The Secret Trading Technique Using OsMA

If you are a seasonal trader of any markets such as Forex, Futures, Stocks or Options, you would notice an indicator called Oscillator of Moving Average, also known as OsMA in short. This technical indicator is not very well known or not being used often in this industry. We seldom hear professional traders provide advise of technical usage of this indicator. So, why is it so not popular in the technical indicator field?

What is OsMA?

As we know from its abbreviation being a category of oscillators, it describes the moving average of the market price through its oscillating strength. In simple terms, it is to show how strong the market direction is. 

It is derived from the construction of Moving Average Convergence Divergence also known as MACD. However, we won't be able to derive the same OsMA oscillating structure with the use of the conventional MT4 MACD which only has single Signal Line. So, this means we have to look for MACD with two lines which as mentioned, the Signal Line and another is MACD Line. Such indicator is widely available in the MT4 market place and I would recommend using "Tipu MACD" as it is free to use. So, the construction of the OsMA is base upon the difference between Signal Line and  MACD Line. 

Thus, this could be the reason why OsMA is not very well known as it has been over ruled by the popularity of the mostly used MACD with two lines.

How OsMA is Being Used Effectively?

Whether you are using OsMA or MACD with two lines, both are the same indicator, just for you to know. Since OsMA is an indicator of strength, it helps me to provide insights of the market direction. Be it a bullish trend or a bearish trend. As this outlook of the market is not a short term information, it is best use on H1 chart time frame with Fast EMA setting at 2 and the rest at 200. The Fast EMA at 2 will take in the latest 2 hours to be compared against the overall 200 hours. This will map out the directional strength in a histogram chart.

For my personal point of view, I do not take into consideration of the spike of the histogram being shown. What's important for  me in this indicator use case is that, the indicator must be stabilized in either positive phase or negative phase in a long period of time. Still, there will be some drawbacks of using this technique as to reference during time period of December 2018 for EURUSD. During this time, EURUSD is very volatile in H1, but in D1 the price action is stagnant. If 200 SMA is placed in H1, you will just see 200 SMA being a straight line and OsMA will show multiples of phase change at such occasion which defeats its use case.

Not For the Scalpers

Once this OsMA setting indicates positive histogram, it shows a strong bull trend and bear trend if negative histogram shows. Since being said it gives a long term outlook of the market, the setting being mentioned is not suitable for scalpers. Even by reducing the Slow EMA and MACD SMA period setting will not help scalpers to gain any advantage, as this is due to its nature of being a lagging indicator. As normally scalpers would prefer to have their position closed within an hour to less than a day, it is highly not recommended to scalpers as trade position will require to be placed over night and thus overnight swap rate will kill off the profit from such trade.

Day Traders Perspective

One more time that I would like to remind you again that, this indicator is a lagging indicator. Since it is also a strength indicator, DO NOT ASSUME that once OsMA changes from positive phase to negative phase, it will mean that the market is heading bearish. Being a day trader means we must learn how to be patient and not to be fooled by the market reactions. A change in the indicator phase could turn out to be a false alarm. To confirm that if  the market is turning to bearish trend, the OsMA negative phase indicator MUST retained its strength at least for one day. Below chart shows how a false alarm would look like. The market has decided to continue with bull trend with supporting confirmation using trend line analysis.

Trend Line Analysis

By pulling a trend line to fit the bottom last lower low and higher low, you will see that the recent higher low is rejected hence the support of this trend line becomes valid. One confirmation of this analysis will not be sufficient, so lets continue to the second one. By pulling the second trend line from the top last higher high and lower high, the current price has breakthrough this trend line making this resistance trend line to be invalid.  

The reason that I do not show the trend line in the chart below is to trigger your doubt. At least, you will do some self study by opening up your MT4 platform and start doing technical analysis base on our above discussion. If you are not doing this, I am very sure that you are not for the interest in trading but just looking for some get rich quick method through Forex. Too bad that there are no such thing as get rich quick in Forex, honestly. Also, I would like to take this chance to let you know that, people like to rely on easy stuffs like installing Expert Advisors, EA, into their MT4 trading platform and expect to get passive income month by month. Yet another hard truth is that, EA lack of organic reasoning and totally base on technical calculation. There is no way you can use technical calculation to derive human emotion in the market!

The period separator shows a one day period across the H1 chart time frame. Period separator can be made accessible by going to the chart properties window. Right click on the chart in MT4 to find 'Properties' at the bottom of the pop up menu. 

Where to Set Entry and Exit Points

In general rule of thumb, as the last candle stick closes above the resistance line, taking that the above discussion as an example, a buy entry is valid. However, to determine how far the market will go for a good sum of profit, that will require another set of technical indicator tools to define. 

The second rule of thumb as a trader is that, know how to cover your backside, being able to manage risk in your trade positions which 90% of retail traders lack of.  

The 17 Proven Currency Trading  Strategies by Mario Singh is one of an eye opener for me to improve my trading style by going through the "Trader Profile Test". In another words, if you DO NOT KNOW whether you are a scalper, day trader or a swing trader, you will want to take the test to define what kind of trader you are.

Besides that,  this book also teaches you Forex hedging strategies used by many professional traders at multinational corporations.

 

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Why Stochastic Indicator is a Pain in The Ass?

Stochastic indicator is widely known among traders to be used to indicate a market asset being over bought or oversold. It was Dr. George Lane who had developed this indicator during 1950s. It describes the current price level in relation to the price range within a given time period. Hence the term over bought when the Stochastic Indicator shows current price level above 70 and over sold when current price level is below 30. Since it is able to describe the price level such a way that there is a possible turning point, why do traders hate it so much? Or is there any misunderstanding between traders and the indicator?

The Problem of Stochastic Indicator

Every trader have their way through trading the market at their preferred methods. Some traders go for the long term with swing trade, some traders look into short term profit with day trade, and there are a lot of traders who are attracted to the shorter term scalping method. With proven trading strategies, which ever methods are being used, trader are being deemed profitable as long as they are the master in their trading skill.

As being part of trading strategies, technical indicators are being used to analyse and filter the market condition. Traders are relying on technical indicators to time their entry. But, what not when one trader is using Stochastic Indicator, at most of 7 out of 10 times of trading entry being made are not good entries, especially for those who are scalpers and day traders.

Scalpers

This group of traders will find it horrific using Stochastic indicator as the time frame that they trade ranges from M1 to M15. The high fluctuation and uncertainties of the market causes the indicator to be unreliable. Just look how M1 stochastic describe EURUSD in a short period trending market structure.

The default setting of Stochastic which are:

- %K Period: 5   

- %D Period: 3 

- Slowing: 3     

provides the least possibilities of lagging information derived from the price movement. However, inexperience traders may take the wrong side of the trade though believing that scalping with a 2.5 pips trade would be profitable. The truth is, I've been there before and it is not a consistent profitable trade. Imagine your risk ratio is 1:1 where you are risking 2.5 pips stop loss to a 2.5 pips profit at a 30% chance of profit rate. Your losing trade still out performs your profitable trades.

Day Traders

Day traders who uses stochastic as trade entry indication by taking buy entry when the indicator crosses above 30 and sell entry when the indicator crosses below 70 may survive what scalpers are worried of, but not for long. As the market makes a sideways structure, day traders can easily profit from H1 to H4 time frame. The downside risk of such strategy is that once the market pick a side,  day traders will face the same problem as the scalpers. Imagine that being a day trader, the stochastic indicates possible trend reversal, crossing above 30, but a stronger bear is pushing the price down even though the indicator not being able to reach up to 50.

Day traders may find some sweet spots to trade base on the market structure shown above. However, let alone by using Stochastic indicator itself is not enough to describe the market condition as a whole.

How Should Stochastic Indicator be Used?

Though I would disagree that Stochastic Indicator is useless, Stochastic Indicator is just not fit for being a trade entry indicator. It tells traders potential of market turning point but to an extend that at times it just failed to do so, not that the market or the indicator is wrong, but it is the limitation of the calculation developed by Dr. George Lane.

It would be unfair if Stochastic Indicator were to be blame for its short coming. A combination of technical indicators may assist Stochastic Indicator to tell a full story of what's the market to be. As for my favorite combination would be Bollinger Band and ADX paired with Stochastic Indicator on a D1 time frame. Even though for me as a day trader, having a D1 time frame allows me to pick up the big picture of the market as to where it would move.

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The 17 Proven Currency Trading  Strategies by Mario Singh is one of an eye opener for me to improve my trading style by going through the "Trader Profile Test". In another words, if you DO NOT KNOW whether you are a scalper, day trader or a swing trader, you will want to take the test to define your trading profile.

Besides that,  this book also teaches you Forex hedging strategies used by many professional traders at multinational corporations.

 

17 Proven Currency Trading Strategies, + Website: How to Profit in the Forex Market

How Chamomile Tea Saved My Life?

Have you ever wondered, in  our everyday life, we are some times psychologically stressed, feeling anxiety due to the nature of the work that we are involved, we are able to easily overcome those negative feelings with just a simple solution?

Scariest Time in my Life

There were few times that I was caught up with panic attack while driving. It feels as if your brain start to trigger survival mode when a pinch of pain is felt on your chest. The first thought came into my mind was, "SHIT! Am I having heart attack?!"

With shortness of breath and the feeling of wanting to throw out, I stopped by the road side and started focusing in my breathing as if that I can't give up my life. I was shocked while disbelieve that it was a real heart attack. Thankfully, the bad feeling was over and I continued my trip. Stopping by a clinic near my ex-company, the doctor had confirmed that there is nothing wrong with my health condition, hinting that it could be just a panic attack due to stress and anxiety. 

Then few years later, the same kind of feeling just pop out with a sudden for a few times. Knowing that this panic attack will not result in chronic health issue, however, the process of going through such feeling is awful. Then I went on to research through ways of getting over with it and not having it to happen again.

Causes of Panic Attack

There are 3 possible causes for panic attack to occur which are:

1. Severe stress
2. Medical condition
3. Physical causes

Base on these possible causes, I do not have any medication required and also not physically abuse in anyway. Hence it leads to most possible cause which is severe stress. Whether it is 'SEVERE' stress, I am not sure about it but definitely I felt emotionally stress during that period of time which related to the loss of my beloved family member and at the later due to overcoming challenges which I am facing throughout my entrepreneurship journey.

Eliminate Caffeine Intake

Through my research, I also found that there is a link of consuming caffeine that leads to panic attack. It was a loss for me since I really love to drink coffee as it gives out aromatic scent that is able to keep you awake. Though my intake of coffee is not extreme, just one cup every morning, it is being said that caffeine has long been linked to anxiety which will induce panic attack. So, I have to say good bye to my coffee consumption.

Not only that I have to stop drinking coffee, any kind of beverage such as certain type of tea would have to be considered being out from my diet. However, there are other tea as well that does not contain caffeine can be use as a treatment for panic attack

Introducing Chamomile Tea

In addition to improve my emotional state from being 'SEVERELY' stressed, I have introduce chamomile tea into my diet before sleep. Chamomile tea gives out a very light scent which helps to bring out relaxation to your nervous system and also helps to bring a good night sleep. Other than that, chamomile tea helps to improve your digestive system, protecting against diarrhea as it has anti-inflammatory attributes

The Result

Since then, I had never once had to caught up with panic attack ever again!

Benefits of Chamomile Tea

Overall, having a cup of chamomile tea will provide you with benefits such as.

1. Improving sleep quality
2. Promotes digestive health
3. Protects against certain type of cancer
4. Capable of controlling blood sugar
5. Improving heart health

Improving Sleep Quality

About 30% of our human population suffers from insomnia and the best medication for such sleep deprivation is always through natural ways of consuming herbal tea. For centuries, chamomile tea has been used as a natural remedy to treat insomnia. This is due to the attribute that was found in this herb which has a mild tranquilizer.

Research had shown that the antioxidant found in chamomile which is known as apigenin provides calming effects to decrease anxiety by binding itself to a specific receptors in our brain. A 400 mg of chamomile extract per day can help to provide better sleep quality compared to those who do not consume the extract. Those who are having chronic insomnia who consume 270 mg of chamomile extract twice per day were able to fall asleep about 15 minutes faster than any other average person. The results of these research are very encouraging and beneficial to anyone who has stress, anxiety, insomnia.

Promotes Digestive Health

Other than improving sleep quality, chamomile tea is known to calm upset stomach, irritable bowel syndrome, diarrhea, colic and other digestive issues. Even being said so, there are no scientific research that proves chamomile tea can help acid reflux. The only possible understanding is that the anti-inflammatory and antimicrobial capabilities found in chamomile could be the attribute that relief gastric acidity as well as antacids.

Protects Against Certain Type of Cancer

There was a study being conducted in 2012 that, marigold and chamomile were used to target cancer tumors selectively, however marigold were providing much better effects compared to chamomile.

Capable of Controlling Blood Sugar

Some studies shows that, chamomile have found to be able to lower blood sugar in people who have diabetes, being a helpful supplement to existing diabetes medical treatment. Consistent consumption of chamomile tea shows to be able to prevent blood sugar from increasing, hence this effect reduces the long term risk of diabetes complication.

Improving Heart Health

Chamomile tea is rich in flavones which is a type of antioxidant. Flavones have the potential to reduce blood pressure and cholesterol levels. Another study shows that a group of diabetic patients were found to have improves in their total cholesterol, triglyceride and "bad" LDL cholesterol levels after drinking chamomile tea with meals.

Who Should Avoid Chamomile Tea?

Even though with its benefits provided, there are certain groups of people would not be suitable for Chamomile tea intake which are:

• People who have history of severe allergies to pollen. Chamomile may have pollen contamination hence may cause allergic reaction.
• People who are specifically allergic to chamomile.
• Infants and very young children specifically age below 12 years old.

If you really love yourself and would never want to be caught up with panic attack ever again, I would recommend taking a cup of organic chamomile tea before you sleep. 

 
Traditional Medicinals Organic Chamomile Herbal Leaf Tea, 16 Tea Bags (Pack of 6)