What do you guys think of using an indicator, (lagging indicator) on short time frames? Hoping I don’t sound too much of an idiot, I am just sort of starting off on the Forex World and wondering if a laging indicator can work in this way? I am keen to know if a SMA or EMA can be used in this way on short time charts.
Will the (EMA) Exponential Moving Average work on short time charts. I have found it difficult to find an easy to use good indicator for this type of trading and just wanted to know your views and hopefully advice on what I can do.
regards.
Barry
I use EMA’s on charts all the way down to 1min. The question is, what do you intend on using this indicators for? I watch price action primarily, and look at indicators to see the overall picture on what price is likely to do.
I used to trade short timeframe using H1 to guage trend, M5 to trade and M1 to execute.
I would put 3 standard deviation bollinger bands on the M5 and M1 charts and set up alerts, when M1 bollingers start to move towards the 1 SD band, take note, if it pushed into the 2SD band a mini trend is established and I would start trading in that direction as long as the price remains within the 1SD and 2SD.
To guage the strength of the momentum AND to confirm the trend movement, i would use EldersRay to see how hard the bears and bulls are pushing and who is winning.
EldersRay is by Dr Alexander Elder and work sort of like RSI, Stochastic…
Bollinger Bands is a measure of volatility. Theory is that price fluctuate around the ‘average’ volatitlity.
The first chart shows how eldersray ‘track’ who is wining, the bears or the bulls.
The next chart shows how a trend ‘normally’ walk the band at between 1SD and 2SD. Walk means it hug the boundary of the band. If it ever touches the 3SD, the something extraordinary is happening, either a news, a critical support/resistance level. If it breaks there it will jump toward a new level. However, if there are divergence in supporting indicators such as the ElderRay time to take note.
Please note that short term trading is very stressful and highly unprofitable because your reaction must be very fast. I lost a lot of money because the stops gets wipe out by whipsaws quickly and if you are not fast to take profit, the price action may just came back to the ‘neutral’ as shown, then go the opposite way (incurring a loss), then go back down again (frustrating), then repeat itself again and again
It’s good to look at the short timeframe to ‘learn’, and great to practise entry/exit. But i am gravitating towards longer timeframe and less usuage of indicators…and just watch the price actions and trends…
