These are my second sets of newbie questions collected along my learning jounrney with School of BabyPips course.
[B]
Regarding Candlesticks outlier[/B]
What are Candlesticks outliers? It seems this ccurs with candle wicks and even bodies, which lie on the “wrong” side of the line. How do one identify these outliers?
[B]Regarding trading system[/B]
Why is it that an effective trading system must integrate a few indicators that are applied in such a way that it is not obvious to most observers?
[B]
Regarding Support and Resistance[/B]
Does resistance and support levels in longer time frames more stronger than those found in a shorter frames as in the case of bollinger bands?
[B]Regarding MACD[/B]
Am I right to say that the Green line represents the faster moving M.A. (average of the fast and slow moving M.A) while the red line depict the slower moving M.A (the average of the green line.)
[B]Regarding Stochastics[/B]
Would it be a better confirmation to wait for both lines to cross instead of the single faster line to cross over the overbought/oversold level?
Regarding trading system
Why is it that an effective trading system must integrate a few indicators that are applied in such a way that it is not obvious to most observers?
Regarding Support and Resistance
Does resistance and support levels in longer time frames more stronger than those found in a shorter frames as in the case of bollinger bands?
OK, I’ll answer these and the other two should be fairly self-evident. Here’s the dirty truth. Candles have very limited predicted power in themselves. You can take this on face value (I wouldn’t) or you can rigorously backtest them (I did).
Secondly, most indicators are either suitable for ranging (overbought/oversold indicators - stochastics) or trending (any kind of MA) markets. Given that markets trend/range for long periods of time, you’ll see certain times of the year when particular strategies excel/do really badly. Trending and ranging strategies respectively. So to answer the first question - most strategies add a couple of indicators to cover the fact their initial signal is rubbish.
Next up, bollingers are not S/R, despite people talking about price ‘bouncing’ off a bollinger line. You’re right though, S/R levels are more important across longer T/Fs - the longer the tf, the more time for orders to build up and the more people that notice them. Simple as that.
An outlier would be a candle that seems to be out of the course of the normal pattern … like a 1 off … or a black sheep … which if ignored would still remain valid…
