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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. #981
    Trader layigold's Avatar
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    What an highly loaded thread this is ! You have brought out information that is an eye opener to traders especially those who are committed to learning new thing each day passing by . The reason why traders take position is because he sight value somewhere else which could be above or below the current market price and that is determined after careful analysis of the market . Value itself is the rationale behind any position a trader assumes in the market which could be either going long or coming short

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  3. #982
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    Quote Originally Posted by layigold View Post
    What an highly loaded thread this is ! You have brought out information that is an eye opener to traders especially those who are committed to learning new thing each day passing by . The reason why traders take position is because he sight value somewhere else which could be above or below the current market price and that is determined after careful analysis of the market . Value itself is the rationale behind any position a trader assumes in the market which could be either going long or coming short
    Yes a good trader who wants to learn new things will surely find these kind of threads so useful that can help him trade better and better. A good trader always trades with a plan and use his strategies with patience to wait for the right time. That is true, experience is the main powerful of any professional trader behind all their good work.

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  4. #983
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    [lang=ar]In many situations for the trading i think that the ability fro making the decisions for the trading can be very easy and this may help us think of the tools offered by the market and the skills we have , in order to show us where and when we can enter and exite the trade we open from the value areas fro the trading[/lang]

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  5. #984
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    Quote Originally Posted by Bhave4U View Post
    Yes a good trader who wants to learn new things will surely find these kind of threads so useful that can help him trade better and better. A good trader always trades with a plan and use his strategies with patience to wait for the right time. That is true, experience is the main powerful of any professional trader behind all their good work.
    This is a useful thread which discuss about how we can find good value to trade any currency pair with high probability for profits. When we have a good strategy and support it with money management we get good value of our trading. So if you want to make huge amount then be patient and just follow the strategy along with the rules of money management.

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  6. #985
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    Quote Originally Posted by AmitChallenger View Post
    This is a useful thread which discuss about how we can find good value to trade any currency pair with high probability for profits. When we have a good strategy and support it with money management we get good value of our trading. So if you want to make huge amount then be patient and just follow the strategy along with the rules of money management.
    Always our all the strategies will perform good and more effective in trading because that will give us solid trade ideas for use , so we have to give importance to learning and for developing own ideas with supportive money and risk management so market will be profitable for us and we are in a better position to perform good .

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  7. #986
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    Quote Originally Posted by fahaddd View Post
    Always our all the strategies will perform good and more effective in trading because that will give us solid trade ideas for use , so we have to give importance to learning and for developing own ideas with supportive money and risk management so market will be profitable for us and we are in a better position to perform good .
    Strategies dont perform good or bad, it is the trader whose performance is good or bad depending upon his intensity of understanding. The prices of currencies are consistently moving, a trader needs to find good value where he can open good trades. Every trader needs to define the path that he would take to reach his destination by trading in Forex.

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