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John Bollinger created a tool to analyze prices in currency pairs. This tool he created in the 1980’s would come to be eventually known as the Bollinger bands. To understand how they work and how you can use it in technical analysis of a Forex market currency pair, it is useful to know a little about moving averages.

A moving average, also known as a rolling average used with a sequence of best fit price points measured at successive uniform time intervals, will show you the short-term fluctuations and longer-term trends or cycles in a currency pair. You may wonder to what end or with what objective, well the moving average will chart a smoother curve based on previous price points making it easier for you as a trader to spot a change in the trend of the currency pair, and confirm support and resistance levels of the currency pair at a given time when used in conjunction with other tools and indicators. Also since moving averages are only computed at specific intervals, they are immune to price spikes that the Forex is known for, hence the smooth curve. The types of moving averages most commonly used in the Forex market by analysts is the simple moving average (SMA) and the exponential moving average (EMA).

Right, so with Bollinger bands you have your middle graph set to plot using a moving average of typically 20 or 50 closed price levels. Notice there a no units for the interval as this depends on what kind of trader you are for instance a ’scalper’ or intraday trader will be interested in 20 previous price points within the hour as opposed to a long term trader who may use 20 weeks or even 20 months. In addition to the middle graph you will have 2 more graphs that trace beside the MA20 graph at 2 standard deviations, above and below it to form what is known as the ‘envelope’; you should know that these are arbitrary figures and you are free to choose your own deviations and moving average to use for the bands but 20 SMA is normally recommended for beginning technical analysts.

So now that we know what they are and how they work, how can we use them in analysis? One thing to remember is that Bollinger bands like all other tools are not absolute, because they can only give you the best buy and the best sell signals of a currency pair based on relative information and indicators at a particular time with all things constant; the decision to buy or to sell would still require your better judgment in the interpretation of the information that the bands would illustrate. The lower Bollinger band often (not always) provides price level support while the upper Bollinger band provides price level resistance. As much as Bollinger himself categorically stated that if the price level of the currency pair tags or exceeds any of the deviated bands, it does not indicate a buy/sell signal, millions of traders in the Forex market do not adhere to his doctrine. Try it for yourself by placing a Bollinger band envelope of a EUR/USD chart and watch the price levels shift as they approach the lower or upper graphs, what you want to look for is the closing low/highs of the candle sticks immediately preceding the one that breaks either the upper or lower bands.

In conclusion, as a simple strategy you can monitor the price levels as they approach the upper and lower bands, and wait for them to breakout. When this happens they will usually retrace back and ‘range’ ; and depending on the previous candlestick when the break from the Bollinger band envelope occurred and the ranging begun (that is whether the candle stick’s open and close levels are lower than the previous candle stick), you can consider that an alert that a major price shift is about to occur. It will be up to you to then decide whether to take a position.

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When you’re looking for a third party signal provider, one of the first things that you need to look at is their maximum draw down. This is the maximum amount lost between an extreme peak and an extreme valley. This number also includes open positions but does not take into account margin required to keep you out of a margin call. Inevitably the question comes: How much draw down is too much? The answer is like many trading questions. It depends. There are a lot of factors that come into play when answering this question. Obviously a person with a 50k account could tolerate more draw down than a person with a 5k account. Another person with a 1k account could withstand even less. So aside from your account size, what else do we have to think about?

The more volatile the market, the higher then index option premium! The duller the market, the lower the index options premium. Well it depends on the expectations of the traders whether the market will move sufficiently in the near future for them to exercise their buy or sell rights.

The whole point of investing in stocks is to choose one that has the greatest chance of a rising share value. Don’t we all look for a stock that we could buy for $10 and later on sell for $300 per share? Well, how can we proceed to accomplish such a feat? What would make a stock rise so much?

The first question that may come to your mind is why invest in commodities? If you have been following the breaking news that you might have come across the news that gold prices have reached historically the highest level! Recently gold broke the price barrier of $1000 per ounce. This might be the best time to invest in commodities. A mutual fund is a fund managed by an investment professional on behalf of the fund investors. Now, mutual funds by law are constrained to follow conservative trading methods. Mutual funds cannot engage themselves in such sophisticated and risky trading techniques like arbitrage trades, long short strategies and distressed asset investing. Some expert of the opinion that the secular bull market started in the commodity market a few years back and may continue for the coming decade! If you want to invest in commodities than you have many options like trading commodity futures, commodity ETF, commodity stocks or commodity mutual funds.

Now for options buyers this option unlike futures limits their maximum liability to the option premium they had paid at the time of buying the options contract. The options market has caught the fancy of many investors and this is not surprising. The beauty of options is embedded in its very name. You have the options but not the obligation to buy or sell stocks at a given price by a given time.

Many people are not aware that commodities as an asset class has a lot of potential especially in the 21st century. It is being predicted that the 21st century belongs to the commodities. If you are interested in investing in commodities than you can invest in a commodity mutual fund!

You as an investor should make yourself well acquainted with the working of an MLP. The reason MLPs exist is to distribute all available cash back to the MLP unit holders. As said, this has to be done on a quarterly basis. Knowing this fact can make you more aware before making your final investment decision in an MLP. The following factors are considered before determining the amount of cash distributed to each individual investor:

You must have been surprised because many people think that trading crude oil futures is only for the hedge funds or really wealthy people. Well, you can trade crude oil futures if you want to. But don’t do it without getting a good training. You might have heard some of your friends talk about trading crude oil futures. Trading crude oil futures can be highly profitable if you know how to do it. Natural whatever you do in life requires good training. So don’t try to trade crude oil futures contracts without proper training.

If you are starting out in Forex trading you will hear the term lot. It is one of the first concepts to understand. You must have a clear understand of what it means to start Forex trading. In the forex market the base unit size of any forex transaction is referred to as a forex trading lot. “I will take 10 lots of the usd against the British pound” you have heard the phrases before; In most cases, one standard lot is equivalent to 100,000 units of the base currency.