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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. #961
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    Quote Originally Posted by sameeh View Post
    i think we learn much by value trading and value trader is a good teacher and let the traders to benefit much from the informations that he post in the forum and so this helps many traders to know more and better about the market, the trader needs to read these informations many times to get good skills that will help him to make money from the market.
    Value trader is a good educator in the forum and his posts are interesting and useful. With his threads we mainly learn good methods of analysis and risk management. Profit and Loss are part of trading business and one must learn to live with it as a part of the trading life. The only simple way one can make a decent and reasonable prediction is by reading the charts and following the trend.

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  3. #962
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    You are right, i also think that the bollinger band should be used by all traders because its multiple functions which are more than the function of the moving average. Indeed valuable signals can be geberated when price moves above or below the center line of the bollinger band.

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  4. #963
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    Quote Originally Posted by komalam View Post
    Value trader is a good educator in the forum and his posts are interesting and useful. With his threads we mainly learn good methods of analysis and risk management. Profit and Loss are part of trading business and one must learn to live with it as a part of the trading life. The only simple way one can make a decent and reasonable prediction is by reading the charts and following the trend.
    Certainly and this thread about value trading, opened by Valuetrader teaches us to find good opportunities and make the most of it. For market moves it way and we can just follow it. Planning has to be considered both for increasing of profits and for lowering of losses as far as possible. There is no sort cut way of earning and we should gradually build our experience.

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  5. #964
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    Quote Originally Posted by MIGHTYRAMESH View Post
    Certainly and this thread about value trading, opened by Valuetrader teaches us to find good opportunities and make the most of it. For market moves it way and we can just follow it. Planning has to be considered both for increasing of profits and for lowering of losses as far as possible. There is no sort cut way of earning and we should gradually build our experience.
    Yes value trading is about using our experience to find proper opportunities in the market and making the most of it with discipline. For things to work smoothly and in our favor we should give enough dedication to our trading work. Experience teaches us all about proper trading we just have to correct our mistakes and try to develop psychologically too.

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  6. #965
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    Quote Originally Posted by MIGHTYRAMESH View Post
    Certainly and this thread about value trading, opened by Valuetrader teaches us to find good opportunities and make the most of it. For market moves it way and we can just follow it. Planning has to be considered both for increasing of profits and for lowering of losses as far as possible. There is no sort cut way of earning and we should gradually build our experience.
    These good threads in the forum gives you the knowledge to trade with confidence and avoid fear. When prices move really fast, or when you see losses, you get scared, and remember scared minds can never profit. The basic thing is to follow your strategy and along with it follow money management.

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  7. #966
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    Quote Originally Posted by kanoop View Post
    These good threads in the forum gives you the knowledge to trade with confidence and avoid fear. When prices move really fast, or when you see losses, you get scared, and remember scared minds can never profit. The basic thing is to follow your strategy and along with it follow money management.
    Indeed, fear will only happen to you in a sequential loss, and this is about personal experience. I have tried it myself repeatedly. So we must take full control of our emotions so that we do not expose ourselves to a ripple loss. Also the eagerness to learn will be a great reason to earn more profits than before.

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  8. #967
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    Quote Originally Posted by big.pharaoh View Post
    Indeed, fear will only happen to you in a sequential loss, and this is about personal experience. I have tried it myself repeatedly. So we must take full control of our emotions so that we do not expose ourselves to a ripple loss. Also the eagerness to learn will be a great reason to earn more profits than before.
    Unless we have confidence in our strategy and a good plan we will have fear, fear of facing loss, fear of losing our floating profits etc. Additionally a trader should be regularly informed and stay updated with information mainly belonging to the news, political and economic events. Everyone talks about consistent profits but it happens with consistency in performance. For new traders they first need to do a lot of work.

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  9. #968
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    Quote Originally Posted by big.pharaoh View Post
    Indeed, fear will only happen to you in a sequential loss, and this is about personal experience. I have tried it myself repeatedly. So we must take full control of our emotions so that we do not expose ourselves to a ripple loss. Also the eagerness to learn will be a great reason to earn more profits than before.
    Many times we cannot allow our profits to run, due to the fear that we will lose the pips earned already, so we need to trade with confidence. It is true that trading can give losses, but then we should not allow fear to interfere our trading. Our trading can carry some good value when it is done rationally with the best of our knowledge and skills.

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  10. #969
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    Quote Originally Posted by ANANDCHENNAI View Post
    Many times we cannot allow our profits to run, due to the fear that we will lose the pips earned already, so we need to trade with confidence. It is true that trading can give losses, but then we should not allow fear to interfere our trading. Our trading can carry some good value when it is done rationally with the best of our knowledge and skills.
    until our strategy is perfect and we wait to get success our profits will be maximize only when we complete our trade plan and wait for profits we should work hard to get good results if we never wait so in this way we lose more money and earn less profits we must have to plan according the market condition and situation .

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  11. #970
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    Quote Originally Posted by zahra2 View Post
    until our strategy is perfect and we wait to get success our profits will be maximize only when we complete our trade plan and wait for profits we should work hard to get good results if we never wait so in this way we lose more money and earn less profits we must have to plan according the market condition and situation .
    Mate, there must be flexibility with the market. You don't have to have a purchase deal. And the market is down and you're still related to the purchase! This is a big mistake in the majority of traders unfortunately. So I wanted to draw your attention to this.

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