The Advantages of Moving Averages and Bollinger Bands in Take Profit

By Ogbonnaya Eme

Learning to trade the forex market is no small job. It is a job that professionals go through all sorts of education and experiences to be able to manage billions and trillions of portfolio funds. Therefore, learning on this profession does not have an end.

The basics of fundamental and techical analysis, therefore cannot be over-emphasized. I will want to discuss the advantages of moving averages and bollinger bands in take profits.

In trading the forex market, emphasis has to be laid on larger time frames, especially when the resistance or support of lower time frames has been broken.

Now, when you plot a bollinger band say 62 band on your chart, enable it on all time frames, you will find out that its resistance and support levels vary for each time frame, hence a break on a larger time frame indicates more pips in the making.

I use a simple moving average (100). A break of this on the 15 minutes chart upwards or downwards may cause a pip rise or drop of over 100, but when this happens on the 1 hour chart, the pips may triple or quadruple.

When there is a break of the 100 SMA on the 15 minutes chart, look to the 1 hour chart, a break of this signifies that the trend has gradually changed from a downtrend to an uptrend even if temporary. It usually results in massive pip gain. However, during the uptrend or downtrend, this moving average or bollinger band, on the larger time frame can be a point for initial profit take. This is because at these point, the market usually takes back some of its gains.

When a currency pair is struggling to break a particular price point, say on the 15 minutes chart, look to the larger time frame because it may have hit a bollinger or moving average of a larger time frame. When this happens, the price retreats initially, then makes another come back.

A break above that resistance or support level is a confirmation of the next rally.

Trading the forex market involves a whole new world of learning. Never underestimate any resource, it will only limit you chances of being a better trader.

I'm just a start up guy with quite a load of experience and still counting. forex trading just got better. Learn the trade, keep the pips. http://successcreations.wordpress.com