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Support and Resistance Zones that Work in Real Trading

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support and resistance zones indicator
support and resistance zones indicator

Welcome to this video and support and resistance zones. This applies to Forex, stocks and futures. one of the questions that I receive a lot is how to draw support and resistance levels like a professional.

In this video you’ll learn how to find support and resistance in day trading and swing trading. I’ll also show you how to draw support and resistance lines in mt4 or any other charting platform.

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SUPPORT AND RESISTANCE ZONES

And so the market goes and goes and goes and boom well there it goes. OK so it went up and that could have been a potentially good entry let’s say. Now so here is the basically money management has two things money management and then also just the realities of the market. So let’s talk about money management first support and resistance zones are for a couple of different purposes.

Number one for entry is as we kind of illustrated here but also for exits. So if I have a let’s say for example I was short here and I was looking to take a profit at this support level then we never would have reached it. So that would not be good. And again from going long it didn’t quite get down to my support level either.

SUPPORT AND RESISTANCE ZONES INDICATOR

So I actually prefer to look for the lowest low of the real body is not of the low of the bar. Could be an open or a closed but the open body means the green section or the red section or green section here. And there is a very logical reason for that and that is that the markets are not so neat and tidy the mark is if you’re trying to make your technical analysis to picture perfect where you are looking for praise to go to the exact Penny, Pip, tick. We’re even to the little pixel on the chart. It’s just very unrealistic. That’s not how the market works. Markets are huge. Today we’re dealing with global markets of millions of people and trillions of dollars and everybody’s doing different things for different reasons.

Markets are not that pinpoint accurate. They’re a little messy, and so, therefore, are support and resistance zones. There’s a little bit of randomness in the market always a little bit of noise if you will. So you’ve got to allow for that noise. So that’s the logical reason from a market perspective just an auction place perspective if you will and then the money management part of it is that again if we are short and we’re coming into a we’re looking to take profits into a in this case a support level then I don’t want to miss it because of the market anyway.

HOW TO DRAW SUPPORT AND RESISTANCE LEVELS LIKE A PROFESSIONAL

That’s it. That’s what you got. So people do price all the time different shapes of price indicators and price bars and price patterns and these kind of horizontal support resistance levels. Those are price levels but very few people are trained to use the time access. The on the X access here and it’s very important because that’s really what we’re looking for we’re looking for the confluence of time and price. The intersection of those two things.

Today’s video is just about price levels it’s poor resistance Zola’s let’s look at one more example a little different example here now we have a moving average. This is the 50 period simple moving average. And you see it down there. So now how do we account for zones. This is the question because a moving average is really dynamic support and resistance zones. In other words it doesn’t stay the same praise as a horizontal line does across time.

HOW TO IDENTIFY SUPPORT AND RESISTANCE LEVELS IN FOREX

It changes price over time. So we’re not manually drawing it on there we can’t mainly draw a high a low. We’re at the real body. It’s just there it’s plotted mathematically. So how do we account for resume’s when it comes to a dynamic support resistance level. Well here’s how I do it. And there’s many different choices but this one’s worked very well for me for a long time.

So let’s just look at this bar here. So this part does come below the 50 SMA. Do I consider that this has broken the support for example if you look back here it held the support of the 50 SMA are pulled the support of the 50 SMA here and now it comes down. And do I consider this is still holding the support of the 50 SMA on this bar.

HOW TO FIND SUPPORT AND RESISTANCE IN DAY TRADING

I call that the flypaper phenomenon where it’s stuck. It’s like a little mouse that gets one foot stuck on the white paper the rest of his body is off its other four feet around. But that one little foot stuck in there there’s like a cat quite get off. So that’s what I consider this. It’s still touching it and that allows for the randomness. Now what about the next part the next part is a dog who got the wrong drawing tool on there.

That’s how I account for the support and resistance zones. Two different ways to account for zones as a review and if you have horizontal support resistance then I account for them by using the real bodies of the lowest bars and not to the highs and the lows. And for dynamic support resistance we have to have a bar completely clear the dynamics of where resistance such as a moving average and the real body has to be below the bar that was touching it.

RESISTANCE ZONE TRADING

We consider that we have now broken through that zone. So these things might seem minor but they actually become very important because sometimes technical analysis can be very deceiving because it’s so precise because it’s so mathematical and we’re looking at these lines and everything is very precise.

The problem is the dynamics of the market as I talked earlier because of the huge scale of them the dynamics of the market are not as accurate and therefore you need to have something like this built into your treaty methodology to account for that noise that randomness that chaos.

GET MY FREE MARKET ENTRY TIMING INDICATOR

BTW, if you’re interested in the indicator that I use personally for very precise entries and exits. I’m happy to share that with you. Just send me an email at Barry@TopDogTrading.com, and I’ll show you how to get access to that indicator.

What did you think of this tutorial on support and resistance zones? Enter your answer in the COMMENTS section at the bottom of this page.

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Also I’m giving away one of my favorite support and resistance zones strategy that works in trading the markets. Just fill out the yellow form at the top of the sidebar on the right. Once you do that, I’ll personally send you an email with first video.

Those interested in support and resistance zones that actually work also showed in interest in this video:
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Forex Strategy Success Strategies that Actually Work

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Forex Strategy Success Strategies that Actually Work
Forex Strategy Success Strategies that Actually Work

Forex strategy success strategies that actually work rely greatly upon reading the price structure of movements in spot Forex markets. For consistent profits scalping, day trading or swing trading Forex you ideally want the best Forex strategy ever.

This is something you can use with other techniques and indicators. It’s about price structure using moving averages for one of the most simple Forex trading strategies.

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FOREX STRATEGY SUCCESS

So this first one here the blank line that is the 15 ema exponential moving average and then this next line the red one is the 50 Period Simple moving average. And the yellow one here or maybe it’s orange kind of yellow orange there and that is a hundred period simple moving average. And then the purple one is the 200 Period Simple moving average. So those are the four that I use and I’ve been using them for years and they work really well.

Let me show you how I use these how I read them and so forth. The ultimate challenge and solution is whether the market actually responds to these levels of course. So basically what I’m looking for is the 50 Period simple moving average that I use as my line in the sand between a bull and a bear market. So if you’re above it and it’s singling out may consider that we are in bullish territory the market sentiment is bullish if we’re below it in it is moving down then I consider that we have a bearish sentiment.

MOST SUCCESSFUL FOREX TRADING STRATEGY

It will also provide support resistance because it is a very very common moving average and in fact especially in daily charts it perhaps may be the most common moving average that in the 200 simple moving average. So as the market comes down I look over here first of all this is very important as well when the moving averages clustered together like this.

Essentially what that really means is literally there’s been no significant change in price action over the last 15 periods or bars 50 periods 100 periods and 200 periods. So this is a sign when these moving averages all clustered together like this that we’ve been in a consolidating market and contracting market. This is one of the best Forex strategy success strategies that actually work.

BEST FOREX STRATEGY FOR CONSISTENT PROFITS

When we come back up where do we go we go to the 200 day. Now if we were to go above the 50 I’m actually we come to all three of them they’re all clustered there today together. But if we were to go Above all three then my reading on the market would be OK. The market participants have not really committed to a bullish or bearish sentiment yet. They’re testing both sides and they tested the downside for Forex strategy success.

They were not able to maintain that with the majority of traders worldwide. And so therefore we do not have a clear bullish market. In other words we don’t have a clear trend. But that’s not what happens when it happens of course is that it does hold the retraces up here the period simple moving average in bounces back down.

FOREX TRADING STRATEGIES THAT ACTUALLY WORK

It stays in bullish territory. Remember that’s the in line in the sand between bullish and bearish markets. So now we have a trend going and then the longer it goes the more the moving averages start to fan out. That’s called a stacked structure

The pinball pattern is where the market gets stuck between moving averages. So it goes between the 15 and the 50 and it keeps kind of bouncing in there. So a short term volatility signal that we are contracting in we’re looking for a move in one direction or the other in the way I determine which way it that’s going to go out is to look at momentum and the next higher time frame. All right so then we go back up and where do we go.

SIMPLE FOREX TRADING STRATEGIES

Timing is a big part of it. And by the way timing is so critical in trading. You really can’t trade without accurate timing and I do have a timing indicator that I do share with my youtube video subscribers. Now we’re going to go up but we’ve got these moving averages which provides support resistance. So it goes back up of course. You know it hits the DMA and of course we have this little pinball next level years ago goes to the hundred.

May notice that it provides resistance there comes back down to the 50 then goes back to the 15 and then comes back down to the 50. Now here’s a distinction that I make with support resistance and maybe I’ll do a separate video on this alone. This actually this part here is actually holding the 50 as support.

FOREX STRATEGIES SCALPING

We call this the flypaper phenomenon with the support resistance. The market is actually holding the EMA here this whole time comes back down here this low is simply created by just this right here. So we get a triple bottom market comes up to the 50 comes back down to that bottom again comes back up to the 100 it holding 100. This can lead to great Forex strategy success.

And then it comes back down to the 15. Then goes back up to the 200 then it gets back down to 50 then it holds the 100 here. So what you’re seeing is the price structure is very much determined by the moving averages these moving averages do provide support resistance which provides price structure price patterns.

GET MY FREE MARKET ENTRY TIMING INDICATOR

BTW, if you’re interested in the indicator that I use personally for very precise entries and exits. I’m happy to share that with you. Just send me an email at Barry@TopDogTrading.com, and I’ll show you how to get access to that indicator.

What did you think of this tutorial on Forex strategy success? Enter your answer in the COMMENTS section at the bottom of this page.

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FREE GIFT!

Also I’m giving away one of my favorite Forex strategy success trading strategy that works in trading the markets. Just fill out the yellow form at the top of the sidebar on the right. Once you do that, I’ll personally send you an email with first video.

Those interested in the Forex strategy success strategies that actually work also showed in interest in this video:
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Backtesting Trading Strategies with Software is the WORST Way to Create a Trading System!

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how to backtest trading strategies
Backtesting Trading Strategies

Welcome to this video on backtesting trading strategies. The irony is that using trading backtesting software may be the absolute worst way to design trading strategies.

Learning how to backtest a trading strategy using excel, MT4 or another software program seems like a good idea at first. But it’s not. This video and article will walk you through the logic of exactly why, and what to do instead.

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BACKTESTING TRADING STRATEGIES

Welcome to this video on backtesting trading strategies I share with you my experience with backtesting which I have done for well I did do for many many years. I don’t do it anymore and I’m going to share with you why. I have very sophisticated software very high powered computer system and I was trained in how to do this I’d find a few strategies that were viable historically.

Then what you do typically is you understand that’s curve fitting. So then you take the successful strategies and you apply them to data that is separate from the data used historically that’s called out of sample forward testing. So most of them when I took them and use them on out of sample data they failed the night. Ninety five percent of them. So then that last 5 percent which is very hard to find.

TRADING BACKTESTING SOFTWARE

I would then start treating real live markets in current time and none of them were successful over the long period of time someone worked for a little while and then ultimately fail. So why is that. I started to wonder because I spend a lot of time on that and I was very disappointed. So I started thinking about it. I realized you know there are some real problems with the whole idea of backtesting. Here’s the first one.

You’ve seen this legal statement everywhere. Go ahead and fill in it just in your mind just fill in the the end of the sentence. Past performance is no guarantee of what you know the end of this. Most people do. We see it everywhere in websites and on documents that people send to us brokerage firm software whatever. Past performance is no guarantee of future results. This is why trading backtesting software isn’t reliable for futures profits.

HOW TO BACKTEST TRADING STRATEGIES IN MT4

So we’ve seen it everywhere. You knew that. That’s a problem. If that’s a legal statement that all these companies put on their documentation that means that that’s a very significant issue and it is in fact that many studies have been done on this Couple of a moment or in 2014 a Wall Street Journal study found that only about 14 percent of Five-Star funds retained their reading 10 years later.

Past performance was not indicative of future results. In 2013 a Vanguard study reported that the one stars and now we’re looking at the other end The Wall Street Journal analyze the Five-Star at Vanguard study the one stars and they had the actual greatest excess returns what they call when compare it against a benchmark. So wow. What the heck’s going on. Yes I hate the opposite of what you would expect especially when most people make decisions on funds to buy based on their past performance. If this is true, then learning how to backtest trading strategies in mt4 may be futile.

HOW TO BACKTEST A TRADING STRATEGY USING EXCEL

Well to me what that indicates is there’s probably a reversion to the mean. We all know that very very few people ever outperform just the benchmark the S&P 500. And so therefore if it does outperform for a while it reverts back to the mean if it underperforms for awhile revert back to the mean. So that’s one huge problem.

Another one is that markets change over time. Back when I started trading which is decades and decades and decades ago I’d have to call my broker on a rotary phone of all things my kids don’t even know who the rotary phone is anymore. They see it in a museum. But yeah we didn’t I mean we had a black and white TV. So learning how to backtest a trading strategy using excel may not be applicable to today’s markets when using long-term historical data.

BACKTESTING TRADING STRATEGIES FREE

We certainly didn’t have computers. And so there’s no direct access. You know there were no low commissions commissions or high cost me 50 bucks to get in 50 bucks to get out decimalization wasn’t around. There was no mobile devices didn’t even have a computer. Bottom line was trading was slow slow and expensive and therefore chart patterns trended more today. People use all this technology to get in and out of the market real fast. That creates choppier chart patterns.

The patterns today are different than they were back then. Now that’s on the retail side. Now on the professional side you’ve got Elgood trading high frequency trading. It got dark pools. So the speed of what’s going on here in the retail around the professional sites even faster. And so again you get different type of chart patterns than you did in the past so. Add to that, the fact that many traders want to use backtesting trading strategies that are free and well, you get what you pay for!

FREE BACKTESTING

Okay that’s great. Now that all begs the question of all day what do we do. So the first thing to acknowledge is are no certainties in the market. Part of that reason we do free backtesting is we’re looking for some certainty as to what’s going to work in the future. And so acknowledge that there’s always risk in the market. You know back in the days of Jesse Livermore they used to call it speculation. I still prefer the term speculation to trading because it reminds me that there’s always risk in the market.

Here’s how I trade here the principles I use two things. Number one market logic and mathematical logic. So what do I mean by these. Well let’s take emerging market logic first. So I’m referring to the market profile model where the market is seen as an auction place and in an auction place you’re beating on memorabilia and so forth art whatever it might be and that that item that’s going to sell for whatever someone is willing to pay for it.

BEST WAY TO BACKTEST TRADING STRATEGIES

And that’s how the markets work too. We’ve got this global auction place essentially. But the logic of the markets not always logical. Sometimes people pay more than many people would think that a piece of art is worth because they have sentimental connection with that. And the same thing happens in the financial markets. So and we see that with bubbles. We’ve seen it in the real estate bubble recently. Before that we saw in the technology bubble before we even start with tulips. If you go back farther and of tulips of all beings and of course this is what Alan Greenspan referred to is as irrational exuberance.

The market logic is the logic of well logic in quotes of people and psychological studies have shown that people generally. Even though we don’t admit it to ourselves we generally make decisions based on emotion and justify them with logic. And so the market logic is not individual psychology but mass psychology that plays a major role in how markets move. Thus, there may be no best way to backtest trading strategies.

FREE BACKTESTING SOFTWARE

The second part of the larger equation that is the mathematical and got to include this too. Because over half of the shares in the New York Stock Exchange aren’t traded by human beings Well I should say they aren’t. The decisions the trading decisions are made by computer models and some of these don’t really affect you in your trading and you certainly can’t compete against them.

You and I cannot compete against these. You’re not going to get free backtesting software or a forex robot on the Internet for $19 that it is going to compete with Goldman Sachs or Merrill or Bank of America. So here’s what I do. I combine these two types of logic. And the bottom line is that mathematically measuring what the market participants are doing now. So again remember it’s market participants globally and I’m taking a treat now.

I need to know what’s going on in the market right at the second entering the trade. Now what happened you know six months ago 12 months ago 40 years ago I trade in the present bar by bar and manage my risk and then I use indicators to objectively and mathematically measure the money flow in and out of the market. Now that’s what we’re looking for the money.

GET MY FREE MARKET ENTRY TIMING INDICATOR

BTW, if you’re interested in the indicator that I use personally for very precise entries and exits. I’m happy to share that with you. Just send me an email at Barry@TopDogTrading.com, and I’ll show you how to get access to that indicator.

What did you think of this tutorial on backtesting trading strategies? Enter your answer in the COMMENTS section at the bottom of this page.

PLEASE PAY IT FORWARD BY SHARING THIS VIDEO & ARTICLE ON FACEBOOK OR TWITTER by clicking one of the social media share buttons.

FREE GIFT!

Also I’m giving away one of my favorite backtesting trading strategies that works in trading the markets. Just fill out the yellow form at the top of the sidebar on the right. Once you do that, I’ll personally send you an email with first video.

Those interested in the backtesting trading strategies also showed in interest in this video:
http://www.topdogtrading.com/heiken-ashi-strategy-trend-trading-unique-japanese-candlestick-chart-pattern/

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Elliott Wave Theory Analysis – the New Rules! Video Revelation

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Elliott-Wave-Theory-Analysis
Elliott-Wave-Theory-Analysis

Welcome to this video on Elliott Wave Theory analysis versus objective trend trading indicators. I traded Elliott Wave rules for a while a couple of years so I’m definitely not here to trash the Elliott Wave principle.

My opinion on it is that it started out with the observation on how markets tend to move seeing repetitive cycles of three impulse moves in or five impulse moves and then three corrective waves. Then using it as an indicator of future price predictions.

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ELLIOTT WAVE THEORY ANALYSIS

The market is a wild animal is like a tiger. It’s not like a purse puppy that you can tame. So the markets are going to do what they’re going to do and they don’t always follow the same patterns as the rules in Elliott Wave theory analysis.

Therefore the way that I count waves is very mathematical. Certainly there’s been people who have attempted to create objective measurements for Elliott Wave charts and I’ve seen them but still the way that I do this is the way that I prefer it. After experiencing many different types of approaches so here it is in basic number one when we define trend.

ELLIOTT WAVE RULES

For example you could have a higher high and higher low and some people define this is a trend that is not a trend that is not a trend. That is simply a complex retrace in an overall downtrend in the extended general direction of this market would be down in this case before the trend is down. So we need a time when we’re going to use a trend trading indicator. We need something that measures the long term move of the market and there is many good choices.

ELLIOTT WAVE PRINCIPLES

I just use a moving average the 50 period simple moving average, which is different than how Elliott Wave theory basics are calculated. It fits the definition of the term trend. It’s also a very commonly used moving average perhaps the most commonly moving average that there is and therefore there’s a self-fulfilling prophecy to it based on mass psychology.

This is similar to what’s taught in Elliott Wave theory books. We’ll get our little ABC patterns here. As the market puts in cycles now this down here is my cycle indicator. When you’re measuring cycles there’s two different things there’s cycles and there’s waves. So this indicator measures cycles but you have to measure cycles before you can measure waves.

ELLIOTT WAVE CHARTS

The other way the wave 3 has a lower low than wave one. And since this does not therefore it is a cycle a wave low. That’s the difference between this and Elliott Wave theory analysis. So every wave is a cycle but not every cycle is a wave. So waves define counting how.

This is why waves are so important in trends. It counts how far you are along in that trend. So I’m sure you’ve heard the term. The trend is your friend until the end. That’s instructing us on is to know how early or late you are in a trend you only want to trade early in the new trend because the leader of the trend goes it’s not your friend anymore because your enemy actually.

ELLIOTT WAVE THEORY BASICS

That’s when we start looking for reversal trades. The trend is your friend. All right now we have trend reversal trades you could have gotten in before this on a trend reversal trade etc.. But these are very very reliable. So let’s define where does Wave 3 come in. Now here’s another thing that people will tell you that I disagree with and it goes back to the higher high higher low higher high higher low thing.

OK higher highs are an oversimplification. So it’s not necessarily important. For example in fact it can be deceiving it can be a bearish pattern. So here we have lower lows. The way I just have to define a wave three is we take this and we’ll look at. Let me bring up my drawing a line here. I’ll take that low straight across in an order for this to be a wave 3.

ELLIOTT WAVE THEORY PREDICTIONS

Here we have this is the start of where we could start a week three. It ends up putting in its low here. Notice the cycle indicator stays down below the mid-range of the indicator this whole time. That’s something to understand about cycle cycles or not even they expand and the contract and sometimes they actually disappear.

If you’ve heard understood or studied cycle theory or Elliott Wave theory analysis in detail then you understand what I’m talking about. Again now here we put in a wave five now counting waves this way of your average of count is if we have five. But let me show you something else so we get a higher high here. Mainlines just a little bit off there but you get the idea. So we get a little higher high here. But where does it close it closes and opens and closes below the high of we have one, therefore we call it a failed three.

ELLIOTT WAVE INDICATOR

And that’s called a rejection of value in market profile theory. Saying that the prices went up here but it didn’t close up there. It’s really not bullish yet. In fact the market rejected these higher prices. Now that’s just temporary. Can turn around in fact it did turn around here. And another thing to look at is the range of the bars all these range all these bars here a very narrow range.

You’ve got a cycle indicator that’s mathematical. You’ve got a rules based on price structure that’s mathematical and everybody gets the exact same way of count. So this can actually be programmed into software and look at that we put in a field name and we’re put in a real line.

It just doesn’t in my opinion make much sense to try to impose or reduce a big trend down to five waves and then expand a little trends into five waves and really those two trends are very different things. Why not number them for what they are either long trends or short trends. And to put numbers on them so that we can identify whether we’re really in a new trend late in an old trend and make it all very objective so that we’re all seeing the same thing and there’s really no guesswork to it at all.

GET MY FREE MARKET ENTRY TIMING INDICATOR

BTW, if you’re interested in the indicator that I use personally for very precise entries and exits. I’m happy to share that with you. Just send me an email at Barry@TopDogTrading.com, and I’ll show you how to get access to that indicator.

What did you think of this tutorial on Elliott Wave theory analysis? Enter your answer in the COMMENTS section at the bottom of this page.

PLEASE PAY IT FORWARD BY SHARING THIS VIDEO & ARTICLE ON FACEBOOK OR TWITTER by clicking one of the social media share buttons.

FREE GIFT!

Also I’m giving away one of my favorite Elliott Wave theory analysis that works in trading the markets. Just fill out the yellow form at the top of the sidebar on the right. Once you do that, I’ll personally send you an email with first video.

Those interested in the Elliott Wave theory analysis also showed in interest in this video:
http://www.topdogtrading.com/tape-reading-price-action-trading-strategies/

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