Calculation:

M = Closing Price [today] – Closing Price [n days ago]

The Momentum indicator is a rate of change indicator that is designed to identify the speed of a price movement. Usually, the momentum indicator compares the most recent closing price to a previous closing price, but it can also be used on other indicators.

The majority of traders use a value greater than zero to indicate an increase in upward momentum and a value less than zero to indicate an increase in selling pressure.

Some of the most valuable signals are generated when the price action and Momentum are diverging, that means heading in opposite directions.

There are basically two ways to use the Momentum indicator:

Momentum Trading Chart

• As a leading indicator: This momentum trading strategy assumes that market tops are typically identified by a rapid price increase, when everyone expects prices to go higher, and that market bottoms typically end with rapid price declines, when everyone wants to get out. As the market peaks, the Momentum indicator will climb sharply and then fall off, diverging from the price action. Similarly, at a market bottom, Momentum will drop sharply and then begin to climb well ahead of the price action. Both of the above-mentioned situations will create a divergence between the indicator and the price action.

Contributed by Toyogo00, Lori, Roberto, & FibMaster at
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This is helpful when looking to enter the market, as when both levels of QQE are moving in same direction, there is a very high (95%) chance of an ensuing move going forward and being successful. The key to QQE is not so much what the actual indicator does, but rather what it shows in relation to the EMA’S one employs in their upper panel in coordination with the candles or bars.

The key to the QQE is the smoothing factor of the QQE or the number placed for the smoothing of the indicator lines. The lower the number, the more bumpy of a line and certain confusion to what is really going on with the market, the higher the number, the smoother the line. So the best way to use the 2 different QQE lines is to place one in one panel of ones platform with a lower smoothing number and the next panel down place the 2nd QQE with a higher smoothing factor, so one can see and optimize what is going on in the market at both a shorter and longer term at same time.

I employ a factor of 5 for my upper QQE which has just a blue line and when it starts to move up, we start to look long, but no entry until QQE crosses the 50 line which is red and the exponential moving averages that I use start to cross over and upwards, the lower panel QQE is used with the higher factor of 60 for a smoothing factor.

Download my file for QQE in MetaTrader4.

With three lines employed in bottom QQE, we really want to see the cross of the dotted red and white lines by the solid blue line, so we have confirmation of the first panel QQE, it is not necessary to have all these lines cross the solid red 50 line. If it does, well then that is awesome for extra confirmation.

Remember, the key is to see upward movement by the QQE. Go along with upward movement of the exponential moving averages. I also place a volume indicator to help in trading, but the key to my trading is all in the QQE and exponential moving averages, simple and smart.

Contributed by Hlass, & FibMaster at
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Every trade should have targets. These can be fixed targets or dynamic ones specific to the current trade. In the case of this trade we have used Fibonacci retracements from the swing low of the AB=CD to the swing high or D point in order to set the targets. Managing a trade for profit taking is a good practice, as it allows initial profits while maintaining potential for further profits.

As seen in our example trade, our first target was hit (Chart 3). At this point two things happen. First, profits are taken on a percentage (scaling out) of the trade. Second, risk is reduced by moving the original stop which was located above the swing high of the larger move to just above the D point of our entry. This was done again for one reason; we don’t know anything for certain in trading!

As the trade developed through the London session we can see that a rally was established. Will it last? We don’t know. Therefore, our movement of the stop to just above D helps control our overall risk but still gives the trade room to work. See highlighted bars in Chart 4.

By allowing our trade to develop and giving it room to move, we have attained our profit targets in just less than a 24 hour day. The trade grossed near 100 pips on the first target followed by a slower move to our second target which gave us a profit of near 200 pips. Some traders also use a three part “peel” to capture further moves. If this is done, it is acceptable to move the stop loss to just above the 1st target, thus ensuring a profit on the third portion of the trade if it was used. This allows for two distinct targets with a third left to “run” with the trend. See Chart 5.

An intrical part of using the gartley is a better understanding of fibonacci ratios and how they work dynamically to assit a trader to see current market support and resistance. Details regarding these methods can be found at http://www.fibmarkets.com

Contributed by Toyogo00, Lori, Bert, & FibMaster at
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The Gartley Pattern is always preceded by a larger move prior to its formation. This move can be up or down and would therefore present opportunity for a bullish Gartley or a Bearish Gartley. This article focuses on the bearish Gartley. A visual of the patterns overall look is found in Chart 1.

The Gartley’s basic structure is an AB=CD retrace into the prior longer move. An AB=CD move is simply this; A is starting point at bottom/top, B is the first major swing point. The distance from A to B should be noted. The C point is found as a higher/lower swing than A followed by a move in direction of the A to B move and somewhat equidistant as A to B thus forming AB=CD. See Chart 2.

The D point of the AB=CD is complete at a 1:1 ratio, however,  many times it moves  1:1.272 and occasionally  1:1.618. 1:1 or 1:1.272  are Fibonacci expansions found in AB=CD patterns and are preferred entry areas especially if it harmonizes with another Fibonacci (or FIB) ratio from the original larger move. (More on advance Fibonacci techniques can be found at http://www.fibmarkets.com) This creates the entry area with a stop above the swing high from the prior larger move.

This cannot be stressed enough; Appropriate risk management must be used to ensure stop loss is appropriate to trade. The reason is simply put; we don’t know anything for certain in trading! A trader must be able to carefully allocate their risk capital and establish a maximum stop loss that gives these patterns room to play out without damaging the trading capital, should you be wrong on your analysis.

In part II of this article, we will discuss trading targets, risk management, and appropriate ways to scale out of a trade and ensure profits.

Contributed by Toyogo00, Lori, Bert, & FibMaster at
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The MACD indicator is the difference between a 26-day and 12-day exponential moving average. A 9-day exponential moving average (a trigger line) is displayed over of the indicator to show buy/sell opportunities.

Calculating the MACD

MACD = EMA(12) [p] – EMA(26) [p]

SIGNAL = EMA(9) [MACD]

p = price

The most popular ways to apply the MACD are:

1. Crossover signals

2. Overbought/oversold alerts

3. Divergence

4. Trend determination

MACD Crossovers

The basic trading rule is to sell when the indicator falls below its signal line. Similarly, a buy signal occurs when it rises above its signal line. It is also popular to buy/sell when it goes above/below zero.  

MACD Overbought/Oversold Conditions

The indicator can also be used as an overbought/oversold indicator. When the faster moving average pulls away dramatically from the longer moving average (i.e., it rises), it is likely that the security’s price is overbought and will soon return to normal conditions. Overbought and oversold conditions vary from one forex pair to another.

MACD Divergences

An indication that an end to the current trend may be near occurs when the indicator diverges from the security. A bearish divergence occurs while MACD is charting new lows, and prices do not make new lows. A bullish divergence occurs when the MACD makes new highs and the price action does not make new highs. Beware of using divergences without confirming data– they fail more than they succeed. Both of these divergences are more significant when they occur at relatively overbought/oversold levels.

MACD Trend Identification

To find the trend, we need to calculate the difference between the MACD line and the signal line. The standard representation is to plot the MACD and signal lines on top of a histogram which represents the difference between the two. Most charting systems will display the histogram at the click of a button.

Since the MACD line is created from the 12-period and 26-period EMA lines and when the MACD histogram crosses zero from below, the shorter-term 12-period EMA simultaneously crosses the 26-period EMA from below. Since the faster 12-period EMA is more influenced by recent prices ( the crossing of the 26-period EMA from below), it indicates recent prices have trended higher; this is seen as a bullish signal.

When the 12-period EMA crosses the 26-period EMA from above, the MACD line will cross zero from above. This indicates that recent prices have trended downward and is seen as a bearish signal.

When the histogram is positive and rising, an up-trend is indicated, so long trades are favored. When the histogram is negative and declining, the chart is in a down-trend indicating that you should trade short.

Contributed by Toyogo00, Lori, Zorlev, Robma & FibMaster at
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