ADX: define trend force, whether the trend will develop further or will gradually weaken.
Three lines in ADX:
1) +DI (Yellow)
2) -DI (Red)
3) ADX line (Blue)
Stochastic: compares a stock's closing price to its price range over a given period of time.
Using the both will give traders great forecasting trend strength.
Two lines in Stochastic:
1) %K: This is the number of time periods used in the stochastic calculation.
2) %D: This is the number of time periods used when calculating the moving average of %K.
Signal to buy:
When either %K or %D falls below the line, and then again crosses the bottom level upwards or when the curve %K crosses the curve %D from below upward.
When +DI is higher than -DI
Signal to sell:
When oscillator grows above the line, and then crosses the top level downwards or when the curve %K crosses a curve %D from top to downward.
When +DI is lower than –DI
2) MACD with RSI:
The MACD proves most effective in wide-swinging trading markets.
Crossovers: the basic MACD trading rule is to sell when the MACD falls below its signal line.
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.
Zero Line Crossovers: A crossing of the MACD line up through zero (the centerline) is interpreted as bullish, or down through zero as bearish.
Some analysts choose to buy or sell when the MACD goes above or below zero.
The RSI indicator ranges in value from 0 to 100, with numbers above 70 indicating overbought conditions and fewer than 30 indicating oversold
Signals to buy:
When the MACD rises above the Signal line & above Zero
When the RSI rises above 30
Signal to sell:
When the MACD falls below the Signal line & below zero
When the RSI below 70
3) MACD with Parabolic SAR
Parabolic SAR is more popular for setting stops than for establishing direction or trend.
Parabolic SAR is base on the following rule: to shift the levels of closing prices only in direction of opened position.
If there is a long position opened before, it is possible to increase the level of closing prices, but not to decrease it.
If the short position is opened, it is possible to decrease the level of closing prices.
The indicator can be very effective if a filter of some sort is used like MACD.
If we were long the market, then only long signals would be taken and the short signals ignored as long as the filter has given a buy signal and remains in buy.
Now you can confirm the signal by using the both indicators.
Signal to buy:
When MACD bars is over 0 level and rising, signal line below bars end and rising and SAR dots below price chart.
Signal to Sell:
When MACD bars is below 0 level and falling, signal line over bars end and falling and SAR dots over price.
4) RSI with Momentum
It measures the amount of change in commodity's price during a period of time.
Using both RSI & Momentum for average 14 days will enable a solid strategy in determining signals.
Signal to buy:
RSI rises above 50 but stays below 70, and momentum rises above zero.
Signal to sell:
RSI falls below 50 but stays above 30, and momentum falls below zero
5) RSI, ADX with Parabolic SAR
The three where developed by J Welles Wilder, using RSI, ADX and Parabolic SAR for average 14 days will show great signals in entering the orders & closing them.
Signal to buy:
1- When RSI cross 30 level and rising up
2- SAR dots below the price chart
3- DI+ over DI-, ADX line cross 20 level, ADX and DI+ rising and DI- falling.
Exit when SAR dots make a cross with the price chart & ADX moving below 30 from above while above +DI and –DI
Signal to sell:
1- When RSI cross 70 level & falling down
2- SAR dots over the price chart
3- ADX line cross 20 levels and rising where DI+ falling and DI- rising.
Exit when SAR dots make a cross with price chart & ADX moving below 30 from above
& above +DI and –DI
6) Bollinger Bands with ADX:
Bollinger Bands are an indicator that allows users to compare volatility and relative price levels over a period time.
Using ADX with Bollinger Bands over 20 days period of time give strong signals:
Signal to buy:
When the price below the lower band of Bollinger (20, 2) & DI+ over DI-, ADX line cross 20 level, ADX and DI+ rising and DI- falling.
Signal to buy:
When the price above the upper band of Bollinger (20, 2) & ADX line cross 20 levels and rising where DI+ falling and DI- rising.
No comments:
Post a Comment