Saturday, December 31, 2011

Metatrader Criticisms - Finding a forex broker and Charting Considerations

Your chart vs Broker execution
When you trade there are 2 very important considerations to completing a trade - 1. How well can you chart your trading strategies. 2. How reliable your broker is at filling the trade weather you are entering a trade or exiting.

No matter how bad your broker, it is a must that you properly chart market data. If the data is bad or the charting software doesn't have the capabilities (including tools & indicators) there is no way to make money in the market with such bad charting methods. A chart is like a map. Just imagine Columbus sailing to America without a chart - he couldn't expect to just jump in the ocean without direction (just because he had an expensive ship) or expect to survive without past data. The past data is the key to it all. It wouldn't matter how good his leader was either if he didn't have any charts - he simple would not be able to sail the seas because he was ordered to and had a good ship. It would equal a dead crew and no ship.

But this is trading and nevertheless we still need to get a good fill when we click trade and many brokers have been criticized for delaying trades - this is more prevalent when there is a big event such as the dreaded Non Farm Payrolls or a Fed Bank meeting. During such times of high volatility the market may move so fast the price will be 50 pips or more from where you thought to trade or clicked buy/sell and the market just keeps pulling away from that point. Talk about intense!!!

You know those times you click buy or sell and the order doesn't execute immediately and you end up getting in at a price much different from when you clicked trade. Doesn't it suck? I actually don't get "bad fills" with my broker (GFT) but I do get those re-quotes that sometimes anger me but I usually can get in or out of the market without a problem because I stay in tune with the market. If your trying to get out of a bad trade fast it can be really costly in those moments and getting in won't be easy (imagine everyone trying to get into a ship out of "Dodge" or in a lifeboat from the sinking Titanic).

Since I usually trade the majors the spread isn't too bad so unless there's something crazy going on I usually get a good order fill with my broker and really that's all I personally expect with my own trading strategies - there's lots of opportunities to make a buck in FOREX. I tend to avoid those high volatility situations - but some people prefer to trade them and sometimes their just unavoidable. But there's never going to be a perfect broker for such a situation when everyone is trying to get out or in the market at the same time.

Electronic Market vs Real Life
Just imagine a real life situation where all the farmers go bankrupt because the food commodities crash (ie wheat or corn) and their all trying to sell their farm at the same exact time before the price falls too fast to get their money back on their investment - it's not going to be easy to get rid of the entire farm when the market collapses and in that case there's no such thing as a "good" broker because their not going to take your loss.

Broker Reputation
I'm not defending brokers there are some real crappy ones of course and their in business just like us. But that's were reputation comes in and you will find ample information of people bashing FOREX brokers and if they have been in business for awhile there will be ample information on them. The bad ones will try to save their reputation but if they are dishonest the word will be out. Of course they are going to put out bad words about each other because of how competitive the field is but there's no masking a very bad and dishonest broker.

The way I see it is a broker is like a car dealer - they are all going to lie to some extent but if you know what your doing you are not going to get ripped off easily and there are legitimate brokers that don't want to be accused of being scammers. This is like street smarts where the thief's are going to avoid messing with you because you are harder pray and not worth it for them. It's also where charting and trading strategies come in and why I personally like Metatrader to make my charts because of it's capabilities. If your brokers is relatively legitimate you should be able to operate as long as you are good at charting and have the required tools of the trade available to you.

If your unsure about a broker just google their name and a keyword like scam, complaint, ripoff, or report. You will always find complaints about them but if their reputation is horrible stay away from them. Some complaints will be by traders that just can't trade and blame the broker for their own trading errors. It's better to spend a few hours or even days of time researching brokers rather than losing all your money if they end up to be a scam.

But seriously why Metatrader?
There are some people that say Metatrader sucks or that it is designed by the bucketshops so that you can't make money. Sure it was created by the industry for the industry but I see it this way - they provide an opportunity to make money but on the most part only the good one's will be able to benefit from it because the big horses in the race are always going to win and be at the top of the pack. If a few end up in the middle they aren't going to fret because a large majority will be at the back.

If you really don't trust metatrader terminal to place your trades you can chart in metatrader with a demo (they are always free) and have your trade placed by a separate non-metatrader broker or ecn.

You can make money and there is a way it's just that odds are most people will not be able to find that way or will fall short. In a sense it's gambling in that aspect because the house is always going to come out ahead in the long run. They are not going to make a path to a safe for you to just take money and say here you go just take it but if you can find the correct path it's there. The market is a huge place with lots of slop so don't let anyone tell you there isn't a way and don't believe the way is simple.

Metatrader gives you a chance to chart and if you are good at charting you can become a successful trader providing you have enough money to invest and are able to correctly manage your money. But no amount of skill is going to allow profit from every trade. The market is like a combination of the currents in the ocean and the weather patterns. It's hard to predict like the weather and like the ocean if you get on the wrong end of the current it takes no prisoners. So even if your an expert chartist if you can only buy 1 lot and if that one lot must be right (ie no loss) the trader still stands a good chance of losing because it is very competitive - 1 chance is not enough to win big.

Just having the tool/terminal (ie Metatrader, Tradestation, Metastock, eSignal, any of them) is not enough to beat the top dogs. Watch a NASCAR race and every-time the big winner of the circuit is going to be those guys that got everything into the races including: top equipment, the best crew, the resources, and promoters. They won't be running used tires, run low grade fuel, or hire inexperienced crew members. So just because you have a car it isn't a threat to the top dogs at the highest level of competition because their cars are maxed out to a science and their trading 100's of big lots a day or more. 1 lot traders are not a threat to them even if 1 out of 10 make a living they aren't going to fret one bit. In fact any one trader (an independent trader) is not a threat to them by themselves - the big dogs have a staff working for them 24/7 - full staff of trained professionals. Remember 2 minds working together are better than one and they are a finely tuned machine.

With all that said Metatrader is not a scam in itself or the other trading vessels and you won't be able to beat the top dogs with it - but if your good you can make a living with the tools that are available to everyone willing to find and employ them properly. Trading in itself is a racket like any other racket including sports. Only so many are going to be able to make it but most will not make it professionally. The opportunity is there though and genuine. In my opinion Metatrader is the best thing invented for independent traders to have a chance at becoming professionals.

Let's take a sports analogy
Top traders often take losses but losing is actually part of getting it right.
Losses can be like incomplete passes or sacks for a top trader that takes a small or a moderate loss. Their like a pro QB. The leading QB's don't try to score a td every play but they look for it if there's an opportunity ie the defense is asleep and a receiver is open. If the opportunity is not there a good QB usually doesn't try to force it but rather they will throw the ball away or would rather give up a sack rather than cause a turnover - that's the mentality a pro trader has to have.

Since there is no time limit like in sports this should never happen (ie big turn over) but you often see inexperienced traders blowing up their accounts - it is equivalent to forcing a pass to get a touchdown because the time is running out but the defense intercepts and scores a td the other way - just take the loss if your wrong and if you don't have enough equity you better get some before for you expect to survive the markets. Some will even resort to blaming their brokers for this but in reality they made a bad play and refused to take a sack (a stop loss) or an incomplete pass (no trade in volatility ect.).
If the opportunity is there the trader scores big and makes up for the few small losses that incurred to get to the prime moment which like the weather is hard to predict but like the current will take you with it. You can't blame the broker as a professional trader if you simply fight the trend.

Football Statistic For NFL Champion QB Aaron Rodgers:
For last years Superbowl the winning QB stats for the Superbowl were 24 of 39, 3 TDS, and 0 interceptions. That means he threw the ball away 15 times and out of 39 passes he "only" threw 3 touchdowns in 39 passes - I know 3 is alot for football but think about it - he threw 39 times for only 3 scores. For the year he only threw 11 interceptions which is excellent and was 68% on his pass completions which is very high actually but nevertheless nowhere near 100% and when I went to school 68% on a test score was barely passing. In my Microsoft Certifications Exam I took for programming 68% would be a fail - I got something like 65% my first try but I never went back because of the cost at the time. Rodgers didn't try to throw a touchdown on every play was the key to his success for the year and the Superbowl. QB's that try to make the big play and force it unusually end up losing from throwing interceptions(unless their competition sucks). An interception in trading is like a really big loss where the trader neglects to abide by a stop loss and gets hammered.

An Experienced Traders Trading Advice For The Newbee
My earnest advice is worry less about who your broker is and focus on your charting abilities - finding a good broker is least of your worries. Metatrader provides ample tools and indicators. I'm not just talking about the indicators that come with Metatrader but custom ones that are created by indicator designers (myself being one). You can even hire a programmer to make you a custom indicator if you have a good idea or strategy off of current indicators. Even simple modifications can make an indicator come to life.

If your not prepared to trade - Don't trade - It's simple advice. You stand a better chance of winning the lottery or going to the casino if your unprepared to handle situations that arise. Don't blame the broker or mechanisms because of laziness or radical behavior. An example is a trader places a trade and takes a vacation. I actually knew a guy that did this. He was way ahead on his stock options. He and his wife thought they were on the path to riches and played at the beech. When they got back their account was blown -- And this was a guy I could not beat in chess even if I cheated. This was before the wireless age so he couldn't manage his trade that way. Now he drives a truck for a living - I did too at one tie and in fact that is how I first met him and he told me the story because he noticed I was charting on my laptop many years ago in Florida.

Bottom line is if your not willing to give 100% expect to take serious financial losses. I have a saying and it is this:
"100% is a losing effort in FOREX but if you give a little more you just might make it."
Neal Vanderstelt

Actually you have to go above and beyond the limits to expect to make a trading dream come true.

MT4 vs MT5
Metatrader uses a programming language called MQL4 (for mt4/metatrader 4.0 indicators, ea's, and scripts). I personally write my own indicators and the language is much like the C programming language.

C is a simple linear programming language. MT5(metatrader 5.0) is more object oriented and like c++. For this reason it really hasn't taken off that fast so I speculate it will be a few more years (maybe even 5 yrs some say never) before MT5 really takes off. Because it's object oriented it's a little more difficult to program in and the MT4 programmers have had a hard time in transition. Least to say I don't think all the bugs have been worked out of MT5 yet. Personally I'm sticking to 4 until 5 takes off (if it does).

MT5 does offer more power by adding more object choices to programmers but personally as a programmer I still prefer MT4 simple because it's easy to use. There's a wealth of resouces in MT4 perhaps because MT5 hasn't fully evolved but maybe because the transition is too much of a leap. We shall see.

By Neal Vanderstelt
Forex Trader, Market Analyst, Trading System Designer

Thursday, December 29, 2011

In regards to AUD-USD

We are finding out that this range could be a continuation but it has to break up higher which means 1.0200 will have to be taken out. We are finding out that the previous area (circa 1.0042) served as strong support. But it is still in a range. The market has not fully decided - it is just favoring the upside. Take in mind this is end of year price action - be careful - as you can see it has been choppy.


(refresh for charts - adding in 10 minutes - or if from exterior site go to real link
)

http://forexindicators-metrader.blogspot.com/

My indicator "The Last Jedi" caught the major moves in the market even in these tough end of year conditions. It does not repaint. It's not free but you can get further details and purchase here.


The horizontal lines were manually drawn. They are visually chosen levels that serve to filter out the small moves. The concept is to buy crosses above and sell crosses below the horizontal lines.

Here is the same move as above with stronger horizontal filter lines. It captures the 2 major moves while the market consolidates in the weaker ones:

*note that the market was irrational do to the post holiday and end of year trading so the first move in particular would have been harder to jump in on (surely not a loss) just harder to capture maximum profit . Contrary (and without as much risk from the volatility) the next move was completely workable for sizable gains since the price action slowed down a bit and the currency began a smooth trend rather than desperately trying to find support. The Last Jedi was not fooled in either case. The 1st trade was actually feasible it just required more skill and I'm pointing out the differences between the 2 big moves that occurred nearly back to back providing a rare opportunity to win big in both directions.

The Last Jedi



The Last Jedi will not be defeated!

By Neal Vanderstelt
Forex Trader, Market Analyst, Trading System Designer

Wednesday, December 28, 2011

MACD for MT4 Indicator

Looking for MACD for Metatrader 4.0?

I will try to make a compilation in my spare time since MACD is such an important indicator in forex trading strategies and doing technical analysis. These should work on all brokers (ie fxpro ect) / version 4 trading terminals. If there are any problems leave a message. Some of these have alerts, some are colored + histogram, and some are good for trading divergence. Also I have included similar indicators in the list.

You can download for free here: (just click the slow download - I think the wait is like 20 seconds)

MACD True.mq4 Also called "Real MACD".
MACDmVersion2.mq4
MACD_OsMA_4ColorH_2LVar_mtf.mq4
MACD_ColorHist_Alert 12 26 9 LA .mq4
MACD-4H-v10.mq4
GA-ind.mq4
JMA_MACD.mq4 jurik research?
JMA_CCI.mq4
MACD (DEMA) DiNapoli.mq4
StochasticDiNapoli_v1.mq4


Just add to your indicators folder and restart metatrader.

About
MACD was developed by Gerald Appel in the late 70's. Moving Average Convergence-Divergence (MACD)turns 2 moving averages into a momentum oscillator by subtracting the larger moving average from the shorter moving average. More correctly it is a "price momentum oscillator".

MACD fluctuates above and below the zero line as the moving averages converge, cross and diverge. MACD is unbounded, it is not particularly useful for identifying overbought and oversold levels especially since moving averages don't work that way.

Calculation:
MACD Line(Price Velocity): (12-day EMA - 26-day EMA)
Signal Line: 9-day EMA of MACD Line
MACD Histogram (Price Acceleration): MACD Line - Signal Line

12, 26 and 9 is the typical setting used by traders although they can be changed to give sharper or duller signals.



Broadening Formations

*Occurs during high volatility.
*A period of great movement but little direction.
*Identified by a series of higher pivot highs and lower pivot lows.
*Considered a rare formation.
*Can be a period of consolidation or reversal.
*Considered difficult to spot.
*False Break-Outs and confusing price action are often prevalent.
*Can be powerful continuation or reversal patterns.

Variations Right Angled, Descending Wedge(falling wedge), Ascending Wedge (rising wedge).

Rules (Falling Wedge):
1. Must be a prior downtrend to reverse.
2. There must be 2 reaction highs from the peak to form the resistance trendline.
3. Similarly there must be 2 reaction lows with the 2nd low lower than the 1st.
4. As the pattern matures the upper and lower trendlines should converge (ie come together). Ideally there will be a 3rd shallower low before breakout to the upside occurs.
5. There is a convincing breakout to the upside through resistance trendline.
6. Volume pickup also occurs at the breakout. Low volume moves are prone to a higher rate of failure.
alternatively watch for a breakout above a previous high.
Unlike symmetrical triangles falling wedges have a definite slope to the downside and a definite bias to the upside.








By Neal Vanderstelt
Forex Trader, Market Analyst, Trading System Designer

Sunday, December 25, 2011

Linear Regression for Trend Analysis in Trading

In trading linear regression is the analysis of 2 variables price and time - basically an algorithm. The 2 lines are graphically displayed by an indicator (or can be drawn) - the parallel lines comprise a price channel where price action is prominent. In general more bars will yield a larger channel. The upper trend line of the channel serves as the resistance and the lower trend line serves as support. If there is a center line it serves as an equilibrium point which usually has a slope. All lines will actually slope together at a fixed distance from each other unless the channel resets. The slope depicts the trend direction.

The name "linear" refers to a straight line while "regression" (a statistical term) is the relationship between the mean value of a random variable and the corresponding values of one or more independent variables. In trading we are most concerned with the variables of time and price.



Example of linear regression in statistics:


Background - Historically
Linear regression was the first type of regression analysis to be studied rigorously in statistics (used first in astrology) and it was later incorporated into financial theories. The first form of regression was "The method of least squares" circa 1794 by Carl Friedrich Gauss when he was only 17 or 18 but the method was not published until 1809. Gauss's method was applied to track a newly discovered asteroid called "Ceres". The method is not considered perfect but was a breakthrough in science, mathematics, and statistics. Gauss is ranked as one of history's most influential mathematicians.

It took awhile for regression analysis to be used in trading and even longer to become popular. In the 50's - 60's economist used desk calculators to calculate regressions. Before the 70's it could take up to 24hrs to receive the result from one regression. Today regression analysis is very common in trading and new methods have been developed. Where it once took nearly 24hrs - today a channel can be drawn in a fraction of a second by advanced indicators like the one's I use in mt4.

The principle
Prices usually exceed the channel frames for a short time. If they keep outside of the channel frames for a longer time than usual, it forecasts the possibility of trend turn. The big idea is to define a previous trend, hopefully predict it's trajectory, and establish support and resistance points. If price action stays within an established channel it can be good points of entry or exit at or near the tops and bottoms - additionally if price breaks the channel it can be a possible reversal. In essence it is a probability theory. As with all trading strategies: experiement, set a stop loss, and set a target price. Never float a trade without a plan.



By Neal Vanderstelt
Forex Trader, Market Analyst, Trading System Designer

Thursday, December 22, 2011

ZUP indicator metatrader

This is a forex reversal indicator for mt4. I found it while browsing the internet and thought I would share it. It is based off of Gartley patterns that look like a butterfly. The last leg will repaint so use with caution.

Scott Carney published the book "The Harmonic Trader" published in 1999 was based on H.M. Gartley early works of circa 1935 and of course harmonic trading. Carney added Fibonacci ratios to the distances between points.

The pattern starts from x point and has waves a,b,c,d with d being the last leg.
Each wave has an angle / fibonacci ratio. These patterns are similar to M or W type Elliott wave patterns.

according to Carney:
1.27/1.618% is ideal ratio for A-B points.
ideal for C is .618/.786%
ideal for D is 76.8% (he considers this to be vital)

Key Features:
Must have an AB=CD pattern that converges in the same area as the .786 Fibonacci on the XA, and also the 1.27 or 1.618 BC. The B point retracement ideally at .618 of the XA leg.






download ZUP for MT4 (just click slow download - it should be free)


Here is a different version:
ZUP_v86.mq4

By Neal Vanderstelt
Forex Trader, Market Analyst, Trading System Designer

Risk On Crude Up, Stocks Up, Shinny Christmas?

Despite troubles in Europe the market is moving up and risk takers are at the table. The market remained thin with market in holiday mode. I'll remain skeptical until the holidays are over with to see if this bullishness will last.









Crude Oil 1hr trend reflects strong upchannel. "Crude oil rose a fourth day as applications for unemployment benefits in the U.S. decreased to a three-year low and the index of U.S. leading indicators signaled that economic growth will accelerate."

Looking for forex metatrader indicators? look here

By Neal Vanderstelt
Forex Trader, Market Analyst, Trading System Designer

Saturday, December 3, 2011

Friday, December 2, 2011

Reversal Patterns Part 1a Inverse Head and Shoulders

Common Characteristics

1. (Left Shoulder) trading volume increases notably
followed by a minor recovery on which volume runs less
than it did during the days of the final decline and at the bottom.
2. (Head) Another decline carries prices below the bottom
of the left shoulder on which activity shows some increase
(as compared with the preceding recovery) but usually
does not equal the rate attained on the left decline, followed
by another recovery which carries above the Bottom level of the
left shoulder and on which activity may pick up, at any rate
exceed that on the recovery of the left shoulder.
3. (Right Shoulder) A third decline on decidedly less volume than accompanied the
making of either the left shoulder or head which fails to reach the level of the head before another rally starts.
4. An advance on which activity increases notably, which pushes up through the neckline and closes above by an amount approximately equivalent to 3% of the market price, with a conspicuous burst of activity attending this penetration. This is the confirmation or breakout.

(you must click image to enlarge )


The neckline is also the resistance line. If volume is strong through the resistance line it is considered a better break. These patterns appear usually after a notable downtrend and mark the bottom or a short term reversal in a prior trend.

Thursday, December 1, 2011

New Indicator To Be Released Soon

This is a non-repainting indicator. By non-repainting I mean once the current bar has formed the previous bars won't turn from positive to negative or negative to positive to look like it captured every move. The current bar of course repaints because it is calculating. This will be available soon on ebay or buy directly through paypal.