Showing posts with label Trading Strategy. Show all posts
Showing posts with label Trading Strategy. Show all posts
Wednesday, August 20, 2025
NZDUSD NZDCAD And NZDJPY Price Reaction 20 Aug 2025
The RBNZ annonuced lower the OCR to 3%. Here are NZDUSD, NZDCAD and NZDJPY price reaction to this news released, using Dolly system on m5 chart.
Sunday, August 17, 2025
Spread To Pip Potential : Which Pairs Are Worth Day Trading?
Spreads play a significant factor in profitable forex trading. When we
compare to the average spread to the average daily movement many
interesting issues arise. Namely, some pairs are more advantageous to
trade than others. Secondly, retail spreads are much harder to overcome
in short-term trading than some may anticipate. Third, a "larger" spread
does not necessarily mean the pair is not as good for day trading when
compared to some lower spread alternatives. Same goes for a "smaller"
spread - it does not mean it is better to trade than a larger spread
alternative.
Establishing a Base Line
To understand
what we are dealing with, and which pairs are more suited to day
trading, a base line is needed. For this the spread is converted to a
percentage of the daily range. This allows us to compare spreads versus
what the maximum pip potential is for a day trade in that particular
pair. While the numbers below reflect the values in existence at a
particular period of time, the test can be applied at any time to see
which currency pair is offering the best value in terms of its spread to
daily pip potential. The test can also be used to cover longer or
shorter periods of time. These are the daily values and approximate
spreads (will vary from broker to broker) as of April 7, 2010. As daily
average movements change so will the percentage that the spread
represents of the daily movement. A change in the spread will also
affect the percentage. Please note that in the percentage calculation
the spread has been deducted from the daily average range. This is to
reflect that retail customers cannot buy at the lowest bid price of the
day shown on their charts.
# EUR/USD
Daily Average Range (12):105
Spread: 3
Spread as a percentage of maximum pip potential: 3/102= 2.94%
# USD/JPY
Daily Average Range (12):80
Spread: 3
Spread as a percentage of maximum pip potential: 3/77= 3.90%
# GBP/USD
Daily Average Range (12):128
Spread: 4
Spread as a percentage of maximum pip potential: 4/124= 3.23%
# EUR/JPY
Daily Average Range (12):121
Spread: 4
Spread as a percentage of maximum pip potential: 4/117= 3.42%
# USD/CAD
Daily Average Range (12):66
Spread: 4
Spread as a percentage of maximum pip potential: 4/62= 6.45%
# USD/CHF
Daily Average Range (12):98
Spread: 4
Spread as a percentage of maximum pip potential: 4/94= 4.26%
# GBP/JPY
Daily Average Range (12):151
Spread: 6
Spread as a percentage of maximum pip potential: 6/145= 4.14%
Which Pairs to Trade
When the spread is placed into percentage terms of the daily average
move, it can be seen that the spread can be quite significant and have a
large impact on day-trading strategies. This is often overlooked by
traders who feel they are trading for free since there is no commission.
If a trader is actively day trading and focusing on a certain pair,
making trades each day, it is most likely they will trade pairs that
have the lowest spread as a percentage of maximum pip potential. The
EUR/USD and GBP/USD exhibit the best ratio from the pairs analyzed
above. The EUR/JPY also ranks high among the pairs examined. It should
be noted that even though the GBP/USD and EUR/JPY have a four-pip spread
they out rank the USD/JPY which commonly has a three pip spread.
In the case of the USD/CAD, which also has a four-pip spread, it was
one of the worst pairs to day trade with the spread accounting for a
significant portion of the daily average range. Pairs such as these are
better suited to longer term moves, where the spread becomes less
significant the further the pair moves.
Adding Some Realism
The above calculations assumed that the daily range is capturable,
and this is highly unlikely. Based simply on chance and based on the
average daily range of the EUR/USD, there is far less than a 1% chance
of picking the high and low. Despite what people may think of their
trading abilities, even a seasoned day trader won't fair much better in
being able to capture an entire day's range - and they don't have to.
Therefore, some realism needs to be added to our calculation,
accounting for the fact that picking the exact high and low is extremely
unlikely. Assuming that a trader is unlikely to exit/enter in the top
10% of the average daily range, and is unlikely to exit /enter in the
bottom 10% of the average daily range, this means that trader has 80% of
the available range available to them. Entering and exiting within this
area is more realistic than being able to enter right in the area of a
daily high or low.
Using 80% of the average daily range in
the calculation provides the following values for the currency pairs.
These numbers paint a portrait that the spread is very significant.
* EUR/USD
Spread as a percentage of possible (80%) pip potential: 3/81.6= 3.68%
* USD/JPY
Spread as a percentage of maximum pip potential: 3/61.6= 4.87%
* GBP/USD
Spread as a percentage of possible (80%) pip potential: 4/99.2= 4.03%
* EUR/JPY
Spread as a percentage of possible (80%) pip potential: 4/93.6= 4.27%
* USD/CAD
Spread as a percentage of possible (80%) pip potential: 4/49.6= 8.06%
* USD/CHF
Spread as a percentage of possible (80%) pip potential: 4/75.2= 5.32%
* GBP/JPY
Spread as a percentage of possible (80%) pip potential: 6/116= 5.17%
With the exception of the EUR/USD, which is just under, 4%+ of the
daily range is eaten up by the spread. In some pairs the spread is a
significant portion of the daily range when factoring for the likely
possibly that the trader will not be able to accurately pick
entries/exits within 10% of the high and low which establish the daily
range. (To learn more, see Forex Currencies: The EUR/USD.)
Final Thoughts
Traders need to be aware that the spread represents a significant
portion of the daily average range in many pairs. When factoring likely
entry and exit prices the spread becomes even more significant. Traders,
especially those trading on short time frames, can monitor daily
average movements to verify if trading during low volatility times
presents enough profit potential to realistically make active trading
(with a spread) worthwhile. Based on the data the EUR/USD and the
GBP/USD have the lowest spread-to-movement ratio, although traders must
update the figures at regular intervals to see which pairs are worth
trading relative to their spread and which ones are not. Statistics will
change over time, and during times of great volatility the spread
becomes less significant. It is important to track figures and
understand when it is worth trading and when it isn't.
Dolly Trading System - Latest Dolly Graphics v18 indicator
The Dolly trading system was created back in 2006 from a group of forex trading community. It was originally based on a commercial trading system, which was popular during that time, WSS system. So a clone of the commercial system was created for free to use. CJA was the coder for Dolly graphics Indicator since 2007. The current latest version is v18 which you may download it from mql5 forum website.
Dolly graphics_v18 indicator
Basically this indicator is trade mainly on the breakout of forex instruments. The comment section on the left top corner of the chart gives a suggestion of pending buy/sell order, with stoploss and target profit level. Additionally there are also a suggestion of bullish and bearish correction with entry, stoploss and target placement. This system mainly trade on lower timeframe such as M5, M15 and M30. The indicator are highly customizable according to you need and trading style.
Inside the indicator there is a indicator instruction available if you need more information about it.
Take a look at below screenshot from the indicator instruction:
This system can be trade on any currency pairs, and also Metals, stocks CFD and indices. All you need to do is customise the level of buy/sell area and target level.
Below was the example of most recent USDJPY m15 chart with Dolly Graphics v18 indicator.
Tuesday, August 5, 2025
Sunday, August 3, 2025
Tuesday, July 29, 2025
Tuesday, July 22, 2025
Sunday, July 20, 2025
Thursday, May 8, 2025
The Moving Average Crossover Strategy: A Comprehensive Guide
Introduction
The moving average crossover strategy is one of the most popular and widely-used technical analysis tools among traders. This simple yet powerful approach helps identify trend directions and potential entry/exit points in various financial markets, including stocks, forex, commodities, and cryptocurrencies.
What is a Moving Average Crossover?
A moving average crossover occurs when two moving averages of different periods intersect on a price chart. These crossovers are interpreted as potential buy or sell signals, depending on the direction of the crossover.
Types of Moving Averages Used
- Simple Moving Average (SMA): The arithmetic mean of prices over a specified period
- Exponential Moving Average (EMA): Gives more weight to recent prices, making it more responsive to new information
How the Strategy Works
The most common version uses two moving averages:
- Fast Moving Average: Shorter period (e.g., 10, 20, or 50 periods)
- Slow Moving Average: Longer period (e.g., 50, 100, or 200 periods)
Buy Signal
When the fast MA crosses above the slow MA, it generates a buy signal, suggesting the start of an upward trend.
Sell Signal
When the fast MA crosses below the slow MA, it generates a sell signal, suggesting the start of a downward trend.
Variations of the Strategy
- Double Crossover System: Uses two moving averages as described above
- Triple Crossover System: Adds a third moving average for confirmation (e.g., 5, 10, and 20-day MAs)
- Moving Average Envelope: Uses bands around a moving average to identify overbought/oversold conditions
Advantages of the Moving Average Crossover Strategy
- Trend Identification: Effectively identifies the direction of the prevailing trend
- Simplicity: Easy to understand and implement
- Versatility: Works across different time frames and markets
- Removes Emotion: Provides objective entry and exit points
- Customizable: Can be adjusted for different trading styles
Limitations and Challenges
- Lagging Indicator: Moving averages are based on past prices, so signals occur after the trend has begun
- Whipsaws: Frequent crossovers in sideways markets can lead to false signals
- Parameter Sensitivity: Performance varies significantly based on the chosen periods
- Not Predictive: Doesn't forecast price movements, only reacts to current trends
Optimizing the Strategy
To improve performance, traders often:
- Combine with other indicators (RSI, MACD, volume)
- Use different time frames for confirmation
- Adjust MA periods based on market volatility
- Add filters to reduce whipsaws (e.g., price or volume filters)
Practical Implementation Tips
- Choose Appropriate Time Frames: Align MA periods with your trading style (shorter for day trading, longer for position trading)
- Test Different Combinations: Experiment with various MA pairs to find what works best for your instrument
- Consider Market Conditions: The strategy works best in trending markets, less so in ranging markets
- Use Proper Risk Management: Always employ stop-loss orders and position sizing
5. Conclusion
6. The moving average crossover strategy remains a cornerstone of technical analysis due to its simplicity and effectiveness in trending markets. While not perfect, when combined with proper risk management and other confirming indicators, it can be a valuable tool in a trader's arsenal. As with any trading strategy, thorough backtesting and practice in a demo account are essential before applying it to live markets.
7. Remember that no single strategy works all the time—successful trading requires discipline, continuous learning, and adaptation to changing market conditions.
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