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Chart and indicator settings
by Pip Queen
I have been trading for over 6 years but like most when i started i lost money again and again. I then started
to stop following my gut feeling or what others said i even got rid of the paid signals i used.
I spent over 4 months printing out charts with different settings and indicators and went through them all
until i found a system (on paper) that should work. I then set about testing this system for the next 6 months
and fine tuning it till it gave me a great way of making pips on every pair and time scale.
I was also lucky after this point I hade one2one training from a fantastic trader who makes most look silly
this is what made me a real trader.
It is not just about the chart settings it is about using all the indicators and learning what each one does
when you have done this there will be no stopping you and 300 pips plus a day can be done over 2 pairs.
I learnt reading charts and getting pips is the easy part the hard part is discipline and money management.
The Chart settings:
Ok here is the most important part and it works on all time frames and pairs set these up as it sets out below
then you are ready to learn how to use them.
1) Add indicator Macd: settings - 12-26-9
Moving Average Convergence/Divergence is the next trend-following dynamic indicator.
It indicates the
correlation between two price moving averages.
The Moving Average Convergence/Divergence Technical Indicator is the difference between a 26-period
and 12-period Exponential Moving Average (EMA). In order to clearly show buy/sell opportunities, a socalled
signal line (9-period indicators` moving average) is plotted on the MACD chart.
The MACD proves most effective in wide-swinging trading markets. There are three popular ways to use
the Moving Average Convergence/Divergence: crossovers, overbought/oversold conditions, and
divergences.
Crossovers
The basic MACD trading rule is to sell when the MACD falls below its signal line. Similarly, a buy signal
occurs when the Moving Average Convergence/Divergence rises above its signal line. It is also popular to
buy/sell when the MACD goes above/below zero.
Overbought/oversold conditions
The MACD is also useful as an overbought/oversold indicator. When the shorter moving average pulls
away dramatically from the longer moving average (i.e., the MACD rises), it is likely that the security price
is overextending and will soon return to more realistic levels.
Divergence
An indication that an end to the current trend may be near occurs when the MACD diverges from the
security. A bullish divergence occurs when the Moving Average Convergence/Divergence indicator is
making new highs while prices fail to reach new highs. A bearish divergence occurs when the MACD is
making new lows while prices fail to reach new lows. Both of these divergences are most significant when
they occur at relatively overbought/oversold levels.
2) Add Parabolic SAR: settings -accelerate 0.020 - maximum 2.0
Parabolic SAR Technical Indicator was developed for analyzing the trending markets. The indicator is
constructed on the price chart. This indicator is similar to the Moving Average Technical Indicator with the
only difference that Parabolic SAR moves with higher acceleration and may change its position in terms of
the price. The indicator is below the prices on the bull market (Up Trend), when it’s bearish (Down Trend),
it is above the prices.
If the price crosses Parabolic SAR lines, the indicator turns, and its further values are situated on the other
side of the price. When such an indicator turn does take place, the maximum or the minimum price for the
previous period would serve as the starting point. When the indicator makes a turn, it gives a signal of the
trend end (correction stage or flat), or of its turn.
The Parabolic SAR is an outstanding indicator for providing exit points. Long positions should be closed
when the price sinks below the SAR line, short positions should be closed when the price rises above the
SAR line. It is often the case that the indicator serves as a trailing stop line.
If the long position is open (i.e., the price is above the SAR line), the Parabolic SAR line will go up,
regardless of what direction the prices take. The length of the SAR line movement depends on the scale of
the price movement.
3) Add Bollinger Bands: setting - MA Type simple period 20 multiple 2.0
Parabolic SAR Technical Indicator was developed for analyzing the trending markets. The indicator is
constructed on the price chart. This indicator is similar to the Moving Average Technical Indicator with the
only difference that Parabolic SAR moves with higher acceleration and may change its position in terms of
the price. The indicator is below the prices on the bull market (Up Trend), when it’s bearish (Down Trend),
it is above the prices.
If the price crosses Parabolic SAR lines, the indicator turns, and its further values are situated on the other
side of the price. When such an indicator turn does take place, the maximum or the minimum price for the
previous period would serve as the starting point. When the indicator makes a turn, it gives a signal of the
trend end (correction stage or flat), or of its turn.
The Parabolic SAR is an outstanding indicator for providing exit points. Long positions should be closed
when the price sinks below the SAR line, short positions should be closed when the price rises above the
SAR line. It is often the case that the indicator serves as a trailing stop line.
If the long position is open (i.e., the price is above the SAR line), the Parabolic SAR line will go up,
regardless of what direction the prices take. The length of the SAR line movement depends on the scale of
the price movement.
4) Add 2 Exponential moving average one is period 5 line colour green the other is period 20 line
colour red
The Moving Average Technical Indicator shows the mean instrument price value for a certain period of
time. When one calculates the moving average, one averages out the instrument price for this time period.
As the price changes, its moving average either increases, or decreases.
There are four different types of moving averages: Simple (also referred to as Arithmetic), Exponential,
Smoothed and Linear Weighted. Moving averages may be calculated for any sequential data set, including
opening and closing prices, highest and lowest prices, trading volume or any other indicators. It is often the
case when double moving averages are used.
The only thing where moving averages of different types diverge considerably from each other is when
weight coefficients, which are assigned to the latest data, are different. In case we are talking of simple
moving average, all prices of the time period in question are equal in value. Exponential and Linear
Weighted Moving Averages attach more value to the latest prices.
The most common way to interpreting the price moving average is to compare its dynamics to the price
action. When the instrument price rises above its moving average, a buy signal appears, if the price falls
below its moving average, what we have is a sell signal.
This trading system, which is based on the moving average, is not designed to provide entrance into the
market right in its lowest point, and its exit right on the peak. It allows to act according to the following
trend: to buy soon after the prices reach the bottom, and to sell soon after the prices have reached their
peak.
Moving averages may also be applied to indicators. That is where the interpretation of indicator moving
averages is similar to the interpretation of price moving averages: if the indicator rises above its moving
average, that means that the ascending indicator movement is likely to continue: if the indicator falls below
its moving average, this means that it is likely to continue going downward.
5) Aroon: settings – Period 20
Aroon Indicator allows defining the changing in prices from the trend state of the market to the
sidewalks state. (It indicates absence of clear tendency).
This indicator is built on the basis of measurement of amount of periods, which has passed from the
moment of Maximum and minimum within the time range of n periods.
The Aroon indicator is used to determine if a currency trading price is moving in a trend or
sideways as well as how strong the trend is. If the price of a currency trading price is rising, the close for
the period will be closer to the end of the period, and vice versa. The Aroon indicator shows how much
time passed between the highest (up) or lowest (down) close since the beginning of a period (in percents).
When Aroon (up) and Aroon (down) are moving together, there is no clear trend (the price is
moving sideways, or about to move sideways). When the Aroon (up) is below 50, it is an indication that the
uptrend is losing its momentum, while when the Aroon (down) is below 50; it is an indication that the
downtrend is losing its momentum. When the Aroon (up) or Aroon (down) are above 70, it indicate a
strong trend in the same direction, while when the value is below 30, it indicates a trend coming in an
opposite direction.
Finally, for the Aroon Oscillator, the positive value indicates an upward trend (or coming trend),
and the negative value indicates a downward trend. The higher the absolute value of an oscillator, the
stronger is an indication of a trend.
6) Zoom in on chart also to make it east to read 125% on marketiva
Ok now you have the setting we are ready to learn what they mean and how to read them and most
importantly of all when to open and the amount of balance to commit.
Below you will see a picture of a 5m g/u chart with all the indicators above already on the chart, read
through each description to understand how it works.
GBP/USD 5 Min Tame Frame:
Ok looking at the above chart you can see the parabolic SAR in red shown as dots this is UNDER the
candles showing there is up pressure you will also see on the macd graph (bottom) that the red line is above
the blue and pointing up.
On top of this you will see how the 2 EMA (moving averages) the green (5) is above the red (20) also
showing a move up.
If we see all the indicators doing this it is a sure sign of an up move in general but the best way to use this
system is to simply follow each candle and use the indicators to get in and out of trades.
As an example I traded the above chart and took a long from 1.9640 the point were the 2 MA’s cross
upwards (green line went through red line )
I sold the trade at 1.9680 that’s 40 pips…why did I sell I hear you asking, ok if you look at the macd you
will see it starts to curve a little showing it could move down from here I sold at this point.
You will also see confirm of this as5 the Aroon also starts to point down. Now I just made 40 pips but I did
not stop there I took a short (sell) the second I closed the long and took another 40 pips :) so that’s 80 pips
in just 1 hour. I trade 4 pairs in this way so you can now see how 300 pips a day is easy to gain.
The simple way to use this system is look for when all indicators point the same way and go with that trend
it takes time, practise and one2one learning to get the most from this system but as a free guide it is a great
place to start making not losing pips.
Choosing entry and Exit:
Ok this is were you need to practice and read up about candles there is full information below read this and
learn word for word then you will have no trouble entering and exiting trades. You need to know candles
and the indicators above to maximise your trade success.
What is a Candlestick?
Example from babypips: While we briefly covered candlestick charts in the previous lesson, we’ll now dig
in a little and discuss them more in detail. First let’s do a quick review. Okay so what the heck are
candlesticks?
he best
The best way to explain is by using a picture:
Candlesticks are formed using the open, high, low and close.
• If the close is above the open, then a hollow candlestick (usually displayed as white) is drawn.
• If the close is below the open, then a filled candlestick (usually displayed as black) is drawn.
• The hollow or filled section of the candlestick is called the “real body” or body.
• The thin lines poking above and below the body display the high/low range and are called
shadows.
• The top of the upper shadow is the “high”.
• The bottom of the lower shadow is the “low”.
Sexy Bodies and Strange Shadows
Sexy Bodies
Just like humans, candlesticks have different body sizes. And when it comes to forex trading, there’s
nothing naughtier than checking out the bodies of candlesticks!
Long bodies indicate strong buying or selling. The longer the body is, the more intense the buying or
selling pressure.
Short bodies imply very little buying or selling activity. In street forex lingo, bulls mean buyers and bears
mean sellers.
Long white candlesticks show strong buying pressure. The longer the white candlestick, the further the
close is above the open. This indicates that prices increased considerably from open to close and buyers
were aggressive. In other words, the bulls are kicking the bears’ butts big time!
Long black (filled) candlesticks show strong selling pressure. The longer the black candlestick, the further
the close is below the open. This indicates that prices fell a great deal from the open and sellers were
aggressive. In other words, the bears were grabbing the bulls by their horns and body slamming them.
Mysterious Shadows
The upper and lower shadows on candlesticks provide important clues about the trading session.
Upper shadows signify the session high. Lower shadows signify the session low.
Candlesticks with long shadows show that trading action occurred well past the open and close.
Candlesticks with short shadows indicate that most of the trading action was confined near the open and
close.
If a candlestick has a long upper shadow and short lower shadow, this means that buyers flexed their
muscles and bided prices higher, but for one reason or another, sellers came in and drove prices back down
to end the session back near its open price.
If a candlestick has a long lower shadow and short upper shadow, this means that sellers flashed their
washboard abs and forced price lower, but for one reason or another, buyers came in and drove prices back
up to end the session back near its open price.
Spinning Tops
Candlesticks with a long upper shadow, long lower shadow and small real bodies are called spinning tops.
The color of the real body is not very important.
The pattern indicates the indecision between the buyers and sellers
The small real body (whether hollow or filled) shows little movement from open to close, and the shadows
indicate that both buyers and sellers were fighting but nobody could gain the upper hand.
Even though the session opened and closed with little change, prices moved significantly higher and lower
in the meantime. Neither buyers nor sellers could gain the upper hand, and the result was a standoff.
If a spinning top forms during an uptrend, this usually means there aren’t many buyers left and a possible
reversal in direction could occur.
If a spinning top forms during a downtrend, this usually means there aren’t many sellers
left and a possible reversal in direction could occur.
Marubozu
Sounds like some kind of voodoo magjic huh? "I will cast the evil spell of the Marubozu on you!"
Fortunately, that's not what it means. Marubozu means there are no shadows from the bodies. Depending
on whether the candlestick’s body is filled or hollow, the high and low are the same as it’s open or close. If
you look at the picture below, there are two types of Marubozus.
A White Marubozu contains a long white body with no shadows. The open price equals the low price
and the close price equals the high price. This is a very bullish candle as it shows that buyers were in
control the whole entire session. It usually becomes the first part of a bullish continuation or a bullish
reversal pattern.
A Black Marubozu contains a long black body with no shadows. The open equals the high and the close
equals the low. This is a very bearish candle as it shows that sellers controlled the price action the whole
entire session. It usually implies bearish continuation or bearish reversal
Doji
Doji candlesticks have the same open and close price or at least their bodies are extremely short. The doji
should have a very small body that appears as a thin line.
Doji suggest indecision or a struggle for turf positioning between buyers and sellers. Prices move above
and below the open price during the session, but close at or very near the open price.
Neither buyers nor sellers were able to gain control and the result was essentially a draw.
There are four special types of Doji lines. The length of the upper and lower shadows can vary and the
resulting candlestick looks like a cross, inverted cross or plus sign. The word "Doji" refers to both the
singular and plural form.
When a doji forms on your chart, pay special attention to the preceding candlesticks.
If a doji forms after a series of candlesticks with long filled bodies (like white marubozus), the doji signals
that the buyers are becoming exhausted and weakening. In order for price to continue rising, more buyers
are needed but there aren’t anymore! Sellers are licking their chops and are looking to come in and drive
the price back down.
Keep in mind that even after a doji forms, this doesn’t mean to automatically short. Confirmation is still
needed. Wait for a bearish candlestick to close below the long white candlestick’s open.
If a doji forms after a series of candlesticks with long hollow bodies (like black marubozus), the doji
signals that sellers are becoming exhausted and weakening. In order for price to continue falling, more
sellers are needed but sellers are all tapped out! Buyers are foaming in the mouth for a chance to get in
cheap.
While the decline is sputtering due to lack of new sellers, further buying strength is required to confirm any
reversal. Look for a white candlestick to close above the long black candlestick’s open.
Reversal Patterns
Prior Trend
For a pattern to qualify as a reversal pattern, there should be a prior trend to reverse. Bullish reversals
require a preceding downtrend and bearish reversals require a prior uptrend. The direction of the trend can
be determined using trendlines, moving averages, or other aspects of technical analysis.
Hammer and Hanging Man
The hammer and hanging man look exactly alike but have totally different meaning depending on past price
action. Both have cute little bodies (black or white), long lower shadows and short or absent upper
shadows.
The hammer is a bullish reversal pattern that forms during a downtrend. It is named because the market is
hammering out a bottom.
When price is falling, hammers signal that the bottom is near and price will start rising again. The long
lower shadow indicates that sellers pushed prices lower, but buyers were able to overcome this selling
pressure and closed near the open.
Word to the wise… just because you see a hammer form in a downtrend doesn’t mean you automatically
place a buy order! More bullish confirmation is needed before it’s safe to pull the trigger. A good
confirmation example would be to wait for a white candlestick to close above the open of the candlestick
on the left side of the hammer.
Recognition Criteria:
• The long shadow is about two or three times of the real body.
• Little or no upper shadow.
• The real body is at the upper end of the trading range.
• The color of the real body is not important.
The hanging man is a bearish reversal pattern that can also mark a top or strong resistance level. When
price is rising, the formation of a hanging man indicates that sellers are beginning to outnumber buyers.
The long lower shadow shows that sellers pushed prices lower during the session. Buyers were able to push
the price back up some but only near the open. This should set off alarms since this tells us that there are no
buyers left to provide the necessary momentum to keep raising the price. .
Recognition Criteria:
• A long lower shadow which is about two or three times of the real body.
• Little or no upper shadow.
• The real body is at the upper end of the trading range.
• The color of the body is not important, though a black body is more bearish than a white body.
Inverted Hammer and Shooting Star
The inverted hammer and shooting star also look identical. The only difference between them is whether
you’re in a downtrend or uptrend. Both candlesticks have petite little bodies (filled or hollow), long upper
shadows and small or absent lower shadows.
The inverted hammer occurs when price has been falling suggests the possibility of a reversal. Its long
upper shadow shows that buyers tried to bid the price higher. However, sellers saw what the buyers were
doing, said “oh hell no” and attempted to push the price back down. Fortunately, the buyers had eaten
enough of their Wheaties for breakfast and still managed to close the session near the open. Since the
sellers weren’t able to close the price any lower, this is a good indication that everybody who wants to sell
has already sold. And if there’s no more sellers, who is left? Buyers.
The shooting star is a bearish reversal pattern that looks identical to the inverted hammer but occurs when
price has been rising. Its shape indicates that the price opened at its low, rallied, but pulled back to the
bottom. This means that buyers attempted to push the price up, but sellers came in and overpowered them.
A definite bearish sign since there are no more buyers left because they’ve all been murdered.
Summary
Candlesticks are formed using the open, high, low and close.
• If the close is above the open, then a hollow candlestick (usually displayed as white) is drawn.
• If the close is below the open, then a filled candlestick (usually displayed as black) is drawn.
• The hollow or filled section of the candlestick is called the “real body” or body.
• The thin lines poking above and below the body display the high/low range and are called
shadows.
• The top of the upper shadow is the “high”.
• The bottom of the lower shadow is the “low”.
Long bodies indicate strong buying or selling. The longer the body is, the more intense the buying or
selling pressure.
Short bodies imply very little buying or selling activity. In street forex lingo, bulls mean buyers and bears
mean sellers.
Upper shadows signify the session high.
Lower shadows signify the session low.
Candlesticks with a long upper shadow, long lower shadow and small real bodies are called spinning tops.
The pattern indicates the indecision between the buyers and sellers .
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