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Forex for Begginers -Forex Articles from NewForex

Discussion in 'Forex Beginner Q&A' started by Anna Mon, May 25, 2016.

  1. Anna Mon

    Anna Mon New Member

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    Bollinger Bands

    Plenty of indicators are used by traders to analyse the market, however only a small part of them can help to estimate the volatility of market processes. The indicator «Bollinger bands» is considered as a secure instrument and is used in many graphic analitical programmes.

    The indicator «Bollinger bands» was created in the 20th century by the financial analyst, the president of the company Bollinger Capital Management John Bollinger. Of course this indicator can not foresee the direction of the future price movement but it is able to prompt the moment when a strong price movement is expected.

    The indicator consists of only three lines.The line in the middle is a simple moving average, as a rule with the period of 20. The upper and the lower line, they determine 2 bands of the indicator, have an equal distance from the middle one. This distance is proportional to the volume of the mean square price range, this indicator characterizes the market volatility. Consequently, we observe narrow lines during calm periods and when the market is unstable Bollinger bands widen.

    There are drastic price changes when the bands meet during small and quite longstanding fluctuations of market prices. During this period the indicator will not prompt the direction of the future movement. Traders can outguess this direction by means of other instruments of technical analysis. If the price goes beyond one of the indicator borders, it might be a signal of the beginning of a new trend or the continuation of the previous trend after the correction.

    Fairly often the price forming a high or a low beyond the indicator lines returns inside the Bollinger bands. In this case the first target of the trader should be an average line.In the given picture there are a lot of examples. Thus, market extremums, which usually occur beyond Bollinger bands, indicate the change of market tendencies and the lines of the indicator represent strong levels of support/resistance and price consolidation. Due to this peculiarity of the indicator it can be a base for a really working trading system.

    The efficiency of Bollinger bands becomes apparent together with other indicators and if they confirm signals of turnback or clearance, the probability that an open position will be profitable sharply increases. It is worth combining Bollinger bands with indicators of volume «MACD» or «Stochastic».

    However, it is worth remembering that work with Bollinger bands requires from the trader sufficient experience and necessary skills acquiring which it will be possible to estimate the placement of forces in the market and take proactive decisions about the trades.
     
  2. Anna Mon

    Anna Mon New Member

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    Can robots trade in Forex? (Part 1)
    The question might seem controversial but if you study it in detail then you can give a positive answer and confirm that yes robots can trade in Forex market and bring profit to a trader.

    Why do we have hesitations then? Although there might be no hesitations but plenty of questions regarding the usage of advisors. Advisors have gained in quite widespread popularity. A lot of traders especially beginners keep a close watch on this trend in trading.

    And here it is worth thinking about “why it happens that 95% of beginners in trading as a rule lose”... An addiction to easy prey is typical of many people and the opportunity to get it by means of an advisor attracts a considerable amount of traders. People usually download from the Internet robot-champions or pay for super lucrative personal funds, however, in most cases it does not bring handsome profit.

    In order to assure yourself of the hopelessness of these operations, a trader should ask himself or herself a simple question and find an answer on it. How long is the trader going to use a robot and what profit should it bring? If a trader is determined to work with a robot on a permanent basis, then it may be firmly said that this path leads to nowhere. One may get profit with the help of an advisor but it probably won’t last as long as it is wished by a trader. For instance, an advisor brings profit for two weeks, maybe two months but then the systems will definitely glitch and nobody know when it happens.

    And nobody knows how hurtful it may be for the deposit. In this case a trader has only one way out — to trust the robot and become an onlooker who tries to predict if it will manage to find the right way or not. Thus, it might occur that instead of increasing your funds, the advisor may turn into a mechanism of destruction. Finally, it should be remembered that advisors are made by people and unfortunately people make mistakes.

    Quite often people have a little bit wrong attitude to these programmes, especially beginners. It resembles the perception of information on the radio or TV by elderly people who take everything at its face value. This gullibility is sometimes used by advertisers with sticky fingers who distribute information about “magic pills” treating all deseases. The same happens with robots. Some believe that the fact of using it in the terminal says that it was developed by professionals and is a high-quality product. However, in reality it does not say anything. Nowadays almost everyone, who understands programming at least a bit, can create an advisor. That’s why it is important to understand who made this advisor. It might be a good trader but a bad programmer or vice versa. A great piece of luck is to meet a good trader and programmer in the one skin.
     
  3. Anna Mon

    Anna Mon New Member

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    Can robots trade in Forex? (Part 2)


    It is important to understand that buying an outside product a trader can not always rely on the fact that a software developer will come to assistance if an advisor starts glitching in trading. What might be the reasons of glitches? There may be plenty of causes for such kind behaviour of an advisor. In particular, it is wellknown that before becoming available for traders, every advisor passes a test on the quote history. But on the history one can see the behaviour of this or that pair in the past and how the advisor was working, however nobody can say how it will work in the future if the behaviour of the currency pair changes. It is very complicated for the developer to take into account all the nuances the appearance which can not be excluded. In this case you can face with a situation when an advisor works incorrectly with the trader’s deposit.

    Usually the developer adjusts the work of an advisor to the history of quotes which is available. Sometimes it happens without relying on any rules just by by trial and error. But the quality of such kind of adjustment is unknown even for a developer. Quite often a certain part from the history of the graphical layout is chosen and the work of the advisor is attached to it. But if you study the history, it will be very difficult to find identical parts of the graph, thus it becomes clear that a test activity takes into consideration particular cases which took place in the past.

    However, when a beginner in trading gets an advisor he or she hardly ever thinks about it because this purchase seems a complete solution of all financial issues and hopefully forever.

    And at this moment there comes up a strategy question which a lot of traders prefer not to think about and do everything to avoid this awkward question. Although having a creative approach to it and systematizing your work with the installed advisors tracking down on time those which glitch, loading those which work accurately and taking out of service advisors which do not work, the result will be much better. It is worth highlighting once more that it is not easy to tackle this problem, you should learn to think and study a lot.

    Another efficient way of applying an advisor is the automation of the decision-making according to the personal strategy. This way of automation is considered as the most rational and correct one from the point of view of the closing gain. In this case a trader relies on the efficiently working strategy with an understandable algorithm of work which is fully or partially realised with the help of an advisor. An undeniable advantage of this decision regarding the automation of trading is that a trader completely realizes the working system of an advisor and can make alterations in its work at any time which is hardly possible with a purchased advisor as in most cases it is given as a black box.

    Thus, making a conclusion to the conversation about advisors we would like to remind once more that money doesn’t grow on trees. Everone who wants to make money and increase the capital in Forex market should concentrate on permanent study and serious patient labour.
     
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