Wednesday, March 23, 2011

Support levels of Dow Jones | 23-Mar-2011

support level of dow jonesIn my previous article, under tutorial section, I've discussed how to find support and resistance levels of chart using Ichimoku indicator. Now, I'm posting another example on the same. Below is the daily technical chart of Dow Jones using Ichimoku indicator.



dow jones technical chart

If you see carefully, the price took support on Senkou Span A and Senkou Span B lines of Kumo twice on around end of November 2010 and then on 16-Mar-2011 respectively.

The chart will turn bearish once it closes below kumo.

Now, you must have realized how easy to find support levels of any chart.

Wednesday, March 16, 2011

Ichimoku Kinko Hyo Tutorial – Part 3

kumo ichimokuIn the next series of Ichimoku tutorial, we'll discuss the basics of one of the most important component - Kumo. In Japanese, kumo means the cloud. I'll take 3 different examples of chart to understand it. For the sake of clarity, I've removed all other components of Ichimoku (TS, KS etc.) except Kumo.

Example 1

bullish chart

In the above chart, the price is ABOVE kumo. So, we can say, the chart is bullish and one should take only long calls in it. Just avoid any short-selling till the price is above kumo. And in such a situation, the upper & lower lines of Kumo acts as support lines. It has been seen that during bullish run, price sometimes takes support at these lines and then bounce back from here.

Example 2

kumo bearish

Chart of example 2 shows bearish chart, as the price is BELOW kumo and now the same lower and upper lines of Kumo acts as resistance1 and resistance2. One should take ONLY short-selling calls in such charts.

Example 3

kumo neutral
In 3rd example chart, the price is INSIDE kumo, so this is a neutral chart. Avoid taking any call in such charts till the price CLOSES above or below kumo. Because you never know where the trend will move from here, so just avoid these charts and look at other opportunities in the market.

In the next part, we'll discuss about more on kumo - Future Kumo.

Saturday, March 12, 2011

Ichimoku Kinko Hyo Tutorial – Part 2

ichimoku kinko hyo tutorialThis is part 2 of the series on Ichimoku Kinko Hyo tutorial. In the previous part, we've discssed the history and components of Ichimoku indicator. Here, I'll eloborate on mathematic portion of this indicator and rule no. 1 for trading via Ichimoku.

Mathematic component of Ichimoku

Tenkan Sen = (HIGHEST HIGH + LOWEST LOW)/2 for the past 9 periods

Kijun Sen = (HIGHEST HIGH + LOWEST LOW)/2 for the past 26 periods

Senkou Span A  = (Tenkan Sen + Kijun Sen)/2 time-shifted forward 26 periods (into the future)

Senkou span B  = (Highest High + Lowest Low)/2 for the past 52 periods time-shifted forward 26 periods (into the future)

This will create the Kumo 26 periods ahead of current price, therefore giving us direction with regards to future support and resistance.

Chikou Span (“lagging line”) = Current closing price time-shifted backwards 26 periods (into the past)

History of 9, 26, 52

At this point, many of you are probably wondering how the number of periods 9, 26 and 52 came about in the various formula. As this indicator was made before WWII, Japanese financial markets were open for trading on Saturdays, meaning that the trading week was six days long.

9: represents a week and a half of trading

26: represents the number of trading days in a predictable month (30 minus four Sundays)

52: represents two months of trading days

Japanese markets today trade only 5 days per week and 22 days in a predictable month, so some practitioners of Ichimoku Kinko Hyo suggest revising the parameters to 7 or 8, 22 and 44. Others choose to stay on the Fibonacci numbers of 8, 21 and 55. You can try the various parameters at your own. I'll stick my trading and tutorial section on default settings 9, 26, 52.

Trading Rules of Ichimoku

There are some rules to use Ichimoku and ALL of them should be used together to trade. Don't worry. There are not so many rules and they are very simple to use. To start with, the first rule is "Crossing of Tenkan-Sen line and Kijun-Sen line". This rule is very similar to use of 2 different moving average on screen - buy or sell on crossing of lines. That's it. Isn't that simple?

Rule No. 1

BUY when Tenkan Sen (TS) line crosses Kijun Sen (KS) line (i.e. TS is above KS) AND price closes ABOVE Kijun sen line.
SELL when Kijun Sen line crosses Tenkan Sen line (i.e. TS is below KS) AND price closes BELOW Kijun sen line.

Example 1

Below is the monthly chart of Gold from 2002 to now i.e. March 2011. I've removed other components of Ichimoku i.e. Kumo, Chikou Span, Senkou Span A and Senkou Span B from the chart. Just 2 lines Tenkan Sen and Kijun Sen.

gold monthly technical chart ichimoku

Around the beginning of 2002, tenkan sen line crosses kijun sen line i.e. tenkan sen line was ABOVE kijun sen line AND price closes above kijun sen - that was the BUY signal. Result - we witnessed a strong uptrend from $298 to recent high of $1434. In 2008, although price went down for some time below these 2 lines but there was no crossing of lines to confirm the change of trend. So, it resumed it uptrend in the beginning of 2009.

Example 2

GBPUSD technical chart ichimoku

The above chart is self explanatory like the previous chart.

Now, I'm sure you can easily spot the beginning of trend using TS and KS lines of Ichimoku. In the next part of this series, I'll discuss rule no. 2.

Thursday, March 10, 2011

Ichimoku Kinko Hyo Tutorial - Part 1

I'm starting a series of tutorials on trading in forex and stock market. As you know, one of my favorite indicator is Ichimoku Kinko Hyo. So, i'll start with this indicator. This is the part - 1 tutorial of this indicator.

First of all, a brief history of this indicator.

Ichimoku was developed in the late 1930s by Goichi Hosoda, a Japanese journalist who used to be known as Ichimoku Sanjin, which can be translated as "What a man in the mountain sees". He spent thirty years perfecting the technique before releasing his findings to the general public in the late 1960s.

Ichimoku Kinko Hyo translates to 'one glance equilibrium chart' or 'instant look at the balance chart' and is sometimes referred to as 'one glance cloud chart' based on the unique 'clouds' that feature in ichimoku charting. This is one of the few indicator, which is complete in itself. In one screen, this indicator can give you support, resistance, bullish or bearish signals, stop loss - everything you need to know for trading.

You may download Ichimoku Kinko Hyo indicator for MetaTrader platform from the indicators section of this website. Source code file is included with the indicator.

The key elements of  Ichimoku indicator are:

  1. Tenkan-Sen

  2. Kijun-Sen

  3. Chikou Span

  4. Senkou Span A

  5. Senkou Span B

  6. Kumo

We'll discuss all these 6 elements in details one by one and then combine them to make a successful strategy.

Below is the chart with all 6 elements. For time being, just remember the names of these elements on chart. Since, these are Japanese terms, you may find it difficult to remember these names in the beginning, but slowly and slowly, you'll like them.

 Ichimoku Kinko Hyo

Tuesday, March 8, 2011

Doda-Stochastic Indicator for MetaTrader

Stochastic is one of the famous indicator used by many investors and traders. Many software, including MetaTrader, provide this indicator in-built. But this indicator gives many buy and sell signals on a shorter time frame.

Below is the variant of this indicator - Doda Stochastic.


 doda-stochastic indicator for metatrader

It displays itself in the lower window of a chart.  The indicator is easy to use and the rules are same as you use normal Stochastic indicator.It also gives you screen alert on buy & sell signals.

Some main points regarding the Doda Stochastic indicator:

  • I'm not the original developer of this indicator. I just made some changes in it. So, the credit and copyright, if any, goes to original coder.

  • Use this indicator on higher time frame like H1 or H4 but not less than that.

  • Use this indicator on the demo account first and later on the real account.

  • Use other indicators like Doda-Donchian & Doda-Bollinger also along with Doda-Stochastic indicator to get a complete picture of trading call.

You may download Doda-Stochastic indicator from here.

Thursday, March 3, 2011

How to filter false signals of Doda-Donchian indicator?

I got several emails and positive comments on Doda-Donchian indicator posted few weeks back. Most of you admitted that it gives very good & accurate signals. But, like no indicator can be 100% accurate, this indicator also sometimes false signals.Today, I'll discuss something about filteration of false signals from Doda-Donchian indicator.

For that, I'm posting the technical chart of EURUSD at time frame H4 with indicators - Doda-Donchian, Doda-Bollinger and BBSqueeze Dark. All these 3 indicators for MetaTrader can be downloaded from indicators section of this website.




Around 17-Feb-2011, Doda-Donchian & Doda-Bollinger gave buy signals and after few hours of volatility, EURUSD currency pair started their uptrend. Then, around 2-Mar-2011, the price closes below Doda-Donchian line; thus giving sell signal. But the price again started moving upward after couple of candles. That was the false signal. So, we need to filter out such false signals from out trading desk.

The solution is in Doda-Bollinger bands. If you look at the chart, Doda-Bollinger band was intact during that false signal and did not change its signal. Even if you look at BBSqueeze dark indicator, it also continued in buy zone i.e. blue histogram with green dots. So, one can easily spot out such false signals, when powerful indicators have different views.

Generally, I've observed that powerful signals are given by Doda-Donchina and Doda-Bollinger bands almost at the same time. If they behave differently, it's better to wait for common view rather than taking risk. After all, opportunities are always there in this market.

 Share your doubts in comments section below.

Wednesday, March 2, 2011

BBSqueeze Dark Indicator for MetaTrader MQL4

silver technical chartIn last some posts, I've mentioned one of the powerful indicator BBSqueeze Dark. Today, I'm posting this indicator for MetaTrader platform along with its usage directions and sample chart. Posting below the technical chart of Silver on time frame H1.


silver technical chart with bbsqeeze dark indicator

The indicator starts below the main chart window and is very simple to use. There are 2 steps to take signals via this indicator.

Step 1:See the zero line. It consists of either Red dot or Green dot. If it is Green dot, it's time to take action. Now, action (buy or sell) has been defined in step 2 below. If it's Red dot, do nothing and stay away. Just hold your position.

Step 2: If you see Green dot in zero line, it's time to either Buy or Sell. For that, see the histogram lines, which are either on above zero line (blue lines) or below zero lines (red lines). Just buy on blue histogram and sell on red histogram.

In a summary, take long position when you see green dot on zero line AND blue histogram lines.

And sell your position, when you see green dot on zero line AND red histogram lines.

Now, for those who want to understand the logic behind this indicator. This indicator is based on signals given by combinations of Bollinger Bands and Keltner Channels. I'm not going in further details. You can find about these 2 indicators somewhere else also.

Last, but not the least, I'm not the developer of this indicator. Just sharing with you from my indicators library. So, all the copyrights and credits goes to the original developer.

I've tested it on different currency pairs and time frame. It works on everywhere but gives best results on high time frame like H4. It's always better to trade on H4 time frame to avoid volatility of the market and false signals.

Download BBSqueeze dark indicator from here.

Update: You can also download this indicator in ZIP file

Got any doubts, share your thoughts in comments section below.