Date: November 22, 2005 15:00GMT 10EST
Expert: Igor Belitsky, Currency Analyst of Fx Currency dealer.com
Topics:
- General Elliot Wave principle.
- Impulse Wave progress and Bollinger Bands rule.
- Correction patterns inside Bollinger Bands.
- Trading System example
Who is Igor Belitsky?
Igor Belitskyis a specialist in applied mathematics and trading systems development. Since 1996 he has been working as a forex market analyst in a Moscow based financial company.
Speech Material:
1. General Elliot Wave principle
According to Elliott Wave theory the market always moves in a sequence of 5 impulse waves in direction of the global trend and then in 3 corrective waves against trend. It is so called 5/3 pattern. In fact it might be more then 5 impulse waves but we always can subdivide them into classic 1-3-5 pattern.
2. Impulse Wave progress and Bollinger Bands rule
We will be using standard Bollinger Bands with period=22 and deviation=1.85. Our rule is very simple: In an up-trend, as long as price continuously touches upper Bollinger Band, impulse wave 3 or 5 is in progress. If the price action touches lower Bollinger Band then correction wave is in progress and next impulse wave to be followed soon. Opposite is true for a down-trend.
Below is example with GBP/USD 240 min chart. Next 1-3-5 impulse pattern started from 1.7900 level. Wave 3 has broken Lower Bollinger Band around 1.7550 and finally hit 1.7325. In order to profit on the wave 3 we had to sell GBP/USD on any bounce from the Lower Band.
Wave 4 was formed as symmetrical triangle pattern. Wave 5 started near Upper Bollinger Band and has broken Lower Band around 1.7370. Best tactics would be selling GBP/USD on small bounces from the Lower Band. Wave 5 total move was from 1.7500 down to 1.7100.
Click image to enlarge
3. Correction patterns inside Bollinger Bands
Corrective waves are often named as A-B-C. There are two standard types of corrective waves: Zig-Zag pattern and flat pattern. But in reality there is large quantity of corrective wave patterns as well as combinations of basic patterns.
Below is example of GBP/USD 240 min chart and composition of correction patterns. The correction phase started after wave 3. It lasted 3 weeks from 12-Aug to 31-Aug 2005 and consisted three patterns: Zig-Zag, Symmetrical Triangle and Expanding Triangle. Nearly one pattern per week.
Click image to enlarge
4. Trading System example
Below is sample automatic trading system. Buy signal is generated every time the price breaks Upper Bollinger Band. Sell signal is generated every time the price breaks Lowe Bollinger Band. This system generally produce more losses then profits if no additional rules is applied. We use it as example of implementation of our rule from section #2.
Click image to enlarge
My favorite technical indicators to trade Forex
Expert: Valeria Bednarik, Independent Contributor at FXstreet.com Independent Analyst Team
Moderator: Maud Gilson
Summary:
Join Valeria Bednarik for FXstreet..com's April Monthly Webinar. She will explore what she considers to be the most effective indicators for her style of trading:
Don't miss Valeria's complete review of these indicators and how she uses them as a part of her trading strategy.
Continue reading "My favorite technical indicators to trade Forex" »
Posted by FXstreet Team in Bollinger Bands, Market Viewpoint & Live Commentary, Moving Averages, RSI, Trading Knowledge & Education, Trading Strategies & Ideas | Permalink | Comments (0)