hello all. A huge thank you to everyone in this forum who generously helped me with my previous question. I'm overwhelmed by the incredible responses. Your support and insights exceeded my expectations. Grateful to be part of this community! So, I am gonna ask other question What are some of your favorite technical indicators or tools for analyzing the EURUSD? How do you use them effectively?
My favorite - the invisible one. But I do add the zig-zag line to improve clarity. I remembered I had hundreds of indicators on the chart. It was so plentiful that I could hardly see the candlesticks. Happy Indicator hunting.
But of course, the rub is in HOW you use them. I don't use MACD and Bollinger bands myself, but having just skimmed a couple of books on trading just for fun, and comparing the strategies they suggested with my own, I've seen how Bollinger bands CAN be put to pretty good use. Yeah... I just went back and searched my entries, and here is the one I was thinking of... PURE FADE This strategy, which Prescott recommends be used exclusively with one-hour charts, seems to be pretty solid as far as I'm concerned. However, it's kind of its own animal and is not well suited for a one-to-one comparison with Numerical Price Prediction (NPP). Also, it looked to me like this setup does not offer a whole lot of trade opportunities. Consequently, rather than summarize the approach here, I decided to simply look to see if a description already existed online, which it does. So, anyone who wishes to see detailed instructions on how to execute this type of trade (which uses three Bollinger bands and the RSI) can navigate to the following URL... https://forexar.yolasite.com/index/the-pure-fade-trade Here is the other... TURN TO TREND According to Prescott, this last setup is designed to find turns in price action in the context of the overarching framework of trading with the trend. It uses two time frames, a moving average and two sets of Bollinger bands as tools of entry. First of all, the 20-period SMA is dropped on daily charts and used to determine if a given pair is in a trend. Bollinger bands are then plotted on hourly charts at both two and three standard deviations to create channels for pinpointing entries. After consulting its daily chart to determine if a particular pair is trending in a given direction, traders then move to its hourly chart to see where candlesticks are painting in relation to the two sets of Bollinger bands. If the daily chart evidences a bullish trend, but the rate is trading between the lower bands of the two indicators loaded on the hourly chart, it tells traders to stay away (given the present downward momentum). However, once price trades above the lower Bollinger band at two standard deviations, it is time to enter the market. A stop loss is set at the swing low minus five points. The target for the first half of the position is set at half the amount of risk. If this target is hit, the stop is moved to breakeven and the target for the second half of the position is set at the upper Bollinger band at three standard deviations. In other words, profit is taken as soon as price crosses to the outside (to the exterior) above the channel formed by the two upper Bollinger bands. (Obviously, the opposite is done when the daily chart displays a bearish trend.)
Absolutely agree. How you interpret and use an indicator directly determines how useful the indicator is going to be. Bollinger Bands is actually a really powerful indicator but one has to be really familiar with the indicator, its strength and its limitations in order to maximize its full potential usefulness.
Trading does not have to be complicated. Indicators for all purposes is useless since, it lags the price of the stock, and what runs the indicators is the stock price. I would use trend lines, support and resistance zones, candlesticks, swing highs and swing lows. You want to use these in a combination and where there is confluence of these things plus add price action and you have a very simple but, potent trading approach. Of course, you need to use stop losses when getting into trades, to minimize losses when a trade does not work out. Use what works for your trading and backtest it. Do not rely on anyone's say so. Just my 2 cents and I am sure, there are going to be others who disagree.