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  1. #1
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    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:

    Attachment 4077

    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.

    Why?

    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:

    Attachment 4078

    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.

    Attachment 4080

    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:

    Attachment 4079

    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!

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  2. #11
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    Quote Originally Posted by SAJANFX View Post
    All the moving averages are identical in nature,And the main demerit of using them is they don't work in range markets. So i prefer MACD instead of moving averages. And most traders use Macd 2 lines and histogram to determine long term trend. You can see MACD is advanced version of moving average which you are using.
    MACD can say is the basis of the formula of the moving average indicator and the ebgitu we need to know is between the MACD and MA does have a way of doing the same analysis that would like to see the trend yet few have the MACD different analysis with the MACD which we will get to see prices that occurred at that time would have oversold or overbought

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  3. #12
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    Quote Originally Posted by jonking View Post
    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.
    Bollinger band is used by many successful trader because of its multiple functions which are more than the function which are of other moving averages. Value trading need deep analysis and also it is difficult to understand by a new trader. Value trading requires a successful trader who have good knowledge about trading. if the placing order is not perfect it will result in a loss so it has a difficult aspect to profit.

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  4. #13
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    Before several years I trade as a stock trader, in one brokerage and one whole weak all traders having negative trades. Then we develop the counter system. Our manager said to us , if you all buying and market going on the bearish side it means that you are consistently wrong. So he tell us, when you want to buy, you simple do the contrary and sell.

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  5. #14
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    Quote Originally Posted by Ema10 View Post
    Before several years I trade as a stock trader, in one brokerage and one whole weak all traders having negative trades. Then we develop the counter system. Our manager said to us , if you all buying and market going on the bearish side it means that you are consistently wrong. So he tell us, when you want to buy, you simple do the contrary and sell.
    so, you want to said that this is the simple way to place position without making an analysis and no need to analyze market? simple thought what position you want to take, then do the contrary. wow great thing to know that but sure this will not last long. though i'm new to forex trading, i never thought this way like you said. at first time i trade, i used a strategy that contained only indicator. my friend taught me that's why it is easier to understand.

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  6. #15
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    Roboforex forums is a great place to start Forex business with such informative and motivating threads. 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. Only good learning and sufficient practicing using a demo account can make us a good trader.

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  7. #16
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    For me , I have adopted some simple methods to assess the right value of the price. My major area of entry and exit remains the monthly and weekly pivots as they indicate the equilibrium for the week and the month respectively. If you take the example of USD/JPY - what happened currently is it broke down for last 2 days opening lot of shorts and when it came to monthly floor pivot it took huge support and we have got a daily pin indicating the huge surge in the price in the coming days.

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  8. #17
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    I think it is good analysis but not easy I was work with Bollinger but it is very difficult and really can not work this analysis alone but I can work with my sample strategy and Fibonacci is very powerful for me but will try to understand it to be expert trader and can earn a huge profit and understand a market move accurately

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  9. #18
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    Quote Originally Posted by momo23 View Post
    I think it is good analysis but not easy I was work with Bollinger but it is very difficult and really can not work this analysis alone but I can work with my sample strategy and Fibonacci is very powerful for me but will try to understand it to be expert trader and can earn a huge profit and understand a market move accurately
    There's nothing complex about Bollinger - it is based on MA as a benchmark (as a line in the middle), and deviations to both sides (lines above and below). Deviation is calculated based on current price action and it's ok, but boliinger channel is often built in a wrong way because value as a price of acceptance is not equal to MA in most cases.

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  10. #19
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    Surely it is quite tough to be able to research what actually using this heavy investigation especially for your starter similar to everyone along with it may need time for it to achieve as soon as that extends to this degree so as to understand why unique factor ahead of placing orders along with just what I find myself greatest agent will track your Bollinger group along with location be friends with the end result is a damage, actually their own very hard to be able to research.

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  11. #20
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    well the word value can mean different things to different people so what we all need to understand here is that we should never do without understanding the Forex market completely because if we do without understanding it then we may not be able to move ahead in this business.

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