USING BOLLINGER BANDS FOR FOREX TRADING

USING BOLLINGER BANDS FOR FOREX TRADING
By Teresa Burnett
The technical indicator known as Bollinger Bands can be an effective tool in any currency trading strategy. Bollinger Bands are a standard deviation plotted around a moving average. Illustration 1 shows Bollinger Bands with the default settings of two standard deviations plotted above and below a 20 period simple moving average.























Illustration 1
Numerous systems abound for interpreting the width of the Bollinger Bands (the distance between the upper and lower bands) to predict price movement. I would like to share a unique interpretation of the bands that works particularly well with trading currencies and that interpretation is to evaluate not the width of the bands but rather the slope.

When the slope of the bands is minimal, in other words, when the upper and lower bands flatten it predicts a reversal as price touches and retreats from the flat band. The relative steepness or flatness of a band can be seen visually and does not require a complicated formula to assess.


















Illustration 2
Illustration 2 shows a weekly chart of the EUR/USD pair


















from May through December, 2006. Note that in October the lower Bollinger Band has flattened. Price repeatedly touched this flat lower band over a two week period near the price of 1.2500 and then climbed steadily to the current early December, 2006 highs of 1.3300.
The upper Bollinger Band flattened on the USD/CHF weekly chart during September and October, 2006 which predicted a powerful movement away from the upper band near the price of 1.2700 down to the lower band near the price of 1.2150 as seen in Illustration 3. At this writing, price has declined further to 1.1910.
Illustration 3

There is something for every currency trader using this technique from the scalper seeking to capture numerous 5 pip moves in a day to the position trader playing for several hundred pip moves over the course of several weeks. In the next section we will examine strategies for timing currency trade entries using Bollinger Bands in various time frames.

I will stop here. Watch out for part 2 of this article

High & Low 8 Hours (GBP/JPY) By Nicotina

Forex System By Nicotina from Portugal:

Find the maximum(High price) and the minimum (Low price) between 18:00GTM and 2:00GTM and then put a buy stop order with maximum/high and a sell stop order with the minimum /low.
TP 100 SL 50 If close in S/L open again the stop orders. Close the day if close in S/L for the second time. Close the day if close in TP. Do not change the SL and the TP Closes orders manually only at the end of the day (18:00 GTM).P.S- Sorry my english

Fozzy Method of Trading

After months of testing and swapping from system to system I've come back to this indicator and in hindsight I should have stuck with it from the start as it seems to work for my style of trading.Anyway, on with the detail.

I only trade daily charts and only EUR/USD, GBP/USD, USD/JPY and USD/CHF. Why these? Primarily because these are the only ones I have backtested and have been trading for the last 3 months. I also tend not to trade Monday mornings (Australian time) as prices sometimes gap over the weekend. However, this is discretionary.On each chart I have an 8 period RSI. I also have an 8 period MA of the RSI and Bollinger Bands with a 20 period setting, also on the RSI.

Long Entries: RSI must be below the middle Bollinger Band. Enter long on the open of the next bar after the MA has crossed above the RSI.

Short entries: RSI must be above the middle Bollinger Band. Enter when MA crosses below RSI.

Stop loss is the low/high of the previous bar. I move S/L to break even if the price moves greater than 40 pips in my direction. After the initial 40 pip move I use a trailing stop for exits (25 pips).I only look at the charts once per day, just before 0.00 GMT. This way I know which pairs are approaching my set-up. I then place trades if my criteria has been met. That's it. A simple system that seems to work for me. Looking at charts all day does not suit me as I have a real job and I'm not in a convenient timezone. 10 minutes a day is all I need.
This method provides a limited number of trades but the trades can last anywhere from 1 day to numerous days. There can also be days on end with no trades. I have found that the secret is have patience. I also have come to believe those who say longer timeframes are easier, especially for newbies.I'm not going to say this system will always work but for me it has generated over 400 pips in September already. Please try this out on demos before putting your hard-earned into it. Just because it is working for me (at the moment) does not mean it will suit everyone.

Fozzy

Why Trade Foreign Currency (FOREX)

Why Trade Foreign Currencies (Forex)?
Elekofehinti Olusola
http://forexprofits-makemoneytradingforex.blogspot.com/
The Foreign Exchange market, also referred to as the "FOREX" or "Forex" or "Retail forex" or FX or "Spot FX" or just "Spot" is the largest financial market in the world, with a volume of about $2 trillion a day. If you compare that to the $25 billion a day volume that the New York Stock Exchange trades, you can easily see how enormous the Foreign Exchange really is. It actually equates to more than three times the total amount of the stocks and futures markets combined! Forex rocks! What is traded on the Foreign Exchange? The simple answer is money. Forex trading is the simultaneous buying of one currency and the selling of another. Currencies are traded through a broker or dealer, and are traded in pairs; for example the Euro dollar and the US dollar (EUR/USD) or the British pound and the Japanese Yen (GBP/JPY).
There are many benefits and advantages to trading Forex. Here are just a few reasons why so many people are choosing this market:
No commissions. No clearing fees, no exchange fees, no government fees, no brokerage fees. Brokers are compensated for their services through something called the bid-ask spread. No middlemen. Spot currency trading eliminates the middlemen, and allows you to trade directly with the market responsible for the pricing on a particular currency pair.
No fixed lot size. In the futures markets, lot or contract sizes are determined by the exchanges. A standard-size contract for silver futures is 5000 ounces. In spot Forex, you determine your own lot size. This allows traders to participate with accounts as small as $250. Low transaction costs. The retail transaction cost (the bid/ask spread) is typically less than 0.1 percent under normal market conditions. At larger dealers, the spread could be as low as .07 percent. Of course this depends on your leverage and all will be explained later. A 24-hour market. There is no waiting for the opening bell - from Sunday evening to Friday afternoon EST, the Forex market never sleeps.
This is awesome for those who want to trade on a part-time basis, because you can choose when you want to trade--morning, noon or night. No one can corner the market. The foreign exchange market is so huge and has so many participants that no single entity (not even a central bank) can control the market price for an extended period of time.
Leverage. In Forex trading, a small margin deposit can control a much larger total contract value. Leverage gives the trader the ability to make nice profits, and at the same time keep risk capital to a minimum. For example, Forex brokers offer 200 to 1 leverage, which means that a $50 dollar margin deposit would enable a trader to buy or sell $10,000 worth of currencies. Similarly, with $500 dollars, one could trade with $100,000 dollars and so on. But leverage is a double-edged sword. Without proper risk management, this high degree of leverage can lead to large losses as well as gains.
High Liquidity. Because the Forex Market is so enormous, it is also extremely liquid. This means that under normal market conditions, with a click of a mouse you can instantaneously buy and sell at will. You are never "stuck" in a trade. You can even set your online trading platform to automatically close your position at your desired profit level (a limit order), and/or close a trade if a trade is going against you (a stop loss order).
Free Demo Accounts, News, Charts, and Analysis. Most online Forex brokers offer 'demo' accounts to practice trading, along with breaking Forex news and charting services. All free! These are very valuable resources for poor and SMART traders who would like to hone their trading skills with 'play' money before opening a live trading account and risking real money.
Mini and Micro Trading: You would think that getting started as a currency trader would cost a ton of money. The fact is, compared to trading stocks, options or futures, it doesn't. Online Forex brokers offer "mini" and micro trading accounts, some with a minimum account deposit of $300 or less. Now we're not saying you should open an account with the bare minimum but it does makes Forex much more accessible to the average (poorer) individual who doesn't have a lot of start-up trading capital.

No Middlemen Centralized exchanges provide many advantages to the trader. However, one of the problems with any centralized exchange is the involvement of middlemen. Any party located in between the trader and the buyer or seller of the security or instrument traded will cost them money. The cost can be either in time or in fees. Spot currency trading does away with the middlemen and allows clients to interact directly with the market-maker responsible for the pricing on a particular currency pair. Forex traders get quicker access and cheaper costs. Buy/Sell programs do not control the market How many times have you heard that "fund A" was selling "X" or buying "Z"? Rumor had it that the funds were taking profits because of the end of the financial year or because today is "triple witching day", all as an explanation of why this stock is up or the market in general is down or positive on the session.
The stock market is very susceptible to large fund buying and selling. In spot trading, the liquidity of the Forex market makes the likelihood of any one fund or bank to control a particular currency very slim. Banks, hedge funds, governments, retail currency conversion houses and large net-worth individuals are just some of the participants in the spot currency markets where the liquidity is unprecedented. Analysts and brokerage firms are less likely to influence the market Have you watched TV lately? Heard about a certain Internet stock and an analyst of a prestigious brokerage firm accused of keeping its recommendations, such as "buy" when the stock was rapidly declining? It is the nature of these relationships. No matter what the government does to step in and discourage this type of activity, we have not heard the last of it. IPO's are big business for both the companies going public and the brokerage houses. Relationships are mutually beneficial and analysts work for the brokerage houses that need the companies as clients. That catch-22 will never disappear.
Foreign exchange, as the prime market, generates billions in revenue for the world's banks and is a necessity of the global markets. Analysts in foreign exchange don't drive the deal flow, they just analyze the forex market. 8,000 stocks versus 4 major currency pairs There are approximately 4,500 stocks listed on the New York Stock exchange. Another 3,500 are listed on the NASDAQ. Which one will you trade? Got the time to stay on top of so many companies? In spot currency trading, there are dozens of currencies traded, but the majority of the market trades the 4 major pairs. Aren t four pairs much easier to keep an eye on than thousands of stocks? I d say so.
I hope this article has been of help to you
You can read more about forex and how profit from this largest financial market in the world by visiting
http://forexprofits-makemoneytradingforex.blogspot.com/
http://forexprofits-makemoneytradingforex.blogspot.com/
To your Success

Elekofehinti Sola

JAPANESE CANDLESTICKS

JAPANESE CANDLESTICK
BY ELEKOFEHINTI OLUSOLA

The Candlesticks techniques we use today originated in the style of technical charting used by the Japanese for over 100 years before the West developed the bar and point and figure systems. In the 1700s a Japanese man named Homma, a trader in the futures market, discovered that, although there was a link between price and the supply and demand of rice, the markets were strongly influenced by the emotions of the traders. He understood that when emotions played into the equation a vast difference between the value and the price of rice occurred. This difference between the value and the price is as applicable to stocks today as it was to rice in Japan centuries ago. The principles established by Homma are the basis for the candlestick chart analysis, which is used to measure market emotions towards a stock.

Candlesticks Components

When first looking at a candlestick chart, the student of the more common bar charts may be confused; however, just like a bar chart, the daily candlestick line contains the market's open, high, low and close of a specific day. Now this is where the system takes on a whole new look: the candlestick has a wide part, which is called the "real body". This real body represents the range between the open and close of that day's trading. When the real body is filled in or black, it means the close was lower than the open. If the real body is empty, it means the opposite: the close was higher than the open. Just above and below the real body are the "shadows". Chartists have always thought of these as the wicks of the candle, and it is the shadows that show the high and low prices of that day's trading. If the upper shadow on the filled-in body is short, it indicates that the open that day was closer to the high of the day. And a short upper shadow on a white or unfilled body dictates that the close was near the high. The relationship between the day's open, high, low, and close determine the look of the daily candlestick. Real bodies can be either long or short and either black or white. Shadows can also be either long or short. Comparing Candlestick to Bar ChartsA big difference between the bar charts common in North America and the Japanese candlestick line is the relationship between opening and closing prices. We place more emphasis on the progression of today's closing price from yesterday's close. In Japan, chartists are more interested in the relationship between the closing price and the opening price of the same trading day. In the two charts below we are showing the exact same daily charts of USDCAD to illustrate the difference between the bar chart and the candlestick chart. In both charts you can see the overall trend of the stock price; however, you can see how much easier looking at the change in body color of the candlestick chart is for interpreting the day-to-day sentiment.

Basic Candlestick PatternsIn the chart below USDCAD 15 minutes, you see the 'long black body', or 'long black line'. The long black line represents a bullish period in the marketplace. During the trading session, the price of the currency was up and down in a wide range and it opened near the low and closed near the high of the day.By representing a bearish period, the 'long white body', or 'long white line'-(in the USDCAD chart below, the white is actually gray because of the white background) is the exact opposite of the long black line. Prices were all over the map during the day, but the currency opened near the high of the day and closed near the low.'Spinning tops' are very small bodies and can be either black or white. This pattern shows a very tight trading range between the open and the close, and it is considered somewhat neutral. The pattern indicates that there is indecision between buyers and sellers.'Doji lines' illustrate periods in which the opening and closing prices for the period are very close or exactly the same. You will also notice that, when you start to look deep into candlestick patterns, the length of the shadows can vary. Doji suggest indecision in the market sentiment. The battle between buyers and sellers is nil.

Watch out for the concluding part of this article in the next post

To your success
Elekofehinti Olusola

JAPANESE CANDLESTICKS

JAPANESE CANDLESTICK
BY ELEKOFEHINTI OLUSOLA

The Candlesticks techniques we use today originated in the style of technical charting used by the Japanese for over 100 years before the West developed the bar and point and figure systems. In the 1700s a Japanese man named Homma, a trader in the futures market, discovered that, although there was a link between price and the supply and demand of rice, the markets were strongly influenced by the emotions of the traders. He understood that when emotions played into the equation a vast difference between the value and the price of rice occurred. This difference between the value and the price is as applicable to stocks today as it was to rice in Japan centuries ago. The principles established by Homma are the basis for the candlestick chart analysis, which is used to measure market emotions towards a stock.

Candlesticks Components

When first looking at a candlestick chart, the student of the more common bar charts may be confused; however, just like a bar chart, the daily candlestick line contains the market's open, high, low and close of a specific day. Now this is where the system takes on a whole new look: the candlestick has a wide part, which is called the "real body". This real body represents the range between the open and close of that day's trading. When the real body is filled in or black, it means the close was lower than the open. If the real body is empty, it means the opposite: the close was higher than the open. Just above and below the real body are the "shadows". Chartists have always thought of these as the wicks of the candle, and it is the shadows that show the high and low prices of that day's trading. If the upper shadow on the filled-in body is short, it indicates that the open that day was closer to the high of the day. And a short upper shadow on a white or unfilled body dictates that the close was near the high. The relationship between the day's open, high, low, and close determine the look of the daily candlestick. Real bodies can be either long or short and either black or white. Shadows can also be either long or short. Comparing Candlestick to Bar ChartsA big difference between the bar charts common in North America and the Japanese candlestick line is the relationship between opening and closing prices. We place more emphasis on the progression of today's closing price from yesterday's close. In Japan, chartists are more interested in the relationship between the closing price and the opening price of the same trading day. In the two charts below we are showing the exact same daily charts of IBM to illustrate the difference between the bar chart and the candlestick chart. In both charts you can see the overall trend of the currency price; however, you can see how much easier looking at the change in body color of the candlestick chart is for interpreting the day-to-day sentiment.

Basic Candlestick PatternsIn the chart below USDCAD 15 minutes, you see the 'long black body', or 'long black line'. The long black line represents a bullish period in the marketplace. During the trading session, the price of the currency was up and down in a wide range and it opened near the low and closed near the high of the day.By representing a bearish period, the 'long white body', or 'long white line'-(in the USDCAD chart below, the white is actually gray because of the white background) is the exact opposite of the long black line. Prices were all over the map during the day, but the currency opened near the high of the day and closed near the low.'Spinning tops' are very small bodies and can be either black or white. This pattern shows a very tight trading range between the open and the close, and it is considered somewhat neutral. The pattern indicates that there is indecision between buyers and sellers.'Doji lines' illustrate periods in which the opening and closing prices for the period are very close or exactly the same. You will also notice that, when you start to look deep into candlestick patterns, the length of the shadows can vary. Doji suggest indecision in the market sentiment. The battle between buyers and sellers is nil.

Watch out for concluding part in the next post