Forex Simplest Technical Indicators - Exponential Moving Average

Exponential moving average (EMA) or most famously known as exponential average (EA) is the most widely use by novice traders. This is because it is the simplest form of technical indicator that can easily be understood by anyone in forex trading. Perhaps you can see most widely discussed subjects in forex forums are run by beginners usually about the EA subject on Technical Analysis trading system.

EA is consist of two line of moving average which you can adjust according to your needs. Novice traders usually will form their own EA indicators by adjusting the moving average line time period parameters. One of the famous setting created by traders to conquer a trend is the 50:120 day simple moving average line.

Every trader EA setting can be different to one another depending on their knowledge, experience, and ideas toward the market movement. Some may adjust it according to other traders setting or they can create their own parameters setting depending on how they see it fit on the market movement. Not all EA with one setting can work with every time frame or currency pairs. And you have to adjust this accordingly based on what time frame you are trading at and also the currency pairs.

The formation of EA is the basic foundation of slow stochastic and moving average convergence divergence (MACD). As you can see it formed by two moving average line just as the stochastic and MACD does. Below EA indicator setting is using 21 Period Exponential average and 8 period simple moving average work very good in 15 minutes time frame.

This is another setting using Simple Moving Average 15 (Blue) and 20 (Red).

The setting of Exponential moving average is depending on individual preference of how they look at the market. The more experience a trader is usually make better setting to novice traders because they have experiment their system on daily trading. However there are universal setting that all traders use to believe in is the EMA 200 to determine trend. So as long as the EMA 200 moving in its direction the market will always bound within its path. As you can see.

Perhaps now you have the idea how to create your own indicators using Simple Moving Average line. They work almost like MACD and Slow stochastic indicators and in fact Bollinger Bands has a similarity to it. The basic idea is all about moving average.

Marketiva Forex: Trade as low as $1 & FREE $5 + $10000 Virtual Practice Money
Kaspersky Internet Security 2009 (1 User/1 Year) - USD 8.50 and (3 Users/1 Year) - USD 12.00

Why failed in forex? - Overbought and Oversold and when the market move

What is the main reason people failed in forex currency trading? This is a question that is hardly can be answered by anyone including the professional traders. A perpetual problem of currency trading that will last forever without precise solutions.

Even though traders can easily gain access to forex knowledge from forums, websites, e-books, and trading experience at free trading platform. This is to say that every forex traders alike are highly knowledgable about currency trading market both fundamentally and technically. You can find this on many stories of overzealous novice traders talking about their ambitious trading goals and technique can be found mostly in forums, commercial forex website, individual blogs, etc. But eventually none of this really works after all because they were right only at a time and wrong most of the time no matter what forex trading system is applied.

So what is the real problem? The answer is none because the problem will always remains as long as forex trading is concern. The first problem is no one can ever predict when exactly the market will move. This is because traders will never tell when they will enter their position especially the major crowds or big traders where we rely on for the market to make a move. The unpredictable time of movement usually frustrates those who setup their position too early this is especially for those traders who are using Moving Average Convergence Divergence (MACD) indicators. As the market do not move for example in 1 or 2 days, they already started to lose on the rollover fees. This delay movement forcing to close position early by sacrificing some losing pips and eventually also considered losses. (Read When the market move )

The second perpetual problems in forex trading is overbought and oversold situation. Every traders can witness this almost everyday in their trading activities. The candlesticks move frequently piercing the bollinger bands line defying the technical analysis goal that has been setup. Only later then it will only move back to expect position when the market is cooling down. And for traders who setup their position early on expecting for correction will get a lot of worries and doubts during this overbought/oversold condition. And this will become one of the driving force to close the position early to avoid further losses. In addition for those who are willing to wait, another condition may occur when will the market will make correction. What if it is making correction after 1 or 2 days later how much then you are going to lose for the carry over fees. This is simply why forex signals simply do not work.

So in order to be good in forex is not merely good in your fundamental or technical systems but also capable of anticipating the perpetual nature of the forex (overbought/oversold and when the market move). Many of us have fails in the forex market and others have already given up because they see the forex trading is simply unpredictable. This is because they have been too long in the market overloaded with knowledge of forex and too much reliance on certain technical analysis systems without considering the unpredictable perpetual factor of the market.

Therefore when you trade in forex be ready to anticipate the unexpected oversold/overbought and when the market move.

Marketiva Forex: Trade as low as $1 & FREE $5 + $10000 Virtual Practice Money

forex EUR-USD Technical Analysis

So we the eur-usd did not experience overbought after all and we can see it now being retrace to the middle band of daily time frame. This should be the ideal position where it should be making correction. However as i always said before we do not want to speculate things in forex where overbought/oversold may happened anytime without warning. A possible move back to the bottom band is always open wide.

However from the current movement patterns that the pair is experiencing right now, it could be moving sideways to form three big mountains and troughs. This has kind of patterns have been recorded in the past and is proven repeatedly happen.

On the fundamental side of it let's take a look how the Euro zone and US economic data has affect the market to move that way. The fundamental is the caused why the market move randomly and frequently go for overshot.

JPY	Housing Starts y/y	19.8%	54.2%
EUR	CPI Flash Estimate y/y	2.1%	3.2%
EUR	Italian Prelim CPI m/m	-0.4%	0.0%
EUR	Unemployment Rate	7.7%	7.6%
CHF	KOF Economic Barometer	-0.05	0.28
GBP	CBI Realized Sales	-46	-27
CAD	Current Account		6.8B
CAD	RMPI m/m		-7.2%
CAD	IPPI m/m		-1.2%

Do you notice actually the fundamental economic data from forexfactory website shows the overall for Eurozone is slightly poor for today. However the market make correction significantly because it follows the long-term trend movement which is still going down.

Marketiva Forex: Trade as low as $1 & FREE $5 + $10000 Virtual Practice Money

forex eur-usd long position

As i have discussed earlier in the previous post the possibility to move up is always around as long as the weekly stochastic still moving upwards. In addition this movement is also backed up by slight improvement in the Euro Zone economic data.

Now position is moving near the upper bollinger band line which may move further overshot up to 1.3273. This is always a possibility in Forex because we do not want to underestimate the power of crowds. However if it does go for overshot up to 1.3273 then the reversal power is going to be more powerful then ever.

Under normal movement the pair position right now is just an ideal place as expected in the earlier analysis that is somewhere near the upper band of the daily time frame.

Marketiva Forex: Trade as low as $1 & FREE $5 + $10000 Virtual Practice Money

forex eur/usd technical analysis - currency trading

Breakout can happen anytime, however as long as the weekly slow stochastic is not yet diving down there should be resistance still going on. That cause the market randomly bouncing ups and downs.

Since there is resistance, a chance to move up until 1.3041 is still a possibility. That is if only extra-ordinary good economic data forecast from the euro zone market. If not then the market should be bouncing just somewhere within the area of 1.2448 and 1.2711 level indicated by the bottom and middle of the bollinger band line respectively.

Below chart shows the possible fluctuation level of the eur-usd pair in the daily time frame. This boundary draws by the bollinger band moving average line.

Weekly time frame below shows upward movement of slow stochastic to confirm that the pair is still fighting against the resistance level and making some correction activities. Breakout is not yet so certain as long as slow stochastic is moving up.

Monthly time frame showing a possible oversold area when the market is successfully break the resistance level in the future. There is a possible extreme oversold depending the fundamental economic data to drive the market into extreme temporary oversold movement

Marketiva Forex: Trade as low as $1 & FREE $5 + $10000 Virtual Practice Money

forex eur-usd forex currency trading results

Today's trading results is also for short trade. I took some chances to go down despite of the 4 hourly stochastic is heading upside. As i can sense that the market is moving in a triangle shape, the idea to find the right edges to break the resistance level 1.2437.

So i have harvested 15 pips from the top of the bollinger band line which is not so bad for end of the day treat. I will add up the eur-usd chart when i have the time. For now get some good night sleep and peace to all who read.

At the moment we are just looking at the market bouncing ups and downs randomly waiting to break the downtrend current resistance level at 1.2466.
Marketiva Forex: Trade as low as $1 & FREE $5 + $10000 Virtual Practice Money

forex Eur/usd trade results

I was not expecting huge reversal from the temporary upward movement yesterday but a quick one yes. However the pair took it both quick and huge as you can see on the chart.




Marketiva Forex: Trade as low as $1 & FREE $5 + $10000 Virtual Practice Money

forex EUR-USD Technical Analysis

The euro zone economic data is slightly weakening as you can see it on www.forexfactory.com. Great Britain CPI y/y 4.5% previous 5.2%, Core CPI y/y 1.9% previous 2.2%, RPI y/y 4.2% previous 5.0%.

The US economic data is significantly improve on major aspect such as TIC Long-Term Purchases 66.2 Billion previous 21 Billion, Core PPI m/m remain 0.4%, and PPI m/m -2.8% previous -o.4%. Upon this analysis i have not yet take into account Federal Reserve head (Ben Bernanke) testifies.

As a results you can see the market is moving downward gradually even though along the way you can notice random movement. The way ahead is non-other than to clear up the path way for further downfall of the pair.


Marketiva Forex: Trade as low as $1 & FREE $5 + $10000 Virtual Practice Money

What is forex trend?

Many novice traders are still confused by the terms of trend. This is no surprise because trend can be many if you see it by time frames. In order to make easy understand traders divided trends into 3 most commons terms which consist of short, intermediate, and long trends. Each of this category are made up of one or more time frames for example short-term trend are consist of 4 hourly up to daily time frames. And intermediate trend is displayed by the weekly time frame and lastly the long-term trends is by monthly.

Short terms trends usually complete cycle usually take up a minimum of 2 days or a week. Intermediate trend will take a month and long term trend maximum up to 5 months before they make correction.

Usually the general term of trend that most people are talking about is the long-term trend. So commonly they are referring to the monthly time frame because it takes at least 2 to 5 months of continuous movement before major correction is taking place. How to estimate how long a trend is making a complete cycle is by using the candlestick counting method.

Take a look at the chart and how many candles can you find in a complete long-term trend cycle.





Marketiva Forex: Trade as low as $1 & FREE $5 + $10000 Virtual Practice Money

forex Euro-Usd Technical Analysis

Euro-Dollar pair is still fluctuating within a minor resistance level where a level of blood rush is very high to go down. Try to buy at this point is very risky business to do, i would rather looking things from the top and have the mindset of riding it down to the bottom instead of thinking from the bottom to go up.

If the weekly stochastic ever to curve down, this minor resistance can easily be broken causing a huge chart slide down. And the level of lowest bottom is not yet known as long as Monthly stochastic is moving down.

Today's trading results not bad after coming back from work, stealing some 15 pips/points from the minor movement on the 15 minute charts. And now away i am to sleep ;) waiting for another week to come. Remember the following weeks until the end of the month could be a break down disaster ;). Let's see and rocks.

Marketiva Forex: Trade as low as $1 & FREE $5 + $10000 Virtual Practice Money

forex EUR-USD Technical Analysis

As far as downtrend is concern for the Euro-Dollar, the pair still has a long way to go down. Oversold is very much likely to take place with a possible target point 1.1690 or below. In addition the economic data forecast on forexfactory website is also bias towards the Dollar strength compare to Euro Zone economic data.

The above is trade results after i came back from work. Not bad for a small correction pips earning 22 points. Looking forward for another day trade tomorrow (Friday) for the last day of the week in currency trading.

Marketiva Forex: Trade as low as $1 & FREE $5 + $10000 Virtual Practice Money

Forex Trade Results

Today's result after i am back from work earning some 12 pips from the GBP-USD pair. That's good enough for a simple trade of the day and let's back to sleep waiting for another tomorrow trade again.

Taking some small scale correction effect.


Marketiva Forex: Trade as low as $1 & FREE $5 + $10000 Virtual Practice Money

Forex Trade Results

I've still never expected today the delay effect for the second candle is taking precedence on the third candle instead. And for that i took my chances to harvest some pips. However not much from the EUR-USD which is only 3 pips, but from the violent GBP-JPY pair which 90 pips riding on the moving train.


The overall trend is still bearish. What you see today perhaps last only for days or this week only, then the rest of it will be all going down.

Marketiva Forex: Trade as low as $1 & FREE $5 + $10000 Virtual Practice Money

forex EUR-USD Technial Analysis

My expectation did not turn up where it should be. This is due to strong downtrend sentiment among traders. As we can see the pair is trying hard to move up to form at least 2 pieces of white candles, but it did not make it. As a result at this point onwards it open the door for continuation to downtrend again for the rest of the week until the end month of November.



Marketiva Forex: Trade as low as $1 & FREE $5 + $10000 Virtual Practice Money

forex EUR-USD Technial Analysis

Alright now where should the EUR-USD is going for this week until Friday?

It's seems to be easier to see the where it is heading to because weekly slow stochastic is already moving upwards direction. As i have discussed before over and over again about the two candlestick counting standard where you can search in the blog.

So let's guess how many candlestick will be formed until this Friday end? He he i answer myself it's 2. Then let's proof it if i am wrong or right by the end of this Friday 2 white candlestick. By the power of Nostradamus the great we will get back to see the chart when Friday ended.

Marketiva Forex: Trade as low as $1 & FREE $5 + $10000 Virtual Practice Money

forex EUR-USD Technial Analysis

As the weekly stochastic is already moving up there is a likelihood that it will form two pieces of white candlesticks for another intermediate correction. However this only can happen if at least daily and 4 hourly stochastic is starting to show upward direction again. At the moment we can see that the chances is 50:50 which is very uncertain whether to go down or up.

This uncertainty is also disturbed by the feelings of traders after looking at the monthly stochastic which is still moving downward direction. Therefore by right the way should be still going down instead of going up.

So my conclusion here is if the 4 hourly and daily stochastic are indeed later on showing upward directions. Then an intermediate correction will take place at least up to 1.3299 first level and second level 1.3658. On the opposite if it does not then it will push further deep down back to 1.2329 or more.

At this kind of situation, the fundamental can play a part to decide where the direction it should go. In doing so we will have to see what economic data will say tomorrow both on the EUR and US economic zone. If the EUR zone has better economic data and US is slightly not good then correction might take place or vice versa.


Marketiva Forex: Trade as low as $1 & FREE $5 + $10000 Virtual Practice Money

forex EUR-USD Post Analysis

I have discussed about the intermediate correction of the eur-usd pair here EUR-USD Technical Analysis and EUR-USD Technical Analysis on the 29 and 30 October last Thursday. At that time i was expected the market to move at its ideal position which is somewhere around 1.2831 which at the upper bollinger band line of the 4 hourly time frame. Why did i expect that because both MACD and Slow Stochastic on the 4 hourly time frame are both moving upwards direction.

However instead of reaching up to 1.2831, the pair gone for overshot until reaching 1.3236 temporarily which is somewhere in the middle band of the daily time frame. The reason why it was only for a temporary movement because 1.2831 is the ideal position where it should be. And for that you can see the market move back somewhere at 1.2831 again quickly.

The overshot target maybe the results of anxiety from the oversold position in the long-term monthly time frame. Every traders are expecting huge correction to take place from the oversold position. However from the daily time frame view only slow stochastic is moving up and MACD did not therefore the market only move temporarily until the middle band of the daily time frame. It would be a different case if both MACD and Slow stochastic move in the same direction the ideal target correction should be 1.3236

4 Hourly time frame view shows the ideal position and overbought target (temporary) and then retrace back to the ideal position.

Daily time frame shows MACD and Slows stochastic not yet moving in line. Only stochastic is moving up but MACD not yet. And also temporary correction point on the middle bollinger band line of daily time frame. If both MACD and Slow Stochastic was moving in line this will be a solid correction point instead of just a temporary one.

Marketiva Forex: Trade as low as $1 & FREE $5 + $10000 Virtual Practice Money

How double top and double bottom exist?

One of the most popular chart patterns that you probably encounter in your daily trading is the double top double bottom formation. You can find this pattern almost in all time frames view ranging from 5 minutes to monthly. Before we go through deeper analysis on this, let's take a look what exactly are they?

What is double top chart formation?

Double top formation is simply a of chart pattern which resemble the letter M shape see picture below.

How it is formed is due to the market power trying to test the previous resistance level if it can breaks it. As the market fail to break the resistance in the second movement resulting in complete reversal of the market to create the M shape patterns. Even though you may not find this patterns all the time, but it is a worthwhile knowledge where you can keep in mind for future reference.

What is double bottom chart formation?

Double bottom formation is a chart pattern that resemble the letter W shape see picture below.

Even though their opposite shape, the caused of formation of the double bottom is exactly the same as double top. Where the market fail to break second resistance and then make a complete reversal.

How long to trade forex in a day?

Brokers always trying to find ways how to make profit for themselves and other of course other than waiting for customers to lose their money on trading they also charge rollover fees. Rollover fees is charge when you did not close your trade and carry to another day. Usually this happens because you make losses during that day forcing you to carry another day in the hope to reduce the losses or waiting to profit if you are lucky it goes in your expectation.

However most often that is not the case where losses keep accumulating and at the same time your rollover fees is also increasing as you carry the trade over and over again. If you are not careful enough to handle the situation you might end up losing the entire deposit you have in a matter of weeks if not days.

Therefore in order to avoid losses from the rollover fees you need to manage your trade within a day period. In doing so you need to set a fix time period how long you should leave the open position floating before closing in the end of the day. An idea arise when i used to discussed about the 2 candlestick standard movement before (read candlestick counting and candlestick counting post analysis).

In that post i have discussed about the common movement of candlestick usually move within 2 candles. Therefore if we are using 4 hourly time frame each candle is equal to 4 hours, that means within a day starting from the Asian Session until the US session is approximately 8 hours to 10 hours. So just to make it safer we just stick to 8 hours for all open position before we can close it. After 4 hourly time frame forming 2 candlestick (up = white candles or down= black candle) then we need to close it and enough for that day of trading.

If you are using daily time frame 2 candlestick is equivalent to 2 days therefore whether you profit or not rollover effect will at least make you some losses because you need to carry trade to another day.

This discipline will keep you away from the rollover fees!! Think about it.

Marketiva Forex: Trade as low as $1 & FREE $5 + $10000 Virtual Practice Money