Forex Sniper Killer Indicator

[Bazara Benavides]

Inthe previous lesson, we introduced the important technical indicators. We also encouraged the use of two to three indicators simultaneously before deciding on a trend and what action to take, but not more.

You learned about the technical indicators and saw examples of how they work individually. But, as we mentioned in the previous lessons in this course, the best way to build a forex strategy is to combine indicators.

This is one of our favorite and most popular trading strategies for short-term trading, and often for long-term signals as well. As you can see, the stochastic is overbought and the price is right below the 100 moving average before it turns south. This is a very effective forex strategy, especially if you there are the candlestick formations. It is a primary trading strategy in the indices and commodity markets as well.

Divergence happens when the directions on the price chart and on the indicating graph split. When divergence occurs, it helps us determine whether we are witnessing a good exit/entry point. Divergence trading allows us to wait with our executions until right near the ultimate point on the trend, and by doing so, enlarge profits and reduce risks at the same time!

Pay attention to the price, which moves from a low to a higher low, and to the indicator which moves from a low to a lower low. In this case, the graph signals a continuing uptrend.

Experienced traders already know a thing or two about the currencies. They know that in many cases, major pairs get to their daily peaks during the rush hours of the early N.Y. sessions when the London session is still open. They also know that by using several indicators they could already guess the general areas on the chart in which the price would get tired, slow down, reverse, and move back to its daily average zone.

First, we take into consideration some important data on the chart, to the current point. In our example, we trade on London session. The chart below is a 10 min. chart (Each candlestick represents 10 minutes). The chart represents the 5-hours frame: 8 am to 1 pm GMT (London time). What does this mean? It means that during the last hour, the N.Y. session started and joined the London session.

Well, our suspicions were verified! You can see on the chart that 1.2909 is indeed a strong resistance level! Pay attention to what happens on 1.2762- It sits exactly on top of the 0.5 Fibonacci ratios! Notice that at first it is used as a support, and when it is breached, it turns into resistance. We expect it to turn into a support level again later on during the current N.Y. session!

Do not forget to set a Stop Loss! In our example, we placed it a fraction above the breakout point (in case we witness a fake-out, meaning, we are wrong!). Once the price has gained some distance from our entry point, we can shift our Stop Loss a little further down, below our entry point. Many forex platforms, such as the MT4 and MT5, now offer the option if a trailing stop loss. It means that you place a stop loss (say 50 pips) and as the trade moves deeper in profit, your stop loss keeps moving in the same direction, increasing the profit potential even if it is triggered.

Experienced traders usually open more than one position simultaneously (trade on 2 or more pairs at the same time). After you practice for a couple of days you will turn into a better trader and then you will probably wish to open more than one position each time. That is why it is necessary to be aware of these relationships! Trading with a number of pairs at the same time is excellent for reducing risks.

Important: You do not have to calculate anything! There are financial sites that do all the work for you by presenting correlation tables after calculating the ratios. The only thing you are left to do is to read the data in the table.

Tip: It allows you also to test given forex trade signals on a certain pair. If you believe that a certain pair is about to break on the chart, you can examine the chart of a similar pair to see what is going on there.

Say you go to the bank and ask for a $20,000 loan. The bank approves at an annual 2% interest. With all the money you borrowed you purchase bonds for investment, which will produce an annual 10% interest for you.

First, we look for a pair with a relatively high differential ratio. The pair should already be stable for a long period. Uptrend current conditions are preferred, especially if the stronger currency of the two is the one to strengthen. We would want to choose a pair that consists of a currency with a relatively high interest rate that is expected to rise even more in the near future; and on the other hand, a currency with relatively a very low interest rate (for example, NZD or JPY), which is expected to maintain the same level in the near future.

This is a daily chart (each candle represents a day). You will notice a strong bullish trend bottoming out after the Brexit referendum. We know that the interest on JPY in 2016 is -0.10. The interest rate on the NZD at the same period of time is 2.25%, with a good potential to rise. Meaning, we have a pair with a high differential (buying New Zealand Dollars with a 2.25% interest rate while selling Japanese yen with a -0.1% interest rate. The differential rates add up to 2.35% interest!). Besides, notice the high profits you could have made just on the bullish trend of the pair itself!

Swing trading or benefiting from interest rates is one of the advantages of forex that other financial markets, such as indices or commodities, dont offer. Buying separate stocks is pretty similar because the dividend replaces the interest rate.

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