This is the last in the series of notes on GMMA applications. Bubble trading is a speculative activity. It calls for good trading skills and excellent trading discipline. The objective is to ride the momentum driven bubble for as long as possible. Exits are fine tuned using a variety of volatility based indicators and techniques. The end of day chart is used to set the general scene for the exit, but the actual exit is usually managed using intraday trading tools. Many traders avoid speculative bubble trading because it is so demanding. However, there are times when we enter a trade which shows a steady trend, only to find that a bubble develops. This poses several dangers and some temptations.
First the dangers. Bubbles inevitably burst. When they collapse prices often fall from a great height. In some cases this fall is fast enough and hard enough to seriously weaken the underlying trend. Bubble collapses can wipe out not only bubble profits, but also profits accumulated over many weeks or months. Recognizing these bubbles is a useful skill to develop because we can limit the damage from a bubble collapse.
If we have not set out to trade a bubble, then we may be tempted to take profits from the temporary bubble as it develops. This is a sound strategy, and can be used to protect profits or take opportunity profits, while still intending to remain with the underlying trend.
Many investors simply ignore the bubble, letting it collapse back to the trend. This may mean ignoring exit signals generated by other indicators. The bubble trade in this situation can attack our trading discipline. Traders need to be clear on when it is appropriate to ignore volatility based stop loss indicators in this situation.
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Filed Under (Forex eBook) by ForexDigg on 24-07-2008
Forex – What is it? The
international currency market Forex is a special kind of the world financial market. Trader’s purpose on the Forex to get profit as the result of foreign currencies purchase and sale. The exchange rates of all currencies being in the market turnover are permanently changing under the action of the demand and supply alteration. The latter is a strong subject to the influence of any important for the human society event in the sphere of economy, politics and nature. Consequently current prices of
foreign currencies, evaluated for instance in
US dollars, fluctuate towards its higher and lower meanings.
Using these fluctuations in accordance with a known principle “buy cheaper – sell higher” traders obtain gains. Forex is different in compare to all other sectors of the world financial system thanks to his heightened sensibility to a large and continuously changing number of factors, accessibility to all individual and corporative traders, exclusively high trade turnover which creates an ensured liquidity of traded currencies and the round – the clock business hours which enable traders to deal after normal hours or during national holidays in their country finding markets abroad open. Just as on any other market the trading on Forex, along with an exclusively high potential profitability, is essentially risk – bearing one. It is possible to gain a success on it only after a certain training including a familiarization with the structure and kinds of Forex, the principles of currencies price formation, the factors affecting prices alterations and trading risks levels, sources of the information necessary to account all those factors, techniques of the analysis and prediction of the market movements as well as with the trading tools and rules.
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Filed Under (Forex eBook) by ForexDigg on 24-07-2008
Who should read this book about proprietary trading techniques within the
foreign currency exchange, also known as the
forex? This book is for beginning, intermediate, and advanced traders who need to increase the odds of successful trades by making precise entries. This means making precise decisions regarding entry selections. This book is for those of you who need to have sustaining income as you develop your personal
trading skills. This book is not intended for successful
traders who have found a procedure that works, and the information contained within this book is in no way intended to put down other
methodologies, traditional trading procedures, or trading styles.
The approach presented in this book is a different type of methodology that uses non traditional proprietary trading tools and must not be integrated with traditional methodology. Merging traditional tools that use other mathematical calculations, patterns, and procedures into these new concepts may cause losses. Change and modernization of trading tools, or simply change, may offend experienced traders; again, allow me to reiterate that this is not my intention in writing this book. My suggestion is that if you are successful and happy with your present status regarding trading success and profits, then why read this book? “If it isn’t broken, then don’t fix it,” as some would say; however, if you feel you have not arrived as a successful forex trader, then read on—because maybe this book is just what you have been searching for. I simply ask that you keep an open mind and try not to merge the trading tools of the smaller markets with the modernized tools of this very large and volatile market known as the forex.
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