Just want to wish all my friends in the forex groups on Facebook a wonderful weekend! I won’t be here because we’ve got a great weekend planned, and I won’t be putting up any videos or posts until either Sunday night or Monday (New York Time).

I’ll be celebrating the 4th in an even more remote location than our home!

Back to Forex talk then.
Stay great!

Before the Forex markets opened up today, I did a quick (and incomplete) run-through of more indicators than just the MACD. Included was also the ADX (Average Directional Index) and the ATR (Average True Range) and they were sort of covered a little quickly and with some wave stuff in there, too. Here’s the video (it’s about 9 minutes 29 seconds)…

So some quick stuff that was gone over in the video, however incomplete it is in the vid…

I’m changing gears here on this training. The Forex Challenge on Facebook, which ends October 31, 2008 for this match, and me being challenged, and starting off over $85K behind the leader, calls for a time efficiency step. Hence, this change.

What I’ll be doing is going over charts at least 3X per week for you. Maybe not in the same currency pair, but with the same indicators: MACD, ADX and ATR.

The MACD is there for spotting divergence patterns. The ADX is another strength/weakness tool, though not used like the MACD because it’s not an oscillating indicator. The ATR, which I’ll have to cover separately down the line, is not used at all in reading the charts, but for trade sizing.

The odd thing is here I won’t be using much trade sizing until I overtake the leader, assuming that I can.

ADX Basics

The Average Directional Index, ADX, shows strength in a move or trend, or weakness in the move or trend. When the market makes a move and the ADX decreases, that’s a weak move in that market on that chart.

When the market makes a move and ADX increases, that’s a strong move in that market on that chart. It’s a sign of strength on that chart only, and is basically useless unless accompanied by other signals.

It gets better later down the line, but really start understanding that little bit now. Ask your questions and I’ll answer those questions, or respond to comments, as I can.

ATR Basics

The Average True Range, or ATR, is only used by me to determine trade size. In other words, I divide my account, under actual trading circumstances with real money, into “units”. The “unit” represents, say, 1% of my trading account.

In the EUR/USD or the GBP/USD one pip is $10, so that makes it pretty easy. The ATR acts as a “volatility normalization” tool. The more volatile a market is, or the bigger the chart is, the higher the ATR will be. The smaller the volatility in the market, or the smaller the chart, the lower will be the ATR, developed by Wells Wilder, by the way.

So I basically divide my max risk for the trade by 10 and that gives me how many pips I can risk. I MUST risk that number of pips or less to be able to enter. There’s a lot more to it, but that’s the basics.

AND of course, the MACD (and histogram) give me divergence patterns that I want to see so I know the market is talking to me.

In Summary…

So, quickly here, we have the GBP/USD appearing before the markets opened for the night (yes, this is Sunday) as if there was still strength in upward moves. While there was one divergence pattern saying the market could come down, that one pattern was poisoned by a very strong ADX (the double-high, to be covered another time) in the wrong place.

A little bit was covered on the waves, but those will really have to be covered over the course of a week or two down the road. The ATR did not show that the market wanted to relax much because the volatility was decreasing, rather than increasing on the chart discussed. And I’ve got to get this posted…

If you have any questions or comments or criticisms, I’m open. I’ll answer, respond, or belittle you as required. LOL

And don’t try using this stuff in your own forex trading until you have successfully managed a paper trading account with it over sufficient time to know if you CAN use it profitably. Got it? If you try, and you have not successfully managed your own paper trading account with the info on this site, guess what? Yep, I guarantee that you will lose money. (Okay, I could make that guarantee and be right for like 97% of Forex traders, right?)

Anyway, have a phenomenally fantastic week in trading. More tomorrow! See you then.

Okay, I’ve been challenged on Facebook to take the Forex Challenge. The Forex Challenge ends October 31, 2008. The first place trader is at $95,550+, starting with $10,000. I don’t know when the challenge actually started, but I’m new to it.

I’m trying to figure out the rules more, but it looks like being so far behind from my start, I’m going to have to forego my normal risk and money management rules for a while and just go balls to the wall. So I’ll either die miserably, or get my butt up the ranks quickly. There’s no in-between here for me.

I’ll get started on the trading side on Monday, June 23, 2008 (or Sunday night) and we’ll see what happens. Either way, it should be fun.

I’m willing to take a bit of time to learn the platform for the Forex Challenge on Facebook, and I’ll be trading anyway, but I’m not sure how I’m going to correlate the trades. Frankly, I think I should use what I’m teaching here so far and just use that as an example, of course using the add-on model because that’s where I’m headed here.

Would you rather see me trading this contest using only what I’m teaching here? Or using what I use to trade my own funds? Using what I’m teaching here, I’ll make videos, ongoing about using the system, and write about it, so there will be practical example. Using what all I use, I won’t because I’m not revealing everything here (there’s just too much to overload you with - really).

Let me know. Ask questions. Have a phenomenal weekend. I’m not sure if there’ll be a video this weekend, but there should be at least two next week. Stay great and trade great!