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Know the probability of support or resistance holding and trade accordingly.
- John Novak | |
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Today's Featured Article
All technical traders use indicators in an attempt to help them time and predict moves in the market. Traders have used Stochastic, Macd CCI, and RSI for years. There is no one indicator that will give you every move in the market, if there was there would be no cab drivers everyone would be a successful day trader. It is the combination of several indicators that gives you a higher statistical advantage when trying to predict the market.
The main focus of what we teach traders at Nexgen Software Services is that 10 simultaneous timeframes of Fibonacci Confluence will give you the highest probability for targets and potential trend turning points when looking at any liquid market whether it is forex, stocks, bonds or futures. We then go further and teach traders how to implement a Macd indicator in order to gauge the strength and potential of those key Fibonacci areas to hold or break. Our Macd has been combined with a Bollinger band to give us what we will refer to as our Macd BB lines. The following lesson will be what we teach traders when using our program the T-3 Fibs ProTrader.
The Macd BB Lines is an indicator that will offer "insight" into the market's strength or weakness. When at key areas, the Macd BB Lines will provide information about the current market, and its expected outcome for the near future. This indicator once mastered will be an invaluable tool.
A. Basics of the Macd BB Lines - If the Macd BB Lines are slowing and the bands are coming together, it is indicative of weakening in the current trend and some consolidation or Reversal may take place. The swing distance on the Macd Bollinger Bands typically indicates the trend and the momentum.
- If the Macd BB Lines are moving rapidly in one direction, with very little to no pullback, it is a strong move. This will typically happen after a period of consolidation on the charts.
- The distance between the Macd BB Lines themselves is also a signal that will help you to determine the strength of the move. The larger the spacing between the Macd BB Lines, the more momentum there will be behind the move.
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B. Macd BB Strength - When Macd BB dots move outside of the Bollinger Band Lines, it will indicate that the market has a lot of momentum. Generally, it will continue in the current direction. If in a position, this will help you to remain patient to maximize your profits. If waiting to enter a new position, this will keep you from getting in too early.
If you cannot view the example,
go here.
C. Macd BB Trend - When the Macd BB Lines cross the upper Bollinger Band, the Macd Trend is up. When the Macd BB Lines cross the lower Bollinger Band, the Macd Trend is down.
If you cannot view the example,
go here.
D. Zero Line Rejection (ZLR) - A Zero Line Rejection occurs when the Macd BB Lines reach the Zero Line and begin to turn. At this point, anticipate the trend to continue. If the Macd BB Lines move though the Zero Line, then anticipate that the trend has changed.
If you cannot view the example,
go here.
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E. Divergences Between Highs and Lows - Divergence shows the potential that the trend of the market may change.
5 basics of Divergence and the expected outcome for the Fib Areas
- Bearish Divergence occurs when there are higher prices and lower Macd BB Lines.
REVERSAL EXPECTED - RESISTANCE MAY HOLD
- The market is trending down when there are higher prices and higher Macd BB Lines. NO REVERSAL EXPECTED - RESISTANCE MAY BREAK
- Bullish Divergence occurs when there are lower prices and higher Macd BB Lines. REVERSAL EXPECTED - SUPPORT MAY HOLD
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The market is trending down when there are lower prices and lower Macd BB Lines. NO REVERSAL EXPECTED - SUPPORT MAY BREAK
- When closing past a Divergence high or low, it shows the trend may continue.
When the MACDS and PRICE go in opposite directions, they create a DIVERGENCE
between the two. If at an area of support or resistance, it will have a higher potential to hold.
If you cannot view the example,
go here.
With Bullish Divergence at an area of Support, the area has the potential to hold.
If you cannot view the example,
go here.
F. Super Divergence - This occurs when there is a normal Divergence, but at the same time the Macd BB Lines DO NOT violate the opposite Bollinger Band. Super Divergence may only be considered at key areas. The higher the time frame, the larger the Reversal.
If you cannot view the example,
go here.
G. Retracement Divergence - At key areas, compare the swings between the price and the Macd BB Lines. Retracement Divergence is defined as, less than a 38% retracement in the Macd BB Lines and at least 50% retracement in price. This Divergence is showing that the area is anticipated to hold. Below is an example of Bearish Retracement Divergence.
If you cannot view the example, go here.
So when looking at support or resistance it is essential to make sure you have some type of indicator that you can rely on to judge the areas potential to hold or break. Remember that there is no one indicator that will give you all the information that you need but rather a combination of indicators to give you a higher probability of winning your trades and for maximizing profits on any given trade.
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About the Author
John Novak
is President of Nexgen Software Services Inc. John is the developer of the T-3 Fibs ProTrader indicator package. He has been involved in the marketing and distribution of Technical analysis software for the last 13 years. He has devoted the last 10 years to the automation of a popular discretionary methodology that he taught in seminars for over 2 years to many successful traders that was centered on Fibonacci analysis of both time and price. With the help of his software programmers they have automated this entire Fibonacci process into a fully automatic program. He spends his days working on constant improvements in his analysis in predictive indicators for traders and spends
the day trading his own methods. | |
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