Part 1: Forex Technical Indicators I’m Using

I’m going to go over the technical indicators I’ve been using over the last couple of weeks.  I’d like to get it down on "paper" so I can figure out how they can all work together and be one big happy family.

Indicator #1: Support and Resistance Lines 

We should all know what these are and how they can single handedly provide the direction of the market sometimes.  These are critical to my trading strategy and should be to most of you.  I use S/R Analyst Pro to automatically draw the trendlines for me.  This saves time and allows me to look for confirmation of these support/resistance lines using another indicator (If you interested in S/R Analyst Pro, do a search on my site and you’ll find a link to where you can get them a lot cheaper than from esignal.)

Indicator #2: Andrew’s Pitchfork 

I’ve grown to like Andrew’s Pitchfork and find it as yet another support/resistance tool.  You need three points to plot a pitchfork and are drawn from peaks and valleys.  This study used to be called the "median line study".  The median lines and the pitchfork can indicate support/resistance where prices tend to stall out or reverse.   This study is more useful in a trending market.

Indicator #3: Candlesticks

I find that I’m using candlestick patterns more and more each week.  Whereas before the candlesticks just looked like a bunch of red or green sticks with only 1 meaning (price up or price down), I’m starting to recognize certain patterns that I would have never seen before.  The more you use them, the easier it is for patterns to just pop out at you with minimal effort.  It’s like those pictures with hidden images in the them.  If you look at it long enough, you will see the hidden image.  Thereafter, the hidden image just pops out of the picture and you can’t believe you couldn’t see it to begin with.

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Indicator #4: Keltner Channels

Keltner Channels are simply moving-average bands.  The default indicators uses a mid band that is based on the average of the high, low, and closing price with a band on each side formed from the 10 moving average of the daily high minus the daily low.  Mathematically, it looks like this:

Average Price = (Close + High + Low) / 3;
Band Moving Average = 10 day simple moving average of (High - Low)
Mid band = 10 day simple moving average of the average price
Upper band = Middle band + Band moving average
Lower band = Middle band - Band moving average

I don’t use the default Keltner channel indicator.  I use a modified version using a 10 day exponential moving average.
Therefore, my mid band is the 10 day exponential moving average of the average price instead of the simple moving average.

How do I use the Keltner channel? If the price closes outside the channel, the current trend should continue.  If the price is outside the channel and closes back into the channel, then it is time to think about closing your position.  So it can be used as a position exit tool in conjunction with fibonacci retracements or I have been using it as an entry tool in conjunction with the Wave.

These are only 4 of the indicators that I’m mentioning in part 1.  If I count the number of indicators in my esignal style template, I get over 10.  I’ll continue this post in part 2 and talk about the rest of the technical indicators I’m currently using.

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