Investing in Currency Pairs: The Bollinger Bands and the Stochastic Oscillator

In earlier posts are the Bollinger band and the stochastic Oscillator used to analyze the market for entries. In this post is the Bollinger bands and the stochastic Oscillator illustrated.

The Bollinger bands and the stochastic Oscillator
The Bollinger bands consist of an upper band and a lower band; if the price line is outside the upper band is it an indication that the currency is oversold; if the price line is outside the lower band is it an indication that the currency pair is overbought.

The indicator cannot stand alone; as a second indicator is the stochastic Oscillator handy as it provides information about the market condition; is the market in an oversold or overbought condition.

The Bollinger bands
The image illustrates a price line and the Bollinger bands; the volatility in the market rise with the bands; wider bands are a market with more volatility and reverse.

If the price rise and the lower band starts to fall is it an indication that the price will start rise slower or fall; if the lower band starts to rise is it an indication that the price will start to rise faster.

The stochastic Oscillator
The image illustrates also the stochastic Oscillator; in this post is it the second indicator; it confirms the market condition the Bollinger bands provide.

How to use the two indicators 
The indicators are used to find the entry and exit point where the market is in an oversold or overbought condition; in my article “Trading Forex Online - How to Use Bolling Bands and Stochastic Oscillator As a Trading Strategy” are described how to trade with the two indicators.

In the image is an overbought and an oversold situation;  the two indicators give the traders an indication of which direction the market is moving in by looking at the tops and bottoms of the price line and the tops and bottoms of the Stochastic Oscillator.

In the overbought situation is the two highest price line tops in an uptrend and the two price line tops at the Stochastic Oscillator in a downtrend which indicates an exit point if the items are met in my article “Trading Forex Online - How to Use Bolling Bands and Stochastic Oscillator As a Trading Strategy” .

Reverse in the oversold situation is the two lowest price line tops in a downtrend and the two price line bottoms at the Stochastic Oscillator in an uptrend which indicates an entry point if the items are met in my article “Trading Forex Online - How to Use Bolling Bands and Stochastic Oscillator As a Trading Strategy”.

Please note that the past performance of any trading system or methodology is not necessarily indicative of future results which also is the case using the two described indicators.

Trading Forex Online: Is it a Good Idea Using a Demo Account?

Trading CFD in Forex, stocks, indices, ETFS and commodities can be beneficial and generate a larger profit but is also a market that generates losses.

As the market is a market with risk and the possibility losing money a demo account might be a good idea. But what are the advantages and disadvantages using a demo account?

A demo account is a part of the real trading account; it has the same instruments as a real account and the currency rates are the live currency rates. The advantages using a demo account is that there are no risks as the money are virtual money and the cost using the account is zero. The disadvantage is that the profit generated is also virtual money.

Another advantage is the possibility to try different trading strategies and learn how the platform works in connection to the plan; an example of a trading plan is the use of indicators such as the use of the Bollinger bands and the stochastic indicators; another example is the use of moving average and the MACD indicator.

One of the disadvantages is the risk; on the practice account is the risk zero and the money is virtual money and the money amount is large; in a real trading situation is the money real and the money amount limited; it is not possible to trade unlimited trades on the real account as it is on the practice account.

On the internet is a lot of articles about advantages and disadvantages using a demo account and they argue that it is a disadvantage using the practice account as the feeling using virtual money is not the same as using real money; this is true also in connection to the money limitation on the real account; but with the demo account is it possible to trade with lager amount and get the feeling of how it is to trade with larger amounts; the feeling of losing 1 dollar is not same as the feeling of losing 10 dollar on each pips.

Some trading platforms have a bonus or a gift card for signing up at their trading platform; if you have the interest trying different trading platforms with real money is the social trading platform eToro a possibility as they at the moment is giving away a free 20 dollar coupon; another trading platform is PLUS500 they give away a bonus for signing up; at the moment is the bonus 25 Euro.

Please notice that your capital may be at risk trading CFD.

Pennant Chart Pattern

In the post Chart Pattern: Pipe Top and Pipe Bottom is the pipe top and pipe bottom pattern illustrated; in the post is also links to other posts illustrating different chart patterns.

In this post is the pennant chart pattern illustrated; the pattern is a continuation pattern as it is a part of an already existing trend. The pennant pattern is a break in the already existing trend and looks like the triangle chart pattern.

Pennant Chart Pattern: downtrend
The image illustrates a downtrend; the trend is a pennant pattern and a breakout; it is often seen that the price returns to the breakout level and afterwards continues the trend.

Pennant Chart Pattern: Uptrend
The image illustrates an uptrend; in the trend is a pennant pattern and a breakout; it is also often seen that the price returns to the breakout level and afterwards continues the trend as described in the downtrend section.