Tips to MT4 2-terminal setup

When trading multiple currency pairs, there are many charts to monitor. Switch between too many charts can be cumbersome, so it is useful to have more than one screen. Most Desktop PC & Laptops support an extra screen. So by adding one more screen, you can have the benefit of 2 screens with minimum cost.

I even find it useful with more than one MT4 accounts running concurrently; each with a different trading strategy. So I set up with 2 screens, one for each account.

Also in MT4, you can sign in from 2 trading terminals for the same account.

1. Set up dual screen is quite simple :
1) plug in the second screen to the VGA port
2) From the Desktop, right click -> select "Graphic Properties" -> Check on "Multiple Display" to complete the configuration. You may also set the extended display to the left or right of your PC/Laptop screen. I suspect procedure for different PC brand may vary; hence get an IT savvy guy to assist if needed.

2. To install another MT4 Trader Platform, run the set up program a second time. Follow the installation wizard as before except for the 2 steps below:

1) After the License Agreement step; the prompt shows:
C:\Program Files\Interbank FX Trader 4

Change to (as example)
C:\Program Files\Interbank FX Demo 2

2) The next setup prompt,
Select program group shows: Interbank FX Trader 4

Again change to
Interbank FX Demo 2

Upon completion of sign up, you will see the new Interbank FX Demo 2 newly installed at:
Start -> All Programs -> Interbank FX Demo 2

3. Sign in with another account:
At the MT4 trading platform; select file -> login
enter login ID & Password

Hope you find the above useful.

A Full Circle

Often in life, things come in full circle.. where am I coming from?

Back to the beginning of this blog - the Pareto Principle, remember the 20/80 rule? (or 80/20 rule whichever way you like)

One interpretation is try to achieve 80% of profits via the 20% of your trades... i.e. be highly selective and go for big kills.

Another perspective is the market don't provide such opportunities most of the times. I recall reading a comment the market moves sideways 70% and trends only 30% of the times. Doesn't matter if the statistics is accurate or not, it merely convince me to adopt the Sniper's Mentality.

May be better put this way: 80% waiting time, 20% productive trading times!

Well, I haven't done before a series of blogs so intense within a short time span. It is like a memory dump for me.. now I can take a breather.

What a sweet feeling I have an open trade right now that hits 105 pips to conclude this article.. good enough, closed it right away!

Develop a Sniper's Mentality

I find this picture capture the essence of the gamesmanship being a trader - Mental Strength & Marksmanship.

We are using a limit resource ($) as our bullets.. every single shot counts! The 1:100 leverage allow us to magnify the size of the kill, but is also a double sided sword that can kill us if not properly handled.

So what's the sniper game? Wait and wait.... for the right moment of execution! Take a good aim before unleashing the shot!

It is a game of patience that pays off.

A Spectator Sport

When I watch live market charts these days, I feel watching the continual tussle between the bull and the bear - moment by moment, fighting round the clock, 5 days a week! Entertaining isn't it?

If we can sit through a football match or movie grip with excitement and suspense, the market does the same. Your choice when to watch or walk away any time; even sample the show once in a while. A complete freedom of choice.

You may switch roles between a player and spectator, join the fray to the winer side to make some profit if right and get a bloody nose when the table turns! Any other game like this?

The institutional players are doing the same too, watching the market from the sidelines most of the time and spring into action when prices hit their trigger levels! Wiser to decode the market signals and follow their coat tails, right? After all they are the ones supported by teams of analysists & strategists in the back room with crystal balls.

Dangers of over trading!

When you sit at your trading station few hours at a stretch, it is hard just to watch & do nothing, isn't it? (That's why I find blogging a benign distraction.)

One would always to look for opportunity to enter a trade or exit with a profit; harder to take loss, right?

Unwittingly we can easily slide into over trading.

Then you realize your account is dwindling.. and need to do more to recover it. The pressure mounts, you want to hurry too.

So you expose yourself even more, you know the outcome, don't you?

Stochastic Oscillator next, of course!

(N.B. Double click on graph to download & enlarge)

When I first came across the term "Stochastic Oscillator".. it sounds rather abstract & bombastic! Was it related to the study of Stochastic processes as in Statistics?

No, it turns out to be another simple idea.
It has 3 parameters: Stoch(5,3,3) - as default values

If you examine its computational method, again it is a moving window tracking the last few data elements. The first parameter specify the window width, 5 candle bars (as in default setting).

The Stochastic value, named %K, is the ratio of:
((Cp)/(H-L)) x 100%
where:
Cp is (closing price of last candle - L); L being the lowest price of the 5 candles
(H-L) is price range i.e. difference of the highest & lowest of candles prices in the window

Expressed as %, hence its values lies (or normalized) between 0% to 100% always.

What does it tell us?
1) It has a short memory - only 5 candle bars as in default settings.
2) It tracks the short term variation of the price movements.

A simplistic view is the price movement consists of 2 main components, short term price variations (or waves) sits on an underlying price trend (e.g. revealed by MA trend indicators).
The Stochastic indicator attempts to remove the underlying "trend information" showing the short term price cycle, centers at 50%. It's algorithm is more effective in tracing through cyclic variation than simply taking the difference between the data & MA trend lines; as it magnifies small variations and compresses large variations adaptively.

The 2nd parameter is for the MA of the Stochastic line, named %D. Again the filtered signal line, MA(3) of the Stochastic, is introduced to generate crossing signals to indicate trend changes.

The 3rd parameter has a value range of 1 - 3; is said to be for "internal smoothing" of the Stochastic. Value of 1 means fast Stochastic and 3 for a slow Stochastic.

Hope the few reviews help to demystify the inner workings of some key Technical Indicators.

What about MACD?

As it's name implies MACD (Moving Average Convergence & Divergence) is another indicator based on the EMA. It is best to review it in 3 parts:
1) MACD line (blue)
2) Signal line (red)
3) MACD Histogram (the dark vertical bars)

The default MACD has 3 parameters i.e. MACD (12, 26, 9).
The first 2 parameters are for the short (fast) and long (slow) EMAs.

1) What does the MACD line signifies?
It is the difference of the fast EMA and the slow EMA. When positive and increasing, it means the fast EMA Diverges from the slow EMA, it's magnitude shows the price acceleration comparison between the 2 EMAs. When it reaches a peak, price acceleration paused before the reversal and Convergence of the EMAs.

In other words, the gradient of the MACD line signifies the price acceleration. Mathematically, it is equivalent to the 1st derivative of "rate of price change" or the 2nd derivative of (price vs time) function.

2) The signal line is a EMA(9) of MACD line, what does this mean? Remember the filter properties of MA? It is the smoothened MACD line that introduce a lag and reduced peak-peak values. It is a time lag signal to generate crossovers (similar to MA crossings) to indicate change of direction.

3) The MACD histogram is the plot of difference between the MACD & the Signal line. It brings the cross over to the zero line. If the decision criteria is based on the crossovers, then histogram above zero signifies an up trend and histogram below means a down trend.

A more subtle point is it provides a visual indication to price acceleration. Note it always peaks before the MACD line? It's gradient shows the 2nd order (pseudo?) derivative of "rate of price changes" or the 3rd derivative of (price vs time) function. In simple term it reveals the "acceleration within an acceleration".

Hitting the peak is the first sign of 'possible reversal' but do not guarantees it! As it is evident graphically there can be higher subsequent peaks.

'Differences of MA' is used to perform 'derivative' function on time series data equivalent to 'differentiation' operation as in calculus! Clever, isn't it?

Varying the first 2 MACD parameters allow tracking of short or longer term trends. While the 3rd parameter merely add a further delay for trend reversal indication.

With these understandings, one may appreciate its inner workings better & choice of the parameters values used in MACD.