TTM Squeeze Indicator Update
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I've received many requests for my version of the TTM Squeeze Indicator. I can't technically call it the TTM Squeeze Indicator because it doesn't have the exact functionality as the indicator that costs $300+. Specifically, the difference isn't with the actual squeeze indication because that is exact. The difference is with the corresponding momentum histogram. While my momentum histogram provides the same trading direction as the TTM proprietary Squeeze indicator (bullish or bearish), it may not provide the smoothing characteristics that seem inherent in their momentum histogram. So my indicator will provide you with the exact functionality as the TTM Squeeze Indicator for SQUEEZE indication and entry direction. What it won't provide exactly is momentum change for exit. They recommend that you exit when the momentum oscillator starts weakening. I would recommend the same but I cannot say for sure that their momentum oscillator is any better than using the MACD or Momentum indicators for exit. From my experience, it is best whether your using the TTM or my squeeze indicator to get additional confirmation for exit.
Either way I find this indicator to be great for showing an "explosion" of volatility and even though you can create this indicator yourself using Bollinger Bands, Keltner or Donchian channels, and a momentum indicator, it just doesn't compare to having a nicely formatted custom indicator with colored dots.
The real reason for this post was to let everyone interested in this indicator to give me a little more time to release the newest version of it. Right now I'm providing the FP Squeeze Indicator (Forex Project Squeeze Indicator) version 0.1. After I've completed version 1.0, it will more closely emulate the TTM indicator, most likely as close as it possibly could. The only way I can see it emulating the TTM indicator closer is if John or Hubert from TTM reveal more about their momentum oscillator.
Currently I only provide a version for esignal but I'm thinking about providing it for MetaTrader also. I've received requests for Tradestation but unfortunately I don't use Tradestation so I don't have any way of programming it on this platform.
Look for the newest version next week. If you want me to notify you when it's complete, drop me an email and I'll add you to the list.
EUR/USD Week of March 26th
I stated a couple of days ago that I would try to analyze the market as if I was a Currency Strategist. I have no idea what it takes to be a Currency Strategist but I made an attempt today to analyze the EUR/USD for the upcoming week.
Introduction
The EUR/USD has had 7 straight weeks of alternating price action (down, up, down, up, down, up, and down.) The 3 weeks prior to last, we had higher highs and higher lows but last week, the EURO failed to push above the prior high of 1.2208. The price closed on Friday at 1.2037.
Candlestick
A dark cloud occurred (which indicates that prices moved up strongly on the previous bar, opened higher, but then closed significantly lower). This implies weakness as the momentum appears to be shifting from the bulls to the bears.
Moving Averages
We have support below from the 8 and 21 EMA’s at 1.2020. The 50 and 100 EMA’s at close above at 1.2144 and 1.2133 respectively. The 200 EMA provides longer term support at 1.1720.
Basic Indicators
MACD – Bullish
Stochastic – Bullish
RSI(7) – Neutral
RSI(14) – Neutral
DMI – Neutral and Trendless
Trendlines
Resistance: 1.2217, 1.2330
Support: 1.1785, 1.1868, 1.2000
TTM Squeeze
Squeeze in progress since 1/27/06. The last exit from a squeeze was 11/11/2005.
Commitment of Traders Report
As you can see from my graph, non-commercial positions are building on the long side.
Volatility Analysis
Bollinger Bands are 41.41% narrower than normal. eur is currently experiencing very low volatility as compared to its normal range. The probability of volatility increasing with a sharp price move is likely in the near future.
Prediction
EUR/USD may remain in the 1.2000 – 1.2200 range. If the psychological important 1.2000 is broken, look for furthur downside to 1.1868.
Busy Trading Week
I’ve been keeping a close eye on the charts this week. I have never quite felt out of the market whether I’m studying the charts or thinking about what might happen next. While this can be mentally draining, I feel like it is necessary for my training.
I’ve kept the indicators on my chart quite busy this week as they must constantly dodge each other on the screen. Yes, I still have too many indicators yet I don’t feel like any of them should be taken away at this point in time. I am using the following indicators this week:
1. Ichimoku – I love this indicator. I’m still learning to use it. Ichimoku actually means "one glance cloud chart." I’ve found it very useful for support/resistance confirmation. In addition, the current trend can be determined in a glance.
2. Trend Lines – Where would any of us be without these
3. EMA’s – 21 EMA Wave, 8 EMA, and 50 EMA
4. Bandwidth – Similar to the squeeze. This indicator is used to indicate volatility or lack thereof
5. RMOM – An indicator that I developed that uses MACD histogram values to compute whether the existing MACD value is greater than or less than the last up or down segment
6. RSI (7) – Relative Strength Index (7 period)
7. Directional Movement Index
8. MACD(12,26,4)
9. Pivot Point Oscillator – An indicator that I developed that I find quite useful now that I made modifications to it last night. I now paint the pivot point values directly on the indicator. This saves having to plot pivot lines on the price chart. Using the 15 minute charts can indicate trend nicely. See the indicator below:
Weekend Reading – Keeping an eye on Momentum
Keep An Eye On Momentum
http://www.investopedia.com/articles/forex/05/MomentumMACD.asp
This article states the obvious yet brings up a simple setup that I never thought about. The basic premise is that momentum precedes price. Any momentum indicator can be used but this article uses MACD as an example.
1. Define a MACD segment. Segment #1 below.
2. Measure the highest bar of segment #1. In the above case, the highest bar was .004.
3. Wait until the next segment forms; segment #2 above. If a bar from segment #2 falls below -.004, downward momentum has exceeded previous upward momentum.
Segment #2 consists of 10 bars. The values are in order from left to right (-.001, -.004, -.006, -.007, -.008, -.008, -.008, -.006, -.002, -.0008)
The third bar from the left is -.006, showing greater momentum than during anytime in segment #1. Sell at the close of this bar (price=1.7579.) Exit the position at your discretion but a good time to do so might be when momentum slows. Momentum stalls 2 consecutive bars at bar #7. MACD value is -.008. Exit at the close of this bar (price=1.7381)
The profit is close to 200 pips. Like every other setup, this will not always be successful and should be used in conjunction with other confirmation tools.
What I like most about this setup is its simplicity.
Simple MACD Trading System
Type: Always in the market trading system
Required indicators: MACD (Moving Average Convergence Divergence)
Entries
Long Entry: MACD Fast Line crossing above the MACD signal line
Long Exit: MACD Fast Line crossing below the MACD signal line
Short Entry: MACD Fast Line crossing below the MACD signal line
Short Exit: MACD Fast Line crossing above the MACD signal line
Renko Charts
I stumbled upon Renko charts when I was checking out the VT Trader platform. I don’t if would use them for but they certainly are interesting for their simplicity.
Renko charts, as the name suggests, were invented by the Japanese and are constructed by placing either a white or black brick in the next column once the price surpasses the top or bottom of the previous brick by a pre-defined amount. White bricks are used for an uptrend and black for a downtrend.
Renko charts are just another way of representing price changes. They are quite superior in displaying the trend when it may not be as obvious pictorially on a candlestick chart.
Here is a renko chart and a candlestick chart for the USD/JPY using identical time periods (click the picture for full-size):
; "Renko Chart")
; "Candlestick Chart")
EUR/GBP trading signals
I entered a position in the EUR/GBP pair by going short yesterday at .6730. My trade was made based on the following criteria:
1. Right triangle formation with the .6740 level being tested multiple times before the breakout down.
2. Sustained downside momentum
3. Negative MACD below zero line.
Currency Trades made last night
I made 2 trades last night that are currently in negative territory. Both trades were based on overbought/oversold indicators using MACD, Stochastic, and RSI. I also based my trades on support and resistance lines. I’m sticking with these trades and setting wider stops than usual. Read more to view my trades.
Forex Article – Trend versus No Trend
I read an excellent article this morning discussing the use of
trending and momentum indicators. It states that during a trend,
momentum indicators should be disregarded because they generate false
signals. If the currency pair is not in a trend (currency pairs
trade in a no trend environment 2/3 of the time), then momentum
indicators should be used. Technical indicators that are
mentioned are DMI, MACD, and RSI.
