Originally Posted by shiree

RK what can we use from Bobby's PDF?

My opinionfor what it is worth, (Hardly know about TA in comparision to most here) : Boris Sclossberg has "added" more to BBZ. Dont think we need to use anything from Bobby's PDF here.
Bobby's PDF merits a look into independently and not to incorporate it here.

Trying to attach a Word file with extracts from Sclosberg's book. Trust would be helpful.

Cannot upload it as the File size is bigger than permissible. Shall try to upload it.

From the Book : Technical Analysis of the Currency Market, by Boris Sclossberg (Copyright material) :

Is there a more accurate way to glean trend? Yes, I believe there is. Surprisingly
enough, one indicator that is often used for range-bound markets
can be an extremely helpful tool for trend discovery. I discuss the
Bollinger bands (BBs) in more detail in Chapter 10, but for now note that
we will use them in a unique way to detect trends in the currency market.
Before we begin, let’s first examine the underlying notion of trend.
What is trend really? I will postulate that trend is actually a deviance in
price. It is common wisdom in all markets that trends are generally
rare. Typically, in all markets, including the currency market, prices
stay in a range somewhere between 70 and 80 percent of the time.
Therefore, when prices decide to trend they in fact deviate from the
norm. What is one of the best tools to measure deviation in technical
analysis? Bollinger bands, of course. The Bollinger band formula contains
the standard deviation (SD) calculation within it. Bollinger bands
measure the standard deviation of price away from its 20-period moving
average. Here is where the use of Bollinger bands becomes quite interesting.
If you superimpose a second set of Bollinger bands with a standard
deviation setting of 1 onto the price chart that already has a set of
BBs with a default setting of 2 standard deviations, you will instantly
see that as prices begin to trend the majority of price action is captured
within the 1 SD–2 SD Bollinger bands.
These Bollinger band “bands” divide the price action into three separate
areas (see Figure 5.10). If prices are between the upper 1 standard

[IMG][/IMG]


FIGURE 5.10 Bollinger Band “Bands”
Source: FXtrek IntelliChart™. Copyright 2001–2005 FXtrek.com, Inc.
deviation Bollinger band and the upper 2 standard deviation Bollinger
band, they are in the buy zone. If a specific currency is trading between
the lower 1 standard deviation Bollinger band and the lower 2 standard
deviation band, then its price is in the sell zone. Price candles that exist in
the area between the second Bollinger band “bands” are in effect in noman’s-
land as markets struggle to find direction.
In essence, Bollinger band “bands” act as dynamic trend channels in a
superior version of hand-drawn trend line channels covered earlier in this
chapter. Because Bollinger bands are generated off the 20-period simple
moving average, their readings can be mathematically calculated with a
much better degree of accuracy than simple trend lines. Furthermore, the
standard deviation formula naturally adapts to the volatility of price action,
widening or narrowing the Bollinger channels accordingly.
For traders seeking a quick confirmation of trend, the Bollinger band
“bands” approach offers an easy visual tool. One can use a variety of rules
to trade with them, but I prefer the following simple rules. The example I
will use refers to detecting and trading the uptrend (for the downtrend the
rules are the same but simply reversed). To trade trend the trader needs to
answer three basic questions:
1. Trend detection. When is a trend in place?
2. Trade entry. How is a position initiated?
3. Trade exit. What constitutes trend exhaustion?
With the Bollinger band “bands” approach, the trend detection rule is
quite straightforward. I consider the uptrend to have commenced once
the price closes—not simply penetrates, but closes—in the buy zone. The
idea behind this rule is that buyers must have enough conviction behind
their actions to sustain a rally into the upper Bollinger channel. If prices
merely pierce the channel but cannot hold their value, then we do not
have enough evidence of a clear up move in place.
The second component of the trade is perhaps the most tricky. Instead
of simply entering the trade at market we will look for an opportunity
to buy on any small dip into the no-man’s-land zone. If the penetration
of the buy zone is so powerful that prices reach the upper 2 standard deviation
Bollinger band, then we will wait for prices to retrace to the middle
of the bands or to the 1 standard deviation band. Why such hesitation?
Shouldn’t we just jump in the moment the trend becomes clear? No. Not if
you want trade FX like a professional.
When it comes to trend trading in FX, the difference between professionals
and amateurs is that while the pros are trend followers, the amateurs
are trend chasers. The distinction may seem like nothing more than
semantics, but in fact it’s often what separates those who earn money
through trading from those who lose it. But perhaps before I explain this
point in more detail I should disclose the final component of the setup—
the exit.
Where would the trader abandon his position? At what point on the
chart will he be proven most likely wrong? If prices retreat all the way
back to the lower 1 standard deviation Bollinger band, then the trader
should stop out. The probability that trend is over is very high. Note the
difference in approach. In order for us to consider the trend valid, prices
must not only touch but close through the upper 1 standard deviation
Bollinger band. As for our exit, a mere tag of the lower 1 standard deviation
band will take us out of the trade. Why be so slow to enter and so
quick to exit? Because, as I noted before, trend is not the common state of
price, so price must really prove to the trader that it is making a directional
move. Once price can’t hold trend, there is absolutely no reason for
the trend trader to stay around. His risks far outweigh potential rewards,
because he now faces three possible scenarios—consolidation, trend reversal,
or trend continuation. Two out of the three outcomes are unfavorable
to his position and the last choice, which is advantageous, is usually
the least likely under such circumstances.
Using the lower 1 standard deviation band provides ample room for
the trend trader not to be falsely shaken out of the trade while the price
meanders through the no-man’s-land zone before it decides whether it
wants to continue its initial impulse higher.
Understanding the exit—the third rule of the trade—may now be
helpful to appreciating the second rule of buying only when the price retraces.
It all has to do with risk and reward. Remember that in real life
prices frequently fake out the trader. Just because price enters into the
trend channel is no guarantee that it will remain there. If markets were
highly predictable most traders would make money rather than lose it.
The key to positioning in a trend-based setup is to minimize the amount
of losses for the countless times you will inevitably be wrong, rather than
to maximize the gains for the few times that you will be right. In trading,
as I will never tire of stating, trends are the exception, not the rule, and in
order to avoid being wiped out, traders need to try to always enter the
market under the most advantageous of circumstances no matter what
the market environment holds. Novice traders tend to succumb to the
lure of the crowd and not restrain themselves from buying at the top or
selling at the bottom. Note in Figure 5.11 how a trader who buys the high
of the candle exposes himself to fully 300 points of losses in the
GBP/USD trade as the uptrend fails and price retreats all the way to the
lower Bollinger band. The more patient trader, however, who would wait
for a retracement down to the upper 1 standard deviation Bollinger band,
Trend Is Your Friend? 75
would suffer only a 150-point loss. Both trades are losers but one is less
of a loss than the other.
Football fans know that the win does not necessarily go to the best
athletic team but to the one that practices the best field management. Joe
Theismann, the former quarterback for the Washington Redskins, once
stated that he became a much better quarterback once he understood
that he did not have to convert every third down play into the first down.
If the opportunity just did not present itself to make first down, it was
better to try for just a couple of extra yards, so the punter would have
more room and could bury the opposition deeper in their own territory.
Trading trend with Bollinger bands follows the same philosophy: When in
the game the focus should always be on minimizing risk first, maximizing
profit second.
In the example with the GBP/USD pair shown in Figure 5.12 the setup
shows how well Bollinger bands can be used to trade trend with minimal
risk. First the price enters into the sell zone, signaling the potential for a
downward move. Second, it retraces back to the 1 standard deviation line,
offering the trader a low-risk entry into the trade. If the trader is wrong he

[IMG][/IMG]

FIGURE 5.11 Buying on Retracement in GBP/USD
Source: FXtrek IntelliChart™. Copyright 2001–2005 FXtrek.com, Inc.


or she could stop out at the 20-period moving average, suffering only a minor
loss. However, in this case the trader is correct and the profits turn
out to be massive as the pair collapses for nearly 1,000 points of uninterrupted decline.

Continued in next post...............

CONCLUSION
Contrary to popular opinion, identifying a trend is not nearly as difficult
as it may seem. Whether we use trend lines, moving averages, Bollinger
band “bands,” or even, for some traders, the ADX, the technician’s arsenal
is full of tools capable of accurate trend analysis. Yet while detecting
a trend is easy, trading it is not. By definition, all of the technical analysis
indicators use past price data and are therefore highly vulnerable to
whipsaws and fakeouts. No technical analysis tool can predict future
price action. Indicators can only suggest it. Generally, the more specific
the technical setup and the more the trader has thought through the va-

[IMG][/IMG]

FIGURE 5.12 Trading Downtrend in GBP/USD
Source: FXtrek IntelliChart™. Copyright 2001–2005 FXtrek.com, Inc.

riety of failures likely to befall it, the more robust the trade. In this chapter
I have offered two setups (the compressed 3 SMA crossover and
Bollinger band “bands”) that not only utilize the basic tools of technical
analysis but combine them in circumspect, logical ways to trade most
traders’ favorite price action—trend. In the next chapter we look at the
far more common price behavior—range—and see how technical tools
can help us to trade it successfully.

Mr Karnani,

From the excerpts of the Boris Sclossberg ,you have posted apart from the BB Bands use he advocated i have noted few things.

1)"in all markets, including the currency market, prices
stay in a range somewhere between 70 and 80 percent of the time."

2)"the difference between professionals
and amateurs is that while the pros are trend followers, the amateurs
are trend chasers. The distinction may seem like nothing more than
semantics, but in fact it’s often what separates those who earn money
through trading from those who lose it. "

3)"The key to positioning in a trend-based setup is to minimize the amount
of losses for the countless times you will inevitably be wrong, rather than
to maximize the gains for the few times that you will be right."

4)"Football fans know that the win does not necessarily go to the best
athletic team but to the one that practices the best field management."

Thks.

Asish

rkkarnani

Excelent excerpts from the book .Many thanks for your effort to bring that section to this blog.
It gives us more conviction to explore the setup.

Originally Posted by uasish

Mr Karnani, From the excerpts of the Boris Sclossberg ,you have posted apart from the BB Bands use he advocated i have noted few things. 1)"in all markets, including the currency market, prices stay in a range somewhere between 70 and 80 percent of the time." 2)"the difference between professionals and amateurs is that while the pros are trend followers, the amateurs are trend chasers. The distinction may seem like nothing more than semantics, but in fact it’s often what separates those who earn money through trading from those who lose it. " 3)"The key to positioning in a trend-based setup is to minimize the amount of losses for the countless times you will inevitably be wrong, rather than to maximize the gains for the few times that you will be right." 4)"Football fans know that the win does not necessarily go to the best athletic team but to the one that practices the best field management." Thks. Asish

Superb insight.

Originally Posted by shiree

RKKARNANI Excelent excerpts from the book .Many thanks for your effort to bring that section to this blog. It gives us more conviction to explore the setup.

Thanks for initiating the thread. Please remove the "font size" from my name!! Its Boris Sclossberg who deserves it, not me. Please do it.

Originally Posted by uasish

Mr Karnani, From the excerpts of the Boris Sclossberg ,you have posted apart from the BB Bands use he advocated i have noted few things. 1)"in all markets, including the currency market, prices stay in a range somewhere between 70 and 80 percent of the time." 2)"the difference between professionals and amateurs is that while the pros are trend followers, the amateurs are trend chasers. The distinction may seem like nothing more than semantics, but in fact it’s often what separates those who earn money through trading from those who lose it. " 3)"The key to positioning in a trend-based setup is to minimize the amount of losses for the countless times you will inevitably be wrong, rather than to maximize the gains for the few times that you will be right." 4)"Football fans know that the win does not necessarily go to the best athletic team but to the one that practices the best field management." Thks. Asish

Wow, Ashish da, Great going, you just Posted the 'concentrate'!!!!

In all charts displayes above, remove B Bands
and you go by rules of Pivots. >>
U would discover entry point (Breakout) is same as
indicated by B Bands.

So BB becomes uncessary tool in the charts posted.

Ajax,

As this guy Boris,is advocating BB ,many avocate TL to understand TREND,there can be few other ways also to understand Trend than Pivots.

Asish