One significant difference between stock and currency trading is that there is no room to get help when the impulse occurs there is sufficient margin of safety - is the price. For example, when trading in shares if the price is consolidating just below the key level of resistance in the amount of lower middle, and then breaks a significant increase in volume, it gives the trader more confidence in breaking because it shows that the major players market indicates their participation in the form of volume. "Volume precedes price", as they say.
In the forex market, however, no further clues. There is only one price and nothing else. In this sense, is very suitable for Forex technical analysis, especially the concentration only on price action. In this sense, when trading in Forex is very important to wait for the price to confirm its previous non-directional movement range.
How can this be done? One of the easiest ways in which we can rely, is to use Bollinger bands. Bollinger bands can help you determine if the price is ready to trend rather than consolidated, and in essence, helping to answer the question: When is ready to start a movement?
All markets alternative stage non-directional and directional movement, and differentiation of these two phases is crucial when trading in the Forex market. Who is trending currency pairs can bring merchant losses while trending tools can offer excellent opportunities for profit. The ability to distinguish between these two phases, rather than using the volume to confirm, can significantly affect trading results. Let's look at the 60-minute chart of the British Pound:
After such a "trip", the price starts to move away from the top of the band, as she enters the stage non-directional movement. The band then started quickly converge, narrowing the distance as price consolidates. Then, the pattern is repeated. Knowing when price is trending move, instead of non-directional trader can determine the precise entry and exit points in the market, how to accurately determine the time reasonably to be out in the market.
Below are examples of the daily chart NZD / USD. Notice how, at the end of December, "Kiwi" was trading in a narrow sideways, Bollinger bands, reflecting the highly compressed price range. This situation was followed by an explosive move up as soon as the NZD broke above the range, and it was quickly extended tapes. Identification range compression that occur before the start of the direction of movement can also help to provide additional confirmation that the "pendulum" is changed back to a strong trend, since in a very narrow range:
We study the behavior of the Bollinger bands, when they are cut and expand as the movement of currency tools and use them to determine when the pair starts to continue the trend, and when she can return to consolidation. This will help to determine the input and output fluctuations in a more accurate, such as the amount used in the stock market to more accurately determine when there is enough power buyers or sellers to move the stock price up or down.
Indicator allows users to compare volatility and relative price levels over a period of time. The indicator consists of three groups designed to encompass the majority of the stock price movement.
First Simple Moving Average (SMA) in the middle.
Second Upper band (SMA plus 2 standard deviations).
Third A lower band (SMA minus 2 standard deviations)
Standard deviation is a statistical term that provides a good measure of variability. Using the standard deviation ensures that the bands will react quickly to price movements and reflect periods of high and low volatility. Sharp price increases (or decreases), and thus the instability will lead to expansion of the bands.
Bollinger bands help in getting the buy and sell signals, but they are not designed to determine the future direction of the stock.
They are designed to complement other indicators and technical analysis methods. Bollinger bands provide two basic functions:
* Identify periods of high and low volatility
* Period when prices are at extreme, and possibly short-term levels.
Buy and sell signals are given when prices reach the upper or lower bands.
These levels only indicate that the prices are relatively high or low. Provision may be overbought or oversold for extended periods of time.
Knowing that prices are relatively high or really low, traders can increase the quality of the interpretation of other indicators and more efficiently with time to choose their trade.
Profitable trading system - that is what is important. If they have a car and are able to comply with their rules and you will profit.
If you fail to abide by the rules, and get some losses. Everything else lines.
That the vehicle has been sharpened by certain tools will tell you when to trade.
The whole problem of the novice trader is exactly the lack of vehicles and thus drain deposit.
Bollinger bands are used to measure the volatility of the market. Initially, this little tool tells us whether the market is quiet or he rages! When the market is quiet, bands come together, and when the market storm, the band apart. Bands are close to each other when the market without jumps in the price, but once the price goes up, bands diverge sharply apart.
Bollinger bounce.
The most important thing you need to know - this is the price level tends to the middle Bollinger band. That's the whole point bounce Bollinger. Given this, if you look at the chart below, we assume the upcoming price movement?
Narrowing Bollinger.
Narrowing Bollinger speaks for itself. When bar "shrink" each other, it usually means that the fault will happen soon. If candles are starting to break through the upper band, the movement usually goes up. If candles are starting to break out of the bottom bar, the market usually goes down.
* It is used to measure volatility.
* They act like mini support and resistance levels.
* Bollinger bounce.
o The strategy, which is based on the observation that the price is always striving for the middle Bollinger band level.
o Buy when the price is lower Bollinger band.
o Sale is when the price of the lower Bollinger band.
o It is best to use in forming channel prices.
* Narrowing Bollinger.
o The strategy, which is used to determine the trend in the early stages.
o When Bollinger bands "squeeze" price, which means that the market is "the calm before the storm", and failure is inevitable. Once there was a breakdown, we are opening position, depending on which way this defect (top or bottom - where there and probe position).
Bollinger Bands indicator is largely similar to the Envelopes indicator, the only difference is that the latter limits, above and below the moving average curve are fixed in particular, expressed as a percentage level, and C is that they are at a distance equal to a certain number standard deviations, which are dependent on volatility: the distance increases with market volatility and decreases in volatile periods.
BB can be applied to the table and graph display. Characteristic of Bollinger Bands is that prices remain within the upper and lower limits of the indicator bands extended period of instability, providing plenty of room for price movement, and in the lull narrow.
Sudden changes in price tend to occur after the bands tighten, and if prices jump beyond their limits, the current trend continues. Trend reversal is possible in the case of Pikes and alcoves outside the bands followed and hollows inside the band. When projecting price targets is also important that the movement that comes from one of the band, usually reaches the opposite.
Calculation
Bollinger bands are formed by three lines. The middle line (the middle line in the middle) - usual Moving Average.
MID = S (cl, x) / x = SMA (CL, X)
The top line (the top line, HIT) - Moving Average, moved up to a certain number of standard deviations (Y).
Top = MID + (y * SD)
Bottom line (bottom line BOT) - middle line shifted by the same number of standard deviations.
BOT = MID - (y * SD)
Where:
S (..., x) - X amount of times;
CL - closing price;
X - number of periods used in calculation;
SMA - Simple Moving Average;
SQRT - square root;
SD - standard deviation:
SD = sqrt (S ((CL - SMA (CL, x)) ^ 2, x) / x)
It is better to use a 20-period Simple Moving Average as the middle line and two standard deviation band. There is a low efficiency of moving averages less than 10 periods.
Forex Strategy Apartment Bollinger Band System is designed to trade on the interval H1, the currency pair - any;
The schedule for the chosen currency pair, you must set the following indicators forex (all of them by default in any trading platform MetaTrader 4:
1) Indicator Bollinger Band (Perion - deviation 24 - 2, HLCC / 4) - blue, indicating a trend for 24 hours schedule daily.
2) Indicator Bollinger Band (period - 120, deviation - 2, HLCC / 4) - color - red, shows the trend for the 120 hour schedule Weekly
3) Indicator Bollinger Band (period - 480, deviation - 2 HLCC / 4) - orange indicates a trend for 480 hours monthly schedule.
4) Simple Moving Average - SMA (4), applied to a close
5) Simple Moving Average - SMA (8), applied to a close
Here's how some of your schedule will look after all the indicators (for convenience, you can use the template for MT4 - you can download it at the end of this forex strategy):
Then determine whether the current price is the lower limit of parallel or poloss Bollinger Upper Bollinger. If the price of, for example, went to the upper range of explosives and jumped on them and this signal podtverdzhen intersection SMA (4) and SMA (8) - to handle the opening to sell the next hour candles.
If the price went down to the bottom of the bands explosive and rejected them and signal intersection podtverdzhen SMA (4) and SMA (8) - to reach an agreement for the purchase.
Stop loss placed above the maximum price for sales growth of BB. And below the minimum price growth from BB - to buy.
Closing the Deal on back 2 Simple Moving Average SMA or the opposite edge or center line stripes BB over time. Respectively for BB (24) - the purpose of the BB (120) BB (120) - is the opposite border or central line BB (480).
See the example below:
Bollinger can be used as an indicator of overbought / oversold. Some traders believe that this is a very effective tool for the determination of such states and the subsequent reversal. Other players are skeptical invention Bollinger, believing that it is difficult to determine the exact value of the price extremes. The fact is that when the price is losing momentum, which deviates from the advance of the range before it reaches extremes. So when the price reaches the upper or lower limit of the number is not necessary in order to achieve optimization. It simply means that the price has reached its specified range. Therefore, to determine overbought / oversold levels and points of trend reversal traders should be used along with other indicators of explosives.
