The 3 Most Accurate Forex Indicators.
Michael Wells | Apr 06, 2012 02:37AM ET.
There are thousands of indicators that are used to find opportunities in the market and profit from them. However, most of them do not give good signals and will get you in the market late. In this article we will present several indicators which are the most accurate and give the biggest trading edge.
Written By: Michael Wells.
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Schaff Trend: A Faster And More Accurate Indicator.
The Schaff Trend Cycle Indicator is the product of combining Slow Stochastics and the Moving Average Convergence/Divergence (MACD). The MACD has a reputation to be a trend indicator, yet it has an equal reputation to be lagging due to its slow responsive signal line. The improved signal line gives the STC its relevance as an early warning sign to detect currency trends.
How the STC Works.
Since the MACD is nothing more than a series of EMAs with a signal line, the STC has improved on the MACD. MACD has a 12- and 26-period EMA with a nine-period signal line. STC Indicator improved on this by incorporating a 23- and 50-period EMA with a cycle component used as the 10-period signal line. Since we can factor cycle trends based on X amount of days, we can then know how far and how long a trend lasts in terms of potential pips to earn.
In terms of indicators both old and new, the STC Indicator is quite original in its conception. Never before has an indicator been developed using a cycle component. Most use some form of moving average, particularly EMAs, as a base because it's easier to calculate and it focuses on recent prices rather than a simple moving average's long data set of closing prices. (Learn more about stochastics in Stochastics: An Accurate Buy And Sell Indicator. )
However, as reliable as the STC Indicator may be, never will an indicator be perfect. The reliability factor may be higher but slight problems exist because of the STC's ability to stay in overbought and oversold markets for extended periods. For this reason, the STC Indicator should be used for its intended purpose: to follow the signal line up and down and take profits when the signal line hits bottom or top. Eventually another signal will generate.
Take a look at the hourly chart of the GBP/JPY, the granddaddy of currency pairs. The MACD generates its signal when the MACD line crosses with the signal line. The STC Indicator generates its buy signal when the signal line turns up from 25 to indicate a long or turns down from 75 to indicate a short. Notice how many more signals the STC generated compared to MACD. It served as an early warning of trend change on the far left with the long red candle. A sell signal was generated at 142.50 and stopped at 139.50, a 300 pip move. While the MACD lines hovered around 140, the STC line generated a buy signal at about 140.00 and stopped at 142.45, a 245 pip move. The next sell signal was generated at about 144.00 and lasted until 141.50, a 250 pip move. These moves occurred ahead of the buy and sell signals generated by MACD.
Notice how many times the STC line resulted in a straight line to signal an overbought or oversold market. One certain aspect is that oversold markets will eventually become overbought and overbought markets will become oversold, especially when it comes to the currency cycle aspects of this indicator. Yet that is not a signal generator. Overbought or oversold markets represented by a straight line can in many instances still represent 200 points on the upside, as it did at the overbought mark at 14:00 in the middle of the chart. This is the small problem with the STC Indicator. The recommendation is to wait for the signal before jumping in.
One can increase the cycle count signal line from 10 and adjust upwards to fit the exact market. This would represent smaller market turns and a more accurate reading. Caution is advised not to increase the cycle count higher than 40, since that is the maximum currency count. One can also adjust downward to generate many market turns, but they may not be accurate signals. For longer time framed charts such as the weekly, it is recommended to adjust the EMAs to 12 and 26 or 7 and 13, and allow the same amount of cycle counts at 20 as the signal line. For shorter time frames, such as the 10-minute chart, increase the EMAs to 115 and 240, and allow the same cycle count. A personal recommendation is to allow the indicator to work as intended with the recommended settings, especially when it comes to cycle counts. Better to adjust the EMAs rather than the cycle count trigger line if one has to adjust at all.
The 3 Most Accurate Forex Indicators.
There are thousands of indicators that are used to find opportunities in the market and profit from them. However, most of them do not give good signals and will get you in the market late. In this article we will present several indicators which are the most accurate and give the biggest trading edge.
Indicator #1: The Bollinger Bands.
The Bollinger Bands were developed 20 years ago by John Bollinger, and were designed to show the volatility of the market on the screen in an easy-to-comprehend manner. They give very good signals and can be used as support\resistance indicators, telling us – before the move occurs – that a reversal is prone to happen. When price touches the lower band it is oversold, and when price touches the upper band it is overbought.
The trading method for the Bollinger Bands is basically to look for price-action support and resistance levels, and confirm them with bounces on the Bollinger Bands themselves. This results in very high win rate and consistent profits.
Indicator #2: The Relative Strength Index (RSI)
The Relative Strength Index was developed 30 years ago by J. Welles Wilder, and is considered a powerful trading indicator that also has a predictive edge in the markets. It tells us when the price is overbought\oversold before the trends begin, so we can enter early and have great reward with little risk. The signals it gives are usually very accurate, and if confirmed using the Thomas DeMark mild bounce system it can even reach 70-80% win rate (depending on the timeframe).
It is a very accurate indicator that we highly recommend.
Indicator #3: Simple Moving Average.
The Simple Moving Average, or the SMA, is an interesting indicator that most traders do not use in the right way. Most traders use it as a trend-following indicator to enter trades after a trend has been established, however we use it in an entirely different way.
The most accurate and predictive way to use the SMA is in the bounce method: we wait for trend to establish, but instead of randomly entering, we wait for price to retrace to the moving average and bounce off it. Once a reversal signal is given we enter a trade in the direction of the trend with stop loss right below the moving average, thus entering at a tactical point with small stop loss and huge reward.
The 3 indicator described above are the most accurate indicators for trading Forex and stocks, and have proven themselves in countless opportunities.
Michael Wells is a trader and author, that focuses on Forex indicator trading and price-action to generate daily trading income.
Indicator 90 % accurate!
The currencycyborg advanced indicator is a modified version of the gartley/zup indi.
This was used as a study model for research!
You can still ask them for a free working version.
Now here i have the demo version of there GRAIL indicator.
Use it only on 15min charts and yes it can be backtested. (don’t like backtesting..)
I have uploaded the indicator and sound files..
There is also an auto installer for less paranoid people.
I use it on the 15min charts and ony trade the buy and sell signals! do not trade the possible trend change!
miss the authorization code.
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