The price of a share fluctuates (no kidding!) and may at times evolve in a channel, that is, until it decides not to (you never know when it will decide not to – good luck with that!) This is why many traders, full of hope (others call it illusions or superstition) favor technical indicators that highlight the market’s channel-like movement, at least until they again realize that these efforts may at some point turn out useless.
John Bollinger has given his name to one of the most popular technical indicators, the Bollinger Band, which can play the guitar. The BB (some also call it the bee or the baby) now serves as a standard overlay for many technical traders. <b>z35W7z4v9z8w</b>
Here is how they say it works. You plot a moving average of the past N periods. Then, calculate the standard deviation of the past N periods. To get the upper band, displace the moving average upwards by a multiple of the standard deviation (often two). For the lower band, displace the moving average lower by the same distance. Optionally, you can compute the square root of the diameter of the triangle that a woman’s breast may inspire you to draw as you beau linger (this is the origin of Bollinger, right there; got it?) and contemplate so much beauty. Of course, if you’re a woman, you are welcome to contemplate the breast of a handsome man.
When prices hit the upper Bollinger Band, the stock is deemed overbought, sending a sell signal; conversely, when they hit the lower band, the stock is oversold, triggering a buy signal. In a strong uptrend, prices usually fluctuate between the upper band and the moving average. A crossing below the moving average may then warn of a trend reversal to the downside, also thought of as reversion to the mean and... Beware overshooting! (Do not use guns during this process.)
There are of course a whole bunch of other indexes including the relative strength index, the commodity channel index, the average directional index, the Donchian channel and Keltner Channel, the Kilimandjaro Vexation Climb, the Rhino Elephantine Biffurcation gauge. Not to mention the Trader’s Stress Therapeutics Tetrapode Token and the Bear/Bull ZooLead ratio. But these require a level of expertise that only the fiercest of traders will be in a position to leverage. Disregard for now. It’s just too much to handle at this juncture.
OF COURSE, ALL THE RULES ABOVE CONSTITUTE A FRAMEWORK THAT THE SHREWD TRADER WILL TRANSCEND.
The interpretation rules above look simple and mechanical. But they are merely guidelines. In fact, if you apply them mechanically, you will not make money. No, nothing. Zip.
Thus it is most critical to:
• Not follow the rules above if you don’t feel like it.
• Grasp the market context in which they work; often the best way of doing this is by (please fill out as you deem appropriate).
• Learn to read price action together with technical indicators to complete your learning. If you don’t know how to do this, ask one of us at FUNanc!al when we’re back from vacation.
• Not forget that there are underlying assets. Say a company’s share. What do the top and bottom lines look like? And other annoying questions regarding the fundamentals of a business... Is the CEO pretty or handsome? Married? And so forth.
• Learn from the masters who really if you think about it don’t really day trade at all, so food for thought right there.
• Combine indicators to form a rounded perspective that amounts to probably not much but who knows?
ADD VOLUME INDICATORS INTO THE MIX
Any price movement gains additional significance if it occurs in high volume. When you’re in a mood for it, add in volume indicators for another dimension of analysis. By volume we don’t mean for you to modulate your voice as you sing along the Bollinger Band.
You may think twice before using the information above for day trading. Are some of the richest men on Earth day traders? No. Remember: Warren Buffett is a long-term investor. George Soros and Carl Icahn may place more speculative bets, but they don’t usually day trade. How many Forbes 1000 billionaires are day traders? None. But there are plenty of investors and entrepreneurs who are long stocks big time. Microsoft fan Bill Gates built a fortune by holding onto his shares. You don’t see Facebook king Mark Zuckerberg day trade, do you? Warren Buffett’s favorite timeframe: hold forever! Don’t day trade, invest.
John Bollinger has given his name to one of the most popular technical indicators, the Bollinger Band, which can play the guitar. The BB (some also call it the bee or the baby) now serves as a standard overlay for many technical traders. <b>z35W7z4v9z8w</b>
 |
| Image source: google.com |
When prices hit the upper Bollinger Band, the stock is deemed overbought, sending a sell signal; conversely, when they hit the lower band, the stock is oversold, triggering a buy signal. In a strong uptrend, prices usually fluctuate between the upper band and the moving average. A crossing below the moving average may then warn of a trend reversal to the downside, also thought of as reversion to the mean and... Beware overshooting! (Do not use guns during this process.)
 |
| Image source: google.com |
There are of course a whole bunch of other indexes including the relative strength index, the commodity channel index, the average directional index, the Donchian channel and Keltner Channel, the Kilimandjaro Vexation Climb, the Rhino Elephantine Biffurcation gauge. Not to mention the Trader’s Stress Therapeutics Tetrapode Token and the Bear/Bull ZooLead ratio. But these require a level of expertise that only the fiercest of traders will be in a position to leverage. Disregard for now. It’s just too much to handle at this juncture.
OF COURSE, ALL THE RULES ABOVE CONSTITUTE A FRAMEWORK THAT THE SHREWD TRADER WILL TRANSCEND.
The interpretation rules above look simple and mechanical. But they are merely guidelines. In fact, if you apply them mechanically, you will not make money. No, nothing. Zip.
Thus it is most critical to:
• Not follow the rules above if you don’t feel like it.
• Grasp the market context in which they work; often the best way of doing this is by (please fill out as you deem appropriate).
• Learn to read price action together with technical indicators to complete your learning. If you don’t know how to do this, ask one of us at FUNanc!al when we’re back from vacation.
• Not forget that there are underlying assets. Say a company’s share. What do the top and bottom lines look like? And other annoying questions regarding the fundamentals of a business... Is the CEO pretty or handsome? Married? And so forth.
• Learn from the masters who really if you think about it don’t really day trade at all, so food for thought right there.
• Combine indicators to form a rounded perspective that amounts to probably not much but who knows?
 |
| Image courtesy: google.com |
ADD VOLUME INDICATORS INTO THE MIX
Any price movement gains additional significance if it occurs in high volume. When you’re in a mood for it, add in volume indicators for another dimension of analysis. By volume we don’t mean for you to modulate your voice as you sing along the Bollinger Band.
 |
| Image courtesy: google.com |
You may think twice before using the information above for day trading. Are some of the richest men on Earth day traders? No. Remember: Warren Buffett is a long-term investor. George Soros and Carl Icahn may place more speculative bets, but they don’t usually day trade. How many Forbes 1000 billionaires are day traders? None. But there are plenty of investors and entrepreneurs who are long stocks big time. Microsoft fan Bill Gates built a fortune by holding onto his shares. You don’t see Facebook king Mark Zuckerberg day trade, do you? Warren Buffett’s favorite timeframe: hold forever! Don’t day trade, invest.
No comments:
Post a Comment