Value trading
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Thread: Value trading

  1. #1

    Value trading

    Hi traders!

    Recently I’ve made webinar «Value trading» and in this thread I want to summarize ideas and concepts from presentation of this webinar.

    Let’s first think about this: every trader has his idea of value, some traders recognize it, some don’t, but we all have idea of value, if we haven’t had it, we would not be able to make a trade. If you go short, you should think that current prices are unfair and market will return to lower prices, if you go long, you also should be aware that value will be built somewhere higher than current price levels. If you sit on your hands, you should think that value is located somewhere near current prices – in other words, opportunity hasn’t appeared yet.

    Conventional and straightforward way for capturing value is to build moving average and derivative of moving average – Bollinger Bands indicator. Moving average is considered to represent value, borders of Bollinger Bands are considered to represent 1 standard deviation from average:


    One the picture you see note that if we take moving average as a substitute for value, we are risking to get many misleading signals.


    It occurs because of what I call «Inequality principle»

    It claims: «Different price levels are not equally important for the market». Do you feel what I’m talking about? Moving average can’t distinguish what price levels are more important for the market – it’s responsibility of a trader. Missing piece is market logic.

    Let me provide an example: if I decided to apply Bollinger Bands on GBPUSD on Monday, I was expected to sell:


    But period in the red circle was a final auction, overall trend was rising and market was no longer able to stay inside of a trading range. When market lacks selling liquidity, when nobody is going to sell, it start advertising higher searching for sellers. We often see that price is leaning to higher extremes and holds on higher prices.


    How do you think – if auction is in place, can we say that this area is equally important for the market as area from previous day? Obviously, it is not – if selling liquidity is not enough, market loses equilibrium and searches for new area where balance can be found. We may pay too much attention to this area, but Bollinger Bands respects is as any other areas – moving average in the center is slowly moving up.

    If we rely on idea of value from Bollinger Bands, we should sell because «value» is located below price. But in fact, proper calculation should like described below: value should not slowly move up, but it should make fast «gap» and it’s location is going to be somewhere in the center of congestion:


    As you see, our scenario completely changes when we look at the chart this way. We now should go long, because value is going up!
    So, there was rationale for long trade there, and I posted it in my journal.

    Good luck!

  2. #2
    Join Date
    Mar 2013
    Am fuly awear of the difficulties of life,so ill try to bounce back
    Although I would like to add that with proper in debt knowledge on the fundamental aspect of the currency pair we might have an edge in applying such indicators as the Bollinger band at an appropriate time and market condition.

  3. #3
    Really it is very difficult to analyse the things with such a deep analysis particularly for a newbie like me and it will take a lot of time to reach at this level to be able to understand this other aspect before placing orders and what I feel maximum trader will follow the Bollinger band and place order and the result will be a loss, really its very tough to analyse.

  4. #4
    Very true, i also think that the bollinger band should be used by all traders because of its multiple functions which are more than than the functions of other moving averages. Indeed valuable signals can be generated when price moves above or below the center line of the bollinger band.

  5. #5
    Trader ara's Avatar
    Join Date
    Dec 2013
    Well, I was using Bollinger Bands in each of my trade, but I have read many times to understand what you're trying to explain,

    But yes, I should learn to understand the market based on realistic conditions,
    And I found one important point for me to understand, this is a valuable point for me to understand the characteristics of market participants. :"When the market lacks liquidity selling, when nobody is going to sell, it start searching for higher advertising sellers. Often We see that price is leaning to higher extremes and holds on higher prices."

  6. #6
    the thing is that moving averages is itself a good indicator so if we try to replace it with any other indicator then we must change the other specifications also because the system should have the identical specifications which the value may not be having.

  7. #7
    Very real, i also think that the RSI and W%R group should be used by all investors because of its several features which are more than than the features of other shifting earnings. Indeed useful alerts can be produced when cost goes above or below the middle range of the RSI Group.

  8. #8
    Join Date
    Aug 2013
    This is very good thread which bears high level professional skills. Being a newbie I am trying to learn about it but I failed to learn many aspects of this lesson due to my improper knowledge and skill. Yet, I copied this topics in my computer (in my learning tools file) so that I can study it elaborately in demo.

  9. #9
    Definitely it's very difficult to studies what exactly using this type of heavy analysis in particular for the beginner like everyone as well as it may need time to achieve when it reaches this degree so that you can see why different factor prior to inserting orders as well as just what I feel maximum broker will follow the Bollinger music group as well as area get along with the result is a damage, truly their really hard to studies.

  10. #10
    Join Date
    Sep 2013
    Sab ke dilo mein
    Very good explanation of because of the fact we were in range trade use to apply MA or bollinger bands for values and they will sell at price touching the value but of the fact market show sum demand at low prices and need some quick momentum at the test and after the test price make higher highs and holding on to new high But only because of accumulation Those moves were not volatile but after the break of last high that breakout succeeded and price did not stop


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