then it kind of meanders down.

Then it comes back into that low. So not a real powerful downtrend by any stretch of the imagination and then it, the ADX indicator Forex line, the black line come back down below 20 again. So not a real strong signal. Right.

ADX INDICATOR FOREX

Okay so how do we resolve this? What are some better signals? Well here are some things that I have looked at and you can evaluate for your own and then one last little tip here before we finish the video. So here is what I like to look at and to do with it.

So my approach to Forex trading the ADX indicator is more aggressive and that’s because I like to get in before things are clear and confirmed as most professional traders do, because by the time everything is clear and obvious to the trading world, it’s too late. Everybody is jumping on board, their mother and their pet turtle in aquarium and its just way too late. You’ve got to get in before. It’s obvious for everybody, that’s professional trading.

So what I do is, I look for the angle of ADX to be up. But before it reaches the 20 level. By the time it gets to 20, to me it’s often too late. Not always, but often. It comes in at that bar right there. And then what I am looking for is this to be angling up below 20 and for, in this case it’s a downtrend.

FOREX TRADING TUTORIAL

Negative dm to be going up and positive dm to be going down. In other words I want them to be separating from each other. Moving away from each other. It’s very very critical. Alright. And so once I see that I can get another bar and that’s a lot early. Now you also want some sort of timing indicator because the nice thing, I would say the positive thing about ADX is that it is both a trend and a momentum indicator in one.

What it doesn’t really help you with real well is timing. So you need some sort of timing indicator, and I’ll be happy to share with you my timing indicator if you like, there is my email address and you can just send me a  quick email and request it, and I’ll send you information on how to get it absolutely free.

So I am looking for these early signals. I want to get in earlier than everybody else. Because it does tend to give late signals. Now when to get out is pretty much the opposite of when we get in. so which kind of makes sense. Right, as soon as Forex trading the ADX indicator starts to trading over, and you get the negative dm and the positive dm line converging back together, alright so all of that happens right about here, you might even be able to get in a bar before. That would be to me a good exit.

Alright let’s look at one more example of the ADX indicator Forex. So here we have a similar pattern, so the ADX had come back down below 20, it starts angling up, negative dm up, positive dm down, separating from each other. That allows us to get in right around this time. Again had our cycle indicator for extra confirmation goes down. Now another thing you want to know is when you get these signals, how late in a trend are you?

ADX STRATEGY

We’ve got a long, oh I am sorry, a short trend indication here. And then you know it gets started here at this cycle low. But actually what’s interesting is the trend continued down. Look we made a much lower low after that. But the ADX indicator did not give us any indication that we should stay short. In fact it reverts back to 40, back to the signal line. Well, what’s up with that?

So this is why Forex trading the ADX indicator not one of my favorites trend strategies. That’s one of the reasons. Number 2, it also is a unidirectional indicator. After it reaches the top, it doesn’t give you any signals to continue the trade and that’s an example of it. So this is where wave counting comes in, and also having a moment indicator that is bidirectional and not just unidirectional.

So you get no trades as its resetting. That’s the problem. But momentum indicator I use is, they do give signal both ways. So if the market turns around, I can still stop and reverse or continue in the same direction.

Now let me show you what is a bad signal with this. This is the one we actually looked at before. So I showed that ADX indicator Forex coming above 40. But the market didn’t really go down very much. Why not? Because you don’t have the separation, the moving apart, the negative ADI, it’s moving down, and so they both are going down. What we would want is for a negative ADI to be going up. And the positive would be going down.

FOREX TRADING TRAINING

To get further away from each other, that’s not what we have. And so the ADX indicator Forex line just getting above 20 is not enough. Look at that signal right there. It just gets above the level of 20 real quickly. We put in that high and it goes right back down. So you got to be very very careful of just choosing this alone. In fact I wouldn’t use it alone, I wouldn’t use any indicator by itself.

My personal trading methodology is based on the 5 energies in the market. 5 energies of money flow in and out of the market. Order flow. And I don’t trust any one of them. Throw with it any further that I can throw them. So each one of these indicators, if that’s what you want to call them, it’s not a bad term because that’s what they do. They indicate. Hey if they made us money, we call them money makers.

Each one can be a valuable piece of information that you put together with other pieces of information. It’s almost being like a detective and each one is a clue. Each one is a piece of evidence. So you don’t want to convict someone on just one piece of evidence. But when you get preponderance of the evidence, okay now you can build a case. So trading is very much like that. Indicators don’t make you money directly but each one could be a valuable piece of evidence.

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Trading Gaps In Stocks Successfully, Videos Part 1 and Part 2

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trading gaps in stocks, how to trade gaps successfully
trading gaps in stocks successfully

This video on “Trading Gaps in Stocks,” demonstrates to you how to trade gaps successfully for a living (in a way rarely taught).

It’s a proven approach to trading gaps for daily profit whether you’re trading stocks, futures, Forex or E-minis.

Let me know if this video on trading gaps in stocks was helpful to you. Leave a message in the COMMENTS section at the bottom of this page. 

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VIDEO TRANSCRIPTION

Welcome to this video on trading gaps in stocks. We’re going to talk about how to trade gaps successfully 3 different ways. Typically they talk about 4 types of gaps, but I’m going to focus on the primary 3 that are actually tradeable and meaningful. These really good as long as you know how to trade them.

HOW TO TRADE GAPS SUCCESSFULLY, TYPE 1: BREAKAWAY GAPS

The first type of trading gaps in stocks that we’ll talk about today is the breakaway gap. It’s also a type of “gap and go strategy,” meaning that we don’t expect it be one of the filling he gaps stocks.

What you’re looking for is first of all a consolidation pattern.Here we see a consolidation pattern, this should proceed the breakaway gap. This is in my mind, the best type of pattern to have before the break out gap. You’re breaking out of this consolidation, so it’s a gap and go strategy and is perhaps the most reliable approach to how to trade gaps successfully.

TWO TIPS TO LOOK FOR THE GAP AND GO STRATEGY:

Breaking out of consolidation you see couple of things here:

  1. There are equal highs and equal lows.
  2. It’s above the 50 MA, below the 50 MA. Above the 50 MA, below the 50 MA. And the 50 period simple moving average is the line that I use as my line in the sand between the bull and bear market. As long as price action hasn’t stayed on one side or the other that means the market hasn’t committed to the bullish or the bearish side of the market sentiment yet.

Here is our breakout and there is our gap. We have a space in between a bar and the bar before it. That would be a breakaway gap. And that is a very strong bullish signal, especially if it’s accompanied with big volume. And here you see that it is. The volume before that here has been relatively small compared to the volume of this day. that means obviously there is a lot of buying, lot of market participants that are participating in this and therefore their strength to that up move.

Markets to tend to wiggle up and wiggle down meaning higher highs, higher lows, higher highs, higher lows, higher highs. So one of the things that we want to look for there is to always looking to trade in the dominant energy of the market.

TRADING GAPS FOR DAILY PROFIT

In other words they could go, move up, and then you could get them to move that to very strong to the down side right after that. You could get a V top for example. So when I talk about dominant energy, what we want to see is, it shows a lot of energy by breaking out of these highs. So that’s number 1, just the price action. Number 2, is the volume that shows a lot of energy.

Then after we’ve done that, the 3rd thing we’re going to look to see if the dominant energy is maintaining to the upside, is what does this retrace look like? Is it very steep? It is coming down at a sharp angle. Is it coming down a large percentage toward the initial impulse? Or is it a shallow move and does it not cover very much time.

TRADING GAPS IN STOCKS, TYPE 2: CONTINUATION GAPS

Now we get what’s called a continuation gap. this occurs again on that same kind of principle. Now increasing volume, notice volume comes back in to the market. We break above this high and the gap actually gives you kind of early indication of that, which you need when you’re learning how to trade gaps successfully.

A lot of times when trading gaps in stocks, they will gap above previous highs like it did here. Now this time it does not. It gaps, only gets stuck at this high for two bars. If I remove this, you see 2 little bars there that market actually kind of hesitated because a lot of people are looking at this high over here, saying oh well we have run right into that resistance level and that’s uncertainty. That’s all that is, it’s hesitation. And then finally it goes up on big volume. So that’s all very encouraging.

Narrow range bars like this, neutral bars, they don’t bother me. I just understand that it’s hesitation uncertainty, it is definitely not a bearish pattern at all.

Let’s get these patterns ingrained into your brain cells so that you have some repetition with this. Notice the angle. It’s very strong. And what’s our retrace. It doesn’t retrace very much at all. Just kind of goes sideways pretty much. Comes down a little bit I guess but you get some nice wide range bars going up. Narrow range bars on the retrace, and again volume retreats.

Another thing that’s very important is timing. How to time your entries. Especially at these lows and if you want to be happy to make my timing indicator available to you, just send me an email at Barry@TopDogTrading.com, and I’ll show you how to get that timing indicator absolutely free. It’s fantastic tool. Super super accurate and precise. So you can keep your stops really tight within the range of a bar to a bar in a half.

TOOLS TO USE WHEN LEARNING HOW TO TRADE GAPS SUCCESSFULLY

Many students ask me how to find a gap up stocks screener. It’s actually one of the most common scanning parameters, so you don’t need a special scanning program for intraday gap trading strategies.

The best place to start is to ask your current charting software provider if they provide it because chances are they do.

TRADING THE GAP FOR A LIVING, TYPE 3: COMING SOON!

PART 2 OF THIS TOPIC IS NOW AVAILABLE BELOW. There is a 3rd type of gap I want to tell you about. There is actually a 4th type as well. I’ll mention it but the 3rd type of gap is when to get out. The 3 gaps give you this information:

  1. Enter is the breakout gap. That’s the best type. The breakaway gap.
  2. The second chance to enter is that continuation gap. That’s not as good because you are getting in a little later.
  3. Then the 3rd type of gap, well that’s the one when you want to get in, and we’ll talk about that in part 2.


Trading Gaps In Stocks Successfully, Video Part 2

Video #2 in the “Trading Gaps in Stocks” video series is below.

Let me know if this video on trading gaps in stocks was helpful to you. Leave a message in the COMMENTS section at the bottom of this page. 

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In part 1 we looked at trading gaps in stocks in the direction of the trend. So we talked about gaps that start at the beginning of the trend, breakaway gaps and then also continuation gaps such as this, where the trend has already been going for a little while.

We’ve got 4 waves and then it gaps in the direction of the trend with large volume, and we talked about the fact that we would expect a continuation rather than for the gap to close right way. That’s how to trade gaps successfully in that type of market environment.

HOW TO TRADE  GAPS SUCCESSFULLY

Now today we are going to talk about the opposite. When will the trend end. So those two types of gaps are entries where we look to get in in the direction of the trend. Now we are going to look at exhaustion gaps which are gaps where we look to get out of a trade or to enter in an opposite direction of the trend.

So here is an example of that. You’ll see that we have a very big gap here from way up here to way down there. So technically sometimes people draw gaps by the way from the low of this bar to the high of that bar.

Technically you should actually draw from the close of that bar to the open of that bar. That was the actual gap. So I’ve seen people do it both ways but technically this is, the gap is defined by the close from 1 bar to the open of the next. That’s very important and I didn’t discuss that in the last video. That’s how you technically analyze a gap and draw markings. And then here again we have large volume. Large volume plays a point on whether we expect that trend to continue or as in this case, to end. That’s one thing.

TRADING GAPS IN STOCKS WHEN THE TREND IS EXTENDED

Now the other thing is that we want to be in an extended trend. So the first five waves of the trend are just the average. Average wave count today lasts about 5 waves. And that is basically higher highs, higher lows. Once it gets beyond that, then we are into an extended trend, we are beyond the norm of the probabilities. We are not trading the rule, we are trading the exception of the length of a trend.

This goes back towards the parable of, well the same, the trend is your friend until the end. So we don’t want to trade the trend, or in the direction of the trend at the end. We want to trade it at the beginning. that’s what your breakaway and continuation gaps are and how to trade gaps successfully

The exhaustion gaps are when the market trend gets, well exhausted and it capitulates. And so then we look for the market to go in the opposite direction. This will be a trend reversal trade and for it to come down. And that’s exactly what it does.

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The Best Market to Trade for Day Trading and Swing Trading

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Best Market To Trade
Best Market To Trade and Best Markets for Day Trading and Swing Trading

“What’s the best market to trade?” is one of the most common questions I receive from swing traders, but “what’s the best markets for day trading?” is also starting to be asked a lot as well.

It’s an important question because when you’re trading markets from home, your results can vary dramatically depending on whether you’re trading stocks, futures, Forex or E-minis, and even which sectors or industries you trade.

Let me know if this video on how to choose the best market to trade was helpful to you. Leave a message in the COMMENTS section at the bottom of this page. 

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VIDEO TRANSCRIPTION

Welcome to this video on How to Find the Best Market to Trade at any given time. I’m going to give you a few pointers here. So, first of all, I get the question a lot where people ask me: “Barry, what is the best market to trade?” and the answer is there is no one best market to trade all the time.

It varies from time to time because every every stock, every Forex pair, every commodity, every futures market goes through various cycles of trending and not- trending. So that’s one cycle, another cycle is that markets alternative from high volatility and low volatility. If you’re trading world markets that are in a low-volatility market cycle then your reward will not be very great. You have to be flexible because the best markets for day trading varies at different times.

THE ULTIMATE ANSWER TO THE BEST MARKET TO TRADE IS …

The ultimate solution is to be trading many non-correlated markets. Have a number of non-correlated markets that you’re watching all the time and looking for where the opportunity is NOW. It’s often been said that there’s always a bear market somewhere, there’s always a bull market somewhere and that is true. But you have to be looking for them.

Not only that but you’re also going to have even something worse. You’re going to have a lot of losses because you’ll be trying to take trade setups when they really are not optimal since you’re not choosing the best markets for day trading at that time.

Look at different markets that are non-correlated and only trade when the good setups are there. So here’s an example, we have the Power Shares Gold and Dragon China market. Then way down below here, we have the US Japanese Yen, Forex pairs.

So when deciding which market to trade today, watch non-correlated markets. So I’m not talking about just looking at different stocks. You can do that if you’re only a stock trader. Sure you can look at just different… “Oh let’s say industries or sectors of the equity markets” and that’s okay, that’s one way to do it.

THE MOST OPTIMAL WAY TO FIND THE BEST MARKETS FOR DAY TRADING

An even more robust way of finding the best markets for day trading is to look at completely different markets. So, yes looking at currencies and looking at different countries. If you look over here on the right-hand side, this is Tradestation® and I’ve got my radar screen here.

Here are indexes and these are the indices of various major indices in the US equity markets. I got my small caps, we got our leveraged indexes. I’m going to scroll down here because then we go into currencies and currencies can trade completely different than equity indexes. We have futures currencies ETFs and futures Forex or the spot Forex. Then we go down to countries and these are basically ETFs and ETNs of various countries around the world.

TRADING WORLD MARKETS

So, how are these stock markets doing in various countries around the world? And then here’s just what I call other markets and they’ve got some of your indexes and of various sectors and industries. You got biotech, you’ve got real estate, you’ve got there’s your Treasuries, TLT. Then there’s telecom, select financials, commodity index tracking.

The point is a lot of different markets that are not correlated. Even if you just trade stocks, you can trade this. Because there are so many ETFs and ETNs now that track these various markets.

DIFFERENT TYPES OF STOCK MARKET TRADING

A couple of tips here, just a real quick example of why this is so important and how this would work. If we’re looking at the Yen you can see that it’s basically pretty flat. You’re not going to be a lot of money made here. On the other hand if you were to trade the power share is Golden Dragon we get a nice big move.

You can make a much bigger reward, it moves up much more on a percentage basis. This goes down here and this. The red line is the 50 period simple moving average and of course again it starts way down here, it’s actually off of the chart and we can scale that chart to kind of give a better idea. This is a trending market where this is just basically a sideways market. So which one would you rather be in?

TRADE MARKET ONLINE

Now the other thing is that I like to put the 50MA on there, that kind of gives kind of a general idea of what’s happening in the markets. Here’s one other tip that you can do. In radar screen Just complete the indicators up here in your columns. I put stochastic up here and we can sort find that.

We’re sorting by the stochastic, and it’s going to bring the small numbers to the top and the big numbers to the bottom. Let’s say that I’m looking for a stochastic to be oversold. We’re looking for it to be down at the bottom of the range. We can sort these by the numbers and we can get a clue. Which ones are at the bottom of the range in potential buying territory

BEST MARKET TO TRADE FOR BEGINNERS

If we go down here, let’s go all the way down to the bottom of the range here and let’s see. So that’s a huge one at 9, 9.4, 9… that might give you an idea. If you’re looking for something to buy, that maybe, I will look for an oversold stochastic reading. You can sort these in order and that sorts inside of these various categories.

This is an easy way for beginners to find the best market to trade. It’s a nice short cut.

Your trading platform may vary if you don’t have Tradestation®, contact your charting software program and ask them. This will help you to find the best market to trade. If we can looking to buy or if you looking to sort, look for numbers that are high or low.

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Triangle Trading Pattern For High Probability Trend Trades

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Triangle Trading Pattern Strategy
Triangle Trading Pattern Strategy

The Triangle Trading Pattern that many traders look for are large patterns with lower highs and higher lows. Today, however, you’re going to learn a smaller triangle trading pattern that occurs within a trend.

Trading this type of triangle is a great way to find an excellent spot to enter a trend. This provides you with an opportunity to enter a trend trading setup with very little risk because of the narrow range of the triangle pattern on the chart (whether you’re trading stocks, futures, Forex or E-minis).

Let me know if this video on triangle trading patterns was helpful to you. Leave a message in the COMMENTS section at the bottom of this page. 

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VIDEO TRANSCRIPTION

When people usually look at a Triangle Trading Pattern, they’re looking at lower highs and then higher lows for a medium sized or pretty big pattern. This will be a symmetrical triangle pattern.

There are two other types of triangles:

  • A descending triangle chart pattern which has a lower high and an equal low.
  • An ascending triangle chart pattern which has a higher low and an equal high.

These large triangle trading patterns are okay, but I don’t personally trade them very much. I’ll show you the triangle trading strategy that works out very well for me.

THE TRIANGLE TRADING PATTERN THAT WORKS BEST FOR ME

What I like to look for are triangles in these little retracement spots. Little retracement there, that’s where I want to see a triangle. This functions as a nice triangle breakout indicator. I call these “Trending Triangles.”

BTW, this works as a Forex triangle pattern indicator, but also for the stock market, futures and E-minis as well.

The first thing is the overall trend is down. We are in a fairly good down move and that’s the first thing that we’re looking for and we’re going to trade in the direction of that trend. This moving average is the 50 period simple moving average by the way.

OTHER TYPES OF TECHNICAL ANALYSIS TREND RETRACE PATTERNS

There’s a little move up, a higher low, higher high, complex retrace, a, b, c complex retrace right there. Sometimes I’ll take that short. Depends on other things. But what I prefer even better than those are these triangle retraces. A little triangle trading pattern within the retrace. So here you go, there is your lower high, and here’s your higher low, and there’s your triangle.

We’re going to take it short but the dynamic of what’s happening here and the energy of the market is that again the overall dominant direction of the market is down and we had a pretty darn strong move here. What happens when you get strong moves like this often is that people are hesitant to take the market short, because they feel they’re late to the party now.

This is mass psychology as to what causes these patterns on the charts is that people hesitate and they say, you know what, we already missed out on this big move or people were in on the move and they are taking their profits, and so they are actually getting out.

Maybe they put in a stop above the high of this bar or something. And so on the market retraces back up a bit. And you have a lot of volatility coming down. That’s also important. The market goes through a cycle of being highly volatile and then going into low volatility.

CYCLES OF VOLATILITY AND TRIANGLE TRADES

Those of you who are familiar with Bollinger bands, you understand this concept. Bollinger bands will expand and then contract. You go on a little Bollinger bands squeeze. And that is a constant fluctuation in volatility of market. That’s a cycle. Another type of cycle in the market.

Here we had a higher high volatile time in the market and then volatility comes out well. If you can catch it at the end of that low volatility cycle, then you will usually get a pretty good impulse move out of that pattern, in this case it’s a triangle trading pattern. And that’s why I like trading triangles is because the market will often explode out of them and make some, you know pretty decent money in a short period of time. So a risk on this trade is from there to there.

THE TRIANGLE TRADING STRATEGY PROVIDES AN EXCELLENT RISK-TO-REWARD RATIO

The potential reward that the move gave us was all the way from there to there. So that’s better than 2 to 1, better than 3 to 1. And that’s how you have to look at it. Not so much the pennies over here.

A triangle trading pattern is a contraction pattern. It shows you when the market is going to low volatility and we like to get in at the end of them back in the direction of trend for another explosive move or at least explosive for a great risk-to-reward ratio.

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