Welcome! Dear Traders,you are reading my forex trading experiences. Forex trading is a very profitable and very risky business opportunity. If you are a beginner, calm down,have a cup of coffee, and convince yourself that you need to study hard to win in forex trading. Obviously, the task is not easy as the statistics claim that only 5% traders win in forex trading. If you are determined, serious,and hard working, you can surely be included in the group of winners.

HOW TO TRADE FOREX WITH MOVING AVERAGE OF OSCILLATOR

Hello Friends, this post will explore the technique of trading forex with Moving Average of Oscillator (OsMA). To trade forex with this technical indicator, we do not need to know the statistical or mathematical formulas of Moving Average of Oscillator. We just need to know the way of getting entry and exit points on the forex candlesticks chart. Through this post you will be able to discover the way to get the entry and exit price levels with the Moving Average of Oscillator.

First of all we need to know the installation and format of the Moving Average of Oscillator. On the popular metatrader4  trading platform you an install the Moving Average of Oscillator as shown in the image below. 

Metatrader4
Through the installation process, you can choose color, period, levels, and some other features. Once you have installed the Moving Average of Oscillator, you may see an indicator just below the  candlesticks chart. The indicators will have a shape as the following image. 


So, Moving Average of Oscillator looks like the MACD without signal line. Three very important components of Moving Average of Oscillator are the zero line, histogram up, and histogram down. From the formation of the histograms of the Moving Average of Oscillator, we will get the signal to enter into the market or exit the market.Before we start, mentionable that here in this post we name the down histograms as down parabolic formation and name the up histograms as up parabolic  formation. We should also remember that two up parabolic formations may come consecutively or may have a down parabolic formation between them, it is true in case of down parabolic formations also.The image below will illustrate the technique of putting a buy order on the candlesticks chart of any currency pairs.


To find a long position using the Moving Average of Oscillator, we will compare the previous five parabolic formations in maximum. In case of above situation, at the red squire points we have a down parabolic formation but we will not place a buy order here rather we will wait for another down parabolic formation. At black squire point we have another down parabolic formation. But will not consider it as valuable signal to buy because at that points down parabolic formation is smaller or shorter than the previous one but the price is not lower than the previous level (red squire point on the candlesticks chart). Still we can consider it to buy but for a short time, if confirmed buy other indicators. At green points we have a strong buy signal comparing with the red squire point. At green squire point the down parabolic formation is shorter and the price (green squire point on the candlesticks chart) is lower than the previous level (green squire point on the candlesticks chart). This is a situation where three consecutive down parabolic formations appear, as a result strong buy signal is found. The most important thing to remember, while placing a buy order, is whether the change in the price is opposite to the change in the parabolic formation.


To place a sell order we will compare at most five up parabolic formations formed previously. Here at red squire point on the Moving Average of Oscillator, we have got a up parabolic formation where a sell order is not confirmed. We will wait until another up parabolic formation. At black squire points we have got the second up parabolic formation where logically a down trend is indicated. But at green squire points we find a strong sell signal because green squire point is on the top of a up parabolic formation came consecutively after another up parabolic formation. At black squire point on Moving Average of Oscillator window the histograms are shorter than the histograms under red squire point on Moving Average of Oscillator. But the price at the black squire point on the candlesticks chart indicates that the price gone up than the previous red squire point price level. Again at the green squire point on Moving Average of Oscillator window the histograms are shorter than the histograms at black squire point, but the price at green squire point on the candlesticks chart is upper than the previous level at black squire point.

Beyond the above techniques, there are some other techniques to consider while trading forex with Moving Average of Oscillators. First thing to remember,as a day trader or short term trader, is the time frame of the candlesticks chart. If the time frame is 5m or 15m, the above strategies are effectively applicable. But if the time frame is 30m, 1hr, or 4 hr, or more, every parabolic formations need to be considered with the above techniques. We need to know that after forming a up or down parabolic formation the histograms will be shortened one buy one to reach the zero line. If you are a long term trader then use the above techniques on 4hr candlesticks chart with out considering the single parabolic formation.

When three consecutive parabolic down formations are formed then a strong buy signal is confirmed as the image below.

 If three consecutive parabolic down formations are formed a strong sell is confirmed as the image bellow.


Two consecutive up or down parabolic formations may also give  the buy or sell signals. The two two consecutive down parabolic formations just before the red squire point indicate the buy signal.

In fine, if we summarize this post, we have the following five stars issues.
  • The up and down parabolic formations are compared to find the buy and sell signals.
  • If the changes in parabolic formation shows negative correlation with the price change we get the entry or exit signals.
  • Three or two consecutive parabolic up or down formations give strong buy or sell signals.
  • While scalping with Moving Average of Oscillator, we need to use the techniques on 5m chart being confirmed by the 4hr chart.
  • Scalping should be done to the trend.
  • Moving Average of Oscillator should be used with some other indicators like RSI, MACD etc.
I hope this post will help you to understand the techniques of forex trading with Moving Average of Oscillator. If you have any other technique of trading with this indicator or if you have any suggestions, please drop a comment below.

Published on Sunday, February 9, 2014 @ 6:06 PM (GMT)
Image Sources: metatrader4

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