The Bollinger Band squeeze is a relatively new forex trading strategy that focuses on defining breakout patterns during low volatility situations. A commonly used technical indicator, Bollinger Bands were first developed by John Bollinger, as a volatility and directional calculator. By specifying the degree of angle or momentum on an uptrend or downtrend, the user can focus on specific entry or exit points. Bollinger Bands in their traditional definition, utilise the standard deviation of price points over a given range. Through the specification of both high and low points on a given direction, the trader can then ascertain as to the volatility, or percentage probability of a pricing change / movement.
Alpha, Beta , Standard Deviation, Sharpe Ratio and R-Squared are five distinctive technical risk ratios used by professional traders to determine the effective level of risk adjusted return in a portfolio. Their application has become increasingly important over the last few years due to the volatility in the markets and the shift towards tighter risk management controls. To truly calculate the specific return of a portfolio, it is key to define the market movements, and how much risk is attributed to performance. Each technical ratio can be used to effectively analyse the specific segments and holdings within a portfolio. [Read more...]
Correlation and Co integration are two terms which define the movements of pricing over a specific time period or scale. Incorrectly defined in many cases due to their complexity, mathematicians have long used both in defining the degree of regression or relationship between variables and data sets. [Read more...]
The Elliott Wave theory is trend based technical system that focuses on forecasting pricing movements based on certain conditions or parameters being met. Designed by Ralph Elliott in the late 1920s, the concept was first adopted as a result of trend and pattern based formulation. Complex in its makeup, the technical indicator has attracted both institutional and retail traders, due to its accuracy and ability to adapt to different forms of data and trends. [Read more...]
Moving Averages are an important technical tool that determines the directional strength of a trend. Commonly overlayed on price, bar or candlestick charts, Moving Averages (MAs) focus on the average price of a data set based on a predefined time range. To calculate the moving average of a trend, one must firstly define the data set. Outlined below is an example of how to calculate a moving average: [Read more...]
Traders have been very cautious to adopt the martingale strategy due to its complexity and high risk nature. The martingale strategy was first adopted as a gambling technique which focused on the high probability of doubling up. Adopted in France in the 18th Century, the method focused on averaging down and increasing an exposure to a position during a time of weakness or loss. Based on probability of 1, the person using this technique will win if he/ she has an infinite cash source and is able to double his/her position after every loss. During the early 60’s, casinos enforced table limit rules to stop gamblers using the martingale style of strategy. [Read more...]