I recently read article about, about standard deviation channel, (which as you may already know is one of my favorite indicators), and I was shocked, although author of this article explained what standard deviation channel is in mathematics but it had very little to do with Forex or any other financial market. Furthermore, I read other articles about standard deviation channels and what I found out is that they all were giving useless information to readers, so here is the right way to use standard deviation channel.
First of all, authors suggest that, when price will reach upper line, it is time to take SHORT position and vice versa, when price will reach lower line you should take LONG position because market is oversold.
This is true only if market is trending. It is quite safe to treat then lower line as support line and upper line as resistance line, and more over (depending on your standard deviation channel settings) 95% of price movement will happen between this two lines, as long as market is trending. The obvious question here is how to tell if Forex is trending, but this question is beyond the scope of this article, at least for now J.
What I like about standard deviation is that it allows to easily determine trend, you just need to draw channel over the selected period of time and that’s it, you have detected trend. However to use this indicator efficiently you need some experience, ideally you should see channel on the chart before you draw any lines on it. If you don’t see it, then do not worry it is all about experience.
How to use correctly Standard Deviation Channel
If market is in uptrend, you should take ONLY long positions, when price will reach lower line. Never take SHORT position in uptrend when the price will reach upper line, that do NOT mean that market is overbought, in uptrend price can easily go waaay over upper line and hit STOP LOSS, of trader who was stupid enough to take SHORT position in bull market.
Obviously, the opposite goes for market in downtrend, do not take long positions on lower line, NEVER.
Most importantly, this indicator is called standard deviation channel and you should use it only with CHANNELS not with any random piece of chart, below is the stock market chart with two correctly drawn channels.
The Commerce Department reported Friday that the gap between what the United States sells abroad and what it imports rose to $63.4 billion in April, 2.5 percent higher than the March imbalance of $61.9 billion.
The trade deficit fell in February and March, after hitting a record high of $66.2 billion in January. While economists noted that the April deficit was smaller than the $65 billion that had been expected, it was still the sixth-largest imbalance on record.
Read more here.
June 12 (Bloomberg) -- The dollar may gain against the euro on speculation U.S. government reports will signal inflation is accelerating and prompt the Federal Reserve to raise interest rates for a 17th consecutive time.
Sixty-two percent of the 53 traders, strategists and investors surveyed by Bloomberg on June 9 from Sydney to New York advised buying the dollar against the euro. Forty percent recommended purchasing the U.S. currency against the yen.
``The markets very nervous about inflation and the prospect of higher interest rates, and thats favoring the dollar, said Ian Gunner, head of foreign exchange in London at Mellon Financial Corp., which holds $4.13 trillion in assets. ``Were likely to see more strength for the currency.
Producer prices probably rose 4.3 percent in May compared with a year earlier, the biggest increase since January, according to the median forecast of economists in a Bloomberg survey. Consumer prices likely increased 3.9 percent in May from a year earlier, after a 3.5 percent gain in April. The reports are scheduled for release June 13 and 14.
The U.S. currency rose the past five days, its longest rally since January, as traders boosted bets the Fed will lift its target rate by a quarter-percentage point on June 29 to 5.25 percent. Odds of an increase surged to 84 percent last week from below 50 percent a week earlier, trading in interest-rate futures show, after Fed Chairman Ben S. Bernanke and central bankers emphasized their concerns about inflation.
Read more here.
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Business InsiderThe Bank of England just revealed that Britains interest rate hike is going ...Business InsiderThe Bank of England has kept interest rates at a record low of 0.5% since March 2009 and markets are on tenterhooks about when they will b ... 
ReutersRaising interest rates with zero inflation is a hard sellReutersBoth the Federal Reserve and Bank of England are proclaiming that they are on the cusp of raising interest rates for the first time in almost a decade. It may take a few months, b ... 
The GuardianU.S. economy adds jobs, could affect Feds interest rate timingTribune-ReviewThe job market stayed on track in July as hiring gains again topped 200,000, a pace that economists say should compel the Federal Reserve to raise interest rates ... 
CNBCWill the Feds rate rise create more bankruptcies?CNBCThe number of people filing for bankruptcy in the U.S. and U.K. has been falling steadily for the past few years, but charities and analysts are concerned that homeowners could get in trouble ... 
