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Thread: Value trading

  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. #21
    Trader lawners1791's Avatar
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    yes i guess the work with the bb strategics also to requires the use of the different confirmation with the use of the different system. that is i guess to call with the better decision on putting risks with witht he logics of request to project to complete the target with the strategics terms with the running manages of the monitoring of improving orders.

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  3. #22
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    Very true,This is very good thread which bears high level professional skills.

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  4. #23
    Trader dkarev's Avatar
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    in this business we need to be highly calculative when trading,the more we calculate our trading account,the better chance we stand not to hit marginal call when trading,though in trading we are bound to lose atimes but when we are calculative we will understand the number of trading position needed to be open when trading

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  5. #24
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    Quote Originally Posted by dkarev View Post
    in this business we need to be highly calculative when trading,the more we calculate our trading account,the better chance we stand not to hit marginal call when trading,though in trading we are bound to lose atimes but when we are calculative we will understand the number of trading position needed to be open when trading
    really need it in this trade we are trying to do this trade better in Its management risk exposure by arranging trade volume as possible because we might not be in this trade are forced to deal continuously with a big risk because we have to manage risk and keep your account immediately and stay away from the opportunity to experience a margin call in our trade

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  6. #25
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    yes i assume the work with the pellet scientific discipline conjointly to needs the employment of the various confirmation with the employment of the various system. that's i assume to decision with the higher call on putt risks with witht he logics of request to project to complete the target with the scientific discipline terms with the running manages of the watching of rising orders.

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  7. #26
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    deeply analysing the things particularly for a beginner like me is really atough one. to understand the market trend properly and perticularly will take a lot of time for us. though i use to apply MA for values and it will sell at price touching the value but the matter is that market shows sum demand at low prices. it's very difficult to study exactly using this type of heavy analysis.

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  8. #27
    Trader layigold's Avatar
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    Bollinger band is a very good technical indicator hut it can not be depended on alone and in fact, most of the technical indicators are such that require one combine them with some other indicators to take decision on trade. I use Bollinger band to trade breakout matket

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  9. #28
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    Definitely it's very complex to research what exactly using this kind of large research in particular for the starter like everyone as well as it may need a probability to accomplish when it gets to this level so that you can see why different aspect before placing purchases as well as just what I experience highest possible possible agent will adhere to the Bollinger songs band as well as place get along with the outcome is a harm, truly their really complicated to research.

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  10. #29
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    it is complicated for me, when i see a different analysis if we use moving average and bollingerbands, one show the price move down and the other show it goes up, how to handle it, or do we combine them until get the clear signals for making decision ?

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  11. #30
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    I'm using price action by support and resistance. I also use trend lines on candle pattern and moving average. I prefer choose them caused it easy for me to see the market clearly. I was a trend follower trader but sometimes take the breakout trend (trend change) especially supported by there is high impact news being released. Trend lines are also use. I think you will be able to identify the market movement properly by using these indicators. Thus your trading will be more profitable in future. So be careful to use this helping instrument.

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