2Bull Forex Blog

Below you will find 10 questions if you can answer them all correctly you have had good forex education and could join the elite 5% of traders who make big profits – get any of them wrong and you need to continue your forex education! So let’s look at the questions below.

1. Forex day trading is a good way to make money

The answer is no – your 100% guaranteed to lose as all short term volatility is random you can’t get the odds in your favour and you will lose.

2. Forex markets move to scientific theory

The answer is no of course they don’t. If they did then we would all know the answer in advance and there would be no market. A market price moves by its very nature due to uncertainty.

3. Buying Dips To Moving Averages Is a Great Strategy

Buying dips to a moving average is a great way to lose money – it’s a lagging not a leading indicator and should never be used in isolation

4. Everything about trading is learned anyone can do it

The correct answer is yes. Anyone can learn to trade if they get the right Forex education and learn the correct knowledge and skills to succeed. Of course most traders fail to do this and lose.

5. Simple Forex Trading Systems Work Better Than Complicated Ones

As a general rule the correct answer is yes, as they are more robust in the face of brutal ever changing market conditions. If a system is to complicated it collapses, as there are too many elements to break.

Most of the world’s top trading systems are simple.

6. I Don’t Need To Work Hard To Make a Lot Of Money

The correct answer is yes. You don’t need to work hard, as there is no correlation between the effort you put in and the reward you get out of forex trading.

You only get paid for being right, nothing else and the amount of effort you make does NOT make any difference to your currency trading success.

The trick is to work smart not hard.

7. Buy low sell high is the best way to make money

The correct answer is no. The best way to make money is not to try and buy lows but buy new highs. The fact is the biggest market moves tend to start form new market HIGHS Not market lows.

If you want to catch the big trends, then aim for these breaks at new market highs and trade them.

8. The more news sources I consult the better

The correct answer is no. News sources don’t help you make money, in fact they normally help you lose – as you run with the pack and let your emotions get involved.

News is stories and the people giving them are not traders follow the news and you will lose.

9. I have a system that works I Don’t need any more education

The correct answer is yes. Many traders think they have to keep learning for ever but if you have a system that works you don’t need to spend any more time studying you can simply spend your time applying it and making money.

10. My risk per trade is my expected profit divided by my stop

The answer is obviously no as this is simply an opinion you hold and has no relation to what the odds of success are. Many people say its high return low risk based upon their opinion and that’s not the way to trade forex.

If you answered the above 10 questions correctly, you are on your way to being a winner – if you got any wrong, then its time to keep studying and improving your forex education.

Bollinger bands are a great trading indicator to use in your forex technical analysis and can help you in three ways to gain greater accuracy in your trading signals and increase profit potential. Let’s look at Bollinger bands in greater detail.

If you want to succeed in forex trading you need to be able to deal with volatility and the Bollinger band is an essential indicator to help you deal with it, turn it to your advantage and gain greater accuracy with your trading signals.

Bollinger bands will help you achieve the following in your forex trading strategy:

1. Help spot trend reversals;
2. Spot trend changes;
3. Time trading signals with greater accuracy.

Bollinger Bands Defined

Bollinger bands are volatility bands drawn around a simple moving average in the center giving you a total of three lines. Two outer bands and the inner moving average. The outer bands represent the standard deviation of price from the average mid band.

Moving averages are used to identify the underlying trend.

The distance between upper and lower Bollinger bands gives you the volatility of the market traded.
The greater the distance the upper and lower bands are the more volatile price of the market traded will be.

Bollinger Bands

In any market, traded the price rises slowly over the longer term. Prices may become volatile in short periods of time, but will normally come back to the longer term moving average – which is defined by the centre band.

The center band the ”normal” value of the market traded that people are used to paying over time i.e it reflects the longer term trend.

The volatility of the outer bands shows how volatile prices are and how far away price is from “normal” value.

Short term price spikes historically away from the average and are normally caused by trader psychology and prices will return the mid band average.

Bollinger bands can therefore help with the following:

1. Spotting New Trends Developing

When a market makes trades in a narrow range, the Bollinger bands are also narrow and close to the central band this means volatility is low and when prices start to become more volatile a new strong trend and volatility are about to emerge.

When prices break above or below the upper or lower band, a signal is given that a trend is about to develop and a trader can position himself to enter the market on the break of the bands.

2. Timing Entry Levels

The Bollinger bands can when a trend is already in progress help you get into the trend with good risk / reward on a Price pullback.

A forex trader simply does this by looking for pullbacks to the center band (moving average) and then enters in the direction of the trend.

3. Market Turning points

When the price touches the top of the Bollinger band and starts to falter – a return to the middle band is likely, as prices have moved to quickly away from the average. On the other hand, when prices hit the bottom of the Bollinger band and momentum wanes a buy signal could be the right move.

Bollinger bands are an essential tool for warning of trending moves and they also help trader’s time entry into these trends with greater accuracy once they have developed.

Standard deviation is an essential concept for all traders to understand and deal with as volatility needs to be dealt with in any forex strategy and Bollinger bands help traders do this.

Using Bollinger Bands with Other Technical Indicators

Bollinger bands should NEVER be used to enter trading signals on their own – they need to be combined with other indicators to confirm trading signals.

Great indicators to combine with Bollinger bands are – RSI, ADX and the stochastic.

There is no better indicator for looking for potential set ups and when combined with momentum indicators such as those above, you have a powerful combination that can ensure greater timing accuracy on your forex charts and lead you to currency trading success.

Most novice forex traders believe that to make money in forex trading they need to predict forex price direction in advance to win. The fact of the matter is if you try and predict where forex prices are going to go you are destined to lose! It’s obvious really when you think about it.

If you try and predict you are hoping or guessing where prices will go and relying on hope or guessing, in any venture is not a good idea and in forex trading it leads to equity wipe out.

A Better Way To Trade – Confirm the Move.

You don’t have to predict though you can act on confirmation and if you do you are not relying on hope or guessing – you are getting the odds in your favour and this can lead to long term profits.

For example, a trader sees prices dipping to support and simply enters the market – he has no idea of whether the support will hold, he is simply guessing and hoping.

Trade Like a Pro

The professional trader doesn’t simply buy into support he WAITS For prices to turn up and watches price momentum to confirm the fact and when prices are moving away from support he enters.

If you wait for price momentum to confirm support has held you are trading with the odds and this is the real way the professional forex trader’s trade.

No guessing or hoping they are trading the confirmation or the reality of price change to increase their chances of currency trading success.

How To Confirm Momentum.

If you know nothing about momentum indicators then you should – their an essential part of any traders Forex education.

If you want to learn forex trading correctly, you must understand and use momentum.

95% of Forex traders lose and in most instances it’s because they rely on hoping and guessing and don’t use the confirmation of momentum.

Great momentum indicators to look at are:

Average directional Movement ADX Relative Strength Index (RSI) – both were developed by trading legend Wells Wilder and the stochastic indicator developed by George Lane.

There are of course other momentum indicators but the above 3 are a great place to start.

When using a forex trading system you should use the following steps:

Look at tests of support and resistance and ONLY execute your trading signal – AFTER Momentum has confirmed your view.

You may well say that this will miss the bottom but you cant spot that in advance anyway (and no forex trader can) so don’t even try.

Forex trading is a game of odds and if you don’t get the odds in your favour you will lose.

Markets are a Game Of Odds Not a Science!

95% of traders lose, because they fail to grasp that forex trading is a game of odds and believe in scientific predictive theories like Gann, Elliot wave or following the Fibonacci number sequence – they don’t work.

Keep in mind Elliot died a pauper, Gann sold courses to survive and the Fibonacci number sequence had nothing to do with finance!

Play the odds and you can win, with your forex trading strategy –try and predict without confirmation and you are guaranteed to lose – PERIOD.