Forex Indicators

Currency strength based trading indicators

Currency strength is calculated from the U.S. Dollar Index which is used as a reference for other currency indexes. ^[4]

The basic idea behind indicators is "to buy strong currency and to sell weak currency".
If is X/Y currency pair in up trend, you are able to determine whether this happens due to X's strength or Y's weakness. ^[5] :

With this kind of indicators you are able to:

• choose the most valuable pair to trade.
• see the reactions of each currency on moves in correlated instruments (for example CAD/OIL or AUD/GOLD)
• look for a strong trend in one currency
• observe most of the forex market in one chart

Typical example of indicators based on currency strength are Relative currency strength and Absolute currency strength. Their combination is called Forex Flow indicator, because you are able to see the whole currency flow across the forex market.

History

Kappa Delta Rho was founded in room 14 of Old Painter Hall at Middlebury College in Middlebury, VT on May 17, 1905.^[1] It formed out of the Middlebury Commons Club, and had ten principal founders: George Edwin Kimball, Irving Thurston Coates, John Beecher, Pierce Wordsworth Darrow, Thomas Howard Bartley, Benjamin Edward Farr, Gideon Russell Norton, Gino Arturo Ratti, Chester Monroe Walch and Roy Dyer Wood.^[2]

Somewhat unique among college fraternities, KDR's Alpha Chapter at Middlebury was forced to coeducate in the early 1990s, due to a policy at the school against single-sex organizations. The chapter is now the Alpha and only chapter of the Kappa Delta Rho Society, and maintains its own traditions and a unique badge, slightly modified from the standard fraternity badge.

[edit] Values

The values of ΚΔΡ are: Fellowship, Leadership, Scholarship, Service, and Tradition and can be seen in its Credo and Precepts. The Credo was written in 1946 by George E. Shaw, Alpha '10, the first pledge of ΚΔΡ. The Precepts were adopted by the 95th National Convention in 2006.

[edit] Credo

Since the Beginning, wherever men have come together, there have I been.

My membership is legion. From the humble home and from the stately mansion; from the rolling farm and from the noisy factory; from the East and West and North and South have my followers come.

They who understand my meaning have followed in the footsteps of the Man of Galilee. In peace, they have been their brother’s keeper, and in the agony of war, their blood has enriched the Fields of Flanders and reddened the sands of the Pacific.

Their reward has been the Inspiration of their Youth; the Driving Power of their Manhood; the Memories of their Maturity. They have fought the good Fight and of these, my sons, I am justly proud,

Who am I? My name is FRATERNITY. And because I have given Man that which he craves, I shall endure. My sons shall neither falter nor fail. They shall add new lustre to my name.

[edit] Precepts of Kappa Delta Rho

As a Brother of the National Fraternity of Kappa Delta Rho, I have but one aim: to lead an honorable life.

To this end, I am bound by my words and actions to:

• Embrace the principles and spirit of the KDR Gentleman, treating all those I encounter with dignity and respect;
• Work diligently in the pursuit of my education, understanding that I am a student first and that the quest for knowledge is an endeavor which will last a lifetime;
• Meet all of my obligations to the Fraternity in a timely manner, so as to ensure that I am doing my share and that I am not a burden to my brothers;
• Engage in the service of mankind, not for the praise or recognition that such service may bring, but because it is the right thing to do;
• Serve as my brothers’ keeper, holding them accountable for their actions as they hold me accountable for mine, and
• Support my Alma Mater, that she may view Kappa Delta Rho as a partner in the development of her students.

I understand that my membership in Kappa Delta Rho is a lifelong privilege that is contingent upon my willingness to incorporate the values of the Fraternity into my daily life and uphold the oath I have sworn. As I speak these words I once again to affirm to my brothers, and all who hear me, that I am a KDR Gentleman and I will place Honor Above All Things.

Honor Super Omnia!

[edit] Publications

[edit] Quill & Scroll

The National Office of the fraternity publishes a semi-annual news magazine called the Quill & Scroll. First published as The Scroll in 1909 at Middlebury College, the Fraternity changed the name in 1924 after it became a national publication. Today, articles in The Quill and Scroll detail the successes of the National Fraternity, the various alumni corporations, undergraduate chapters and individual members. The articles are supposed to reflect the high ideals of KDR as experienced by its undergraduates and alumni.^[3]

[edit] Pathfinder

The Pathfinder is the KDR educational and historical manual. It is given to those who choose to pledge the fraternity so that they may understand the responsibilities of membership. It also provides them with an introduction to the way in which KDR is organized, how it operates and what the roles are of the chapter, alumni, and National Office. The manual is updated every few years by the National Office to bring it up to date with new information, policies and ideas.^[4]

[edit] Awards

Awards are given out to Chapters and individual Brothers each year at the National Convention. Chapter awards include: the Robert D. Corrie Award for Chapter of The Year, O.D. Roberts Award for Chapter Improvement, Donald C. Wolfe for Outstanding Newsletter, George E. Kimball Award for Outstanding Social Service, John L. Blakely Award for Outstanding Philanthropics, Leo T. Wolford Award for Outstanding Campus Involvement, Gino A. Ratti Award for Outstanding Alumni Relations, E. Mayer Maloney Award for Outstanding Faculty Relations, Dr. Harold Osborn Award for Outstanding Intramural Sports, & George E. Shaw Award for Outstanding Public Relations.

Individual awards are also handed out including: Outstanding Senior, Outstanding New Member, Outstanding Advisor, & the Red Rose Award. In addition, qualified Alumni may be inducted into the prestigious Ordo Honoris based upon achievements in either their career, community or their dedication to the fraternity.^[5]

[edit] Foundation

Kappa Delta Rho is financially supported through undergraduate dues and by the Kappa Delta Rho Foundation, a 501(c)(3) charity. The foundation raises funds from Brothers, family, and friends of KDR to financially support the educational, leadership, and character development programs undertaken by the National Fraternity. The foundation also manages both individual and collective scholarship endowments of the National Fraternity providing more than $75,000 in academic support each year to qualified members of the Fraternity.

[edit] Scholarships

The Kappa Delta Rho Foundation provides competitive scholarships based upon academic achievement and applications are submitted online. The foundation also serves as caretaker to several chapter specific scholarships and area of study specific scholarships that can be applied for with the same application. The foundation typically gives away more than $75,000 in scholarships with individual awards typically ranging from a minimum of $500 upwards to $2,200.

In addition to competitive academic scholarships the Foundation also gives away non-competitive New Member academic scholarships. Any Brother who received above a 3.0 on a 4.0 scale during his pledging semester will receive $100 from the foundation providing they submit the proper documentation.

The Kappa Delta Rho Foundations also offer scholarships for the Undergraduate Interfraternity Institute and Futures Quest, both of which are educational programs run by the North-American Interfraternity Conference. The scholarships cover the full cost of registration for each program.

[edit] Programs

The Elmon Williams Leadership Academy is a multi day leadership program that occurs during each National Convention and is funded in large part by the foundation. The academy allows for all undergraduate Brothers who attend the National Convention to learn more about being an effective leader in their chapter and in the professional world.

In 2007 the KDR Foundation created the Kappa Delta Rho Wilderness Institute which occurs once a year in a different wilderness location around the country. Brothers who have been admitted to the program through an application process take part in a multi day hike that is led by an alumni mentor and experienced guide. The program is designed to provide hands on leadership programming, substance free brotherhood building activities, personal growth opportunities, and core values exploration.

The Coppock curve or Coppock indicator is a technical analysis indicator for long-term stock market investors created by E.S.C. Coppock, first published in Barron's Magazine in October 15, 1962.^[1]

The indicator is designed for use on a monthly time scale. It's the sum of a 14-month rate of change and 11-month rate of change, smoothed by a 10-period weighted moving average.

.

Coppock, the founder of Trendex Research in San Antonio, Texas^[2], was an economist. He had been asked by the Episcopal Church to identify buying opportunities for long-term investors. He thought market downturns were like bereavements and required a period of mourning. He asked the church bishops how long that normally took for people, their answer was 11 to 14 months and so he used those periods in his calculation.^[3]

A buy signal is generated when the indicator is below zero and turns upwards from a trough. No sell signals are generated (that not being its design). The indicator is trend-following, and based on averages, so by its nature it doesn't pick a market bottom, but rather shows when a rally has become established.

Coppock designed the indicator (originally called the "Trendex Model"^[1]) for the S&P 500 index^{[citation needed]}, and it's been applied to similar stock indexes like the Dow Jones Industrial Average. It's not regarded as well-suited to commodity markets, since bottoms there are more rounded than the spike lows found in stocks.^[4]

[edit] Variations

Although designed for monthly use, a daily calculation over the same period can be made, converting the periods to 294 day and 231 day rate of changes, and a 210 day weighted moving average.^[5]

A slightly different version of the indicator is still used by the Investors Chronicle, a British investment magazine. The main difference is that the Investors Chronicle version does include the sell signals, although it stresses that they are to be treated with caution. This is because such signals could merely be a dip in a continuing bull market.^[6

The Relative currency strength (RCS) is a technical indicator used in the technical analysis of forex market. It is intended to chart the current and historical strength or weakness of a currency based on the closing prices of a recent trading period.It's based on Relative Strength Index and mathematical decorrelation of 28 cross currency pairs.It shows relative strength momentum of selected major currency. (EUR, GBP, AUD, NZD, USD, CAD, CHF, JPY)

The RCS is typically used on a 14*period timeframe, measured on a scale from 0 to 100 like RSI, with high and low levels marked at 70 and 30, respectively. Shorter or longer timeframes are used for alternately shorter or longer outlooks. More extreme high and low levels—80 and 20, or 90 and 10—occur less frequently but indicate stronger momentum of currency.

Combination of Relative currency strength and Absolute currency strength indicators gives you entry and exit signals for currency trading.

Contents [hide] 1 Basic idea 2 Signals 3 Indicator 4 Advantageous for trading strategies 5 See also 6 References 7 External links

[edit] Basic idea

Indicator basic idea is "buy strong currency and sell weak currency".
If X/Y currency pair is in an uptrend, it shows you if it's due to X strength or Y weakness.
On these signals you can choose the most worth pair to trade.

[edit] Signals

You can use Relative currency strength for pattern trading as well, among basic patterns which can be used are: cross, trend break, trend follow,divergencies divergencies.

Cross

Trend-break

Divergence

[edit] Indicator

Combination of Relative currency strength and Absolute currency strength

Absolute currency strength

[edit] Advantageous for trading strategies

• Most commonly used as combination with Absolute currency strength
• information indicator to realize which currencies are being demanded, this is ideal indicator for trend follow traders
• help for scalpers looking for strength trend (trader can see both absolute and relative strength)
• instrument for correlation/spread traders to see reactions of each currencies on moves in correlated instruments (for example CAD/OIL or AUD/GOLD)

MACD (Moving Average Convergence/Divergence) is a technical analysis indicator created by Gerald Appel in the late 1970s.^[1] It is used to spot changes in the strength, direction, momentum, and duration of a trend in a stock's price.

The MACD is a computation of the difference between two exponential moving averages (EMAs) of closing prices. This difference is charted over time, alongside a moving average of the difference. The divergence between the two is shown as a histogram or bar graph.

Exponential moving averages highlight recent changes in a stock's price. By comparing EMAs of different periods, the MACD line illustrates changes in the trend of a stock. Then by comparing that difference to an average, an analyst can chart subtle shifts in the stock's trend.

Since the MACD is based on moving averages, it is inherently a lagging indicator. As a metric of price trends, the MACD is less useful for stocks that are not trending or are trading erratically.

Note that the term "MACD" is used both generally, to refer to the indicator as a whole, and specifically, to the MACD line itself.

Contents [hide] 1 Basic components 2 Interpretation 2.1 Signal line crossover 2.2 Zero crossover 2.3 Divergence 2.4 Timing 2.5 False signals 2.6 Limitations 3 Oscillator classification 4 Signal processing theory 5 History 6 References 7 External links

[edit] Basic components

The graph above shows a stock with a MACD indicator underneath it. The indicator shows a blue line, a red line, and a histogram or bar chart which calculates the difference between the two lines. Values are calculated from the price of the stock in the main part of the graph.

For the example above this means:

• MACD line (blue line): difference between the 12 and 26 days EMAs
• signal (red line): 9 day EMA of the blue line
• histogram (bar graph): difference between the blue and red lines

Mathematically:

• MACD = EMA[fast,12] – EMA[slow, 26]
• signal = EMA[period,9] of MACD
• histogram = MACD – signal

The period for the moving averages on which an MACD is based can vary, but the most commonly used parameters involve a faster EMA of 12 days, a slower EMA of 26 days, and the signal line as a 9 day EMA of the difference between the two. It is written in the form, MACD(faster, slower, signal) or in this case, MACD(12,26,9).

[edit] Interpretation

Exponential moving averages highlight recent changes in a stock's price. By comparing EMAs of different lengths, the MACD line gauges changes in the trend of a stock. By then comparing differences in the change of that line to an average, an analyst can identify subtle shifts in the strength and direction of a stock's trend.

Traders recognize three meaningful signals generated by the MACD indicator.

When:

• the MACD line crosses the signal line
• the MACD line crosses zero
• there is a divergence between the MACD line and the price of the stock or between the histogram and the price of the stock

Graphically this corresponds to:

• the blue line crossing the red line
• the blue line crossing the x-axis (the straight black line in the middle of the indicator)
• higher highs (lower lows) on the price graph but not on the blue line, or higher highs (lower lows) on the price graph but not on the bar graph

And mathematically:

• MACD – signal = 0
• EMA[fast,12] – EMA[slow,26] = 0
• Sign (relative price extremum_final – relative price extremum_initial) ≠ Sign (relative MACD extremum_final – MACD extremum_initial)

[edit] Signal line crossover

Signal line crossovers are the primary cues provided by the MACD. The standard interpretation is to buy when the MACD line crosses up through the signal line, or sell when it crosses down through the signal line.

The upwards move is called a bullish crossover and the downwards move a bearish crossover. Respectively, they indicate that the trend in the stock is about to accelerate in the direction of the crossover.

The histogram shows when a crossing occurs. Since the histogram is the difference between the MACD line and the signal line, when they cross there is no difference between them.

The histogram can also help in visualizing when the two lines are approaching a crossover. Though it may show a difference, the changing size of the difference can indicate the acceleration of a trend. A narrowing histogram suggests a crossover may be approaching, and a widening histogram suggests that an ongoing trend is likely to get even stronger.

While it is theoretically possible for a trend to increase indefinitely, under normal circumstances, even stocks moving drastically will eventually slow down, lest they go up to infinity or down to nothing.

[edit] Zero crossover

A crossing of the MACD line through zero happens when there is no difference between the fast and slow EMAs. A move from positive to negative is bearish and from negative to positive, bullish. Zero crossovers provide evidence of a change in the direction of a trend but less confirmation of its momentum than a signal line crossover.

[edit] Divergence

The third cue, divergence, refers to a discrepancy between the MACD line and the graph of the stock price. Positive divergence between the MACD and price arises when price makes hits a new low, but the MACD doesn't. This is interpreted as bullish, suggesting the downtrend may be nearly over. Negative divergence is when the stock price hits a new high but the MACD does not. This is interpreted as bearish, suggesting that recent price increases will not continue.

Divergence may also occur between the stock price and the histogram. If new high price levels are not confirmed by new high histogram levels, it is considered bearish; alternately, if new low price levels are not confirmed by new low histogram levels, it is considered bullish.

Longer and sharper divergences—distinct peaks or troughs—are regarded as more significant than small, shallow patterns.

[edit] Timing

The MACD is only as useful as the context in which it is applied. An analyst might apply the MACD to a weekly scale before looking at a daily scale, in order to avoid making short term trades against the direction of the intermediate trend.^[2] Analysts will also vary the parameters of the MACD to track trends of varying duration. One popular short-term set-up, for example, is the (5,35,5).

[edit] False signals

Like any indicator, the MACD can generate false signals. A false positive, for example, would be a bullish crossover followed by a sudden decline in a stock. A false negative would be a situation where there was no bullish crossover, yet the stock accelerated suddenly upwards.

A prudent strategy would be to apply a filter to signal line crossovers to ensure that they will hold. An example of a price filter would be to buy if the MACD line breaks above the signal line and then remains above it for three days. As with any filtering strategy, this reduces both the probability of false signals as well as the frequency of missed profit.

Analysts use a variety of approaches to filter out false signals and confirm true ones. As a lagging indicator, the MACD is often paired with a leading indicator, like the Relative Strength Index (RSI). Historical comparisons to similar stocks as well as a careful investigation of past price movements provide added information about how a stock tends to move.

[edit] Limitations

The MACD has often been criticized for failing to respond in very low or alternately very high volatility market conditions.^[3] Since the MACD measures the divergence between averages, it can only give meaningful feedback as trends change. Thus, the MACD is less useful if the market is not trending—trading sideways or trading erratically—making sudden, dramatic, and/or countervailing moves.

In a sideways market, the divergence between averages will not have a trend to illuminate. In an erratic market, the changes will happen too quickly to be picked up by moving averages or will cancel each other out, diminishing the MACDs usefulness. A partial caveat to this criticism is that whether a market is trending or volatile is always relative to a particular timeframe, and the MACD can be adjusted to shorter or longer spans.

Finally, though some analysts trade on technical indicators alone, the abundance of experts recommend a complete work-up of a company's business sectors, financial strength, past earnings, new products, management, and institutional buying. For more traditional investors, an indicator like the MACD may be used only to support a previously determined stock choice, or to select an ideal entry-point into a fundamentally sound stock.

[edit] Oscillator classification

The MACD is an absolute price oscillator (APO), because it deals with the actual prices of moving averages rather than percentage changes. A percentage price oscillator (PPO), on the other hand, computes the difference between two moving averages of price divided by the longer moving average value.

While an APO will show greater levels for higher priced securities and smaller levels for lower priced securities, a PPO calculates changes relative to price. Subsequently, a PPO is preferred when: comparing oscillator values between different securities, especially those with substantially different prices; or comparing oscillator values for the same security at significantly different times, especially a security whose value has changed greatly.

A third member of the price oscillator family is the detrended price oscillator (DPO), which ignores long term trends while emphasizing short term patterns.

[edit] Signal processing theory

In signal processing terms, the MACD is a filtered measure of velocity. The velocity has been passed through two first-order linear low pass filters. The "signal line" is that resulting velocity, filtered again. The difference between those two, the histogram, is a measure of the acceleration, with all three filters applied. An MACD crossover of the signal line indicates that the direction of the acceleration is changing. The MACD line crossing zero suggests that the average velocity is changing direction.

[edit] History

The MACD was invented by Gerald Appel in the 1970's. Thomas Aspray added a histogram to the MACD in 1986, as a means to anticipate MACD crossovers, an indicator of important moves in the underlying security.