Tuesday, February 05, 2008

Standard Deviation Channel

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.


michal said...


My name is Michal and I am looking for your feedback, positive or negative, about our Forex trading platform : eToro. I contact you since we appreciate your opinion.
Will be willing to give more information via email michal.geva@etoro.com

alysia said...

Nice blog. Thanks for your work on it.

I've recently created a completely free forex website which hopefully will be of use to you.

The purpose of this site is to show you how the forex market reacted in the minutes and hours after news was released. Patterns have emerged. For instance, if the USD Non Farm Payroll number is significantly better than expected, the USD will initially gain against the GBP and Euro in the minutes after the number is released, and then lose value shortly there after.


Forex Trading said...

You have some great information on your blog and it is a great resource for Forex traders. We run a very unique Forex trading system that forecasts 10 currency pairs and the S&P 500 with great accuracy. We have been averaging over 1000 Pips/week with our swing trading system and have a 2-Week Trial. Also, if you are interested in our referral program, we pay 40% monthly for each referral which equates to about $100/month for the life of the subscriber. We would value your feedback and comments.

Forex Swing Trading - ForecastTrader

Dwight said...
This comment has been removed by a blog administrator.
s said...

If you are considering, long term investment, like one or two months than Polish currency might be interesting for you.

Forex trading robot reviewed

Nadine said...

Dear Webmaster,
My name is Natalia Campos and I am looking for websites where to promote one of my forex clients through a contextual link or a text add.
I found your site http://proforex.blogspot.com/ very suitable for this kind of advertising so I would like to get a proposal for a 6 months trial with a possibility of a longer period deal.
Payments are made in advance the moment the link is live via paypal or moneybookers.
Hoping this can be interesting for you and we can start cooperating,
Waiting for your response
Kind Regards,
Natalia Campos

Psiholog said...

prepricana lektira zlatna jabuka
prepricana lektira zlatna jabuka
prepricana lektira zlatna jabuka

Blogger said...

AvaTrade is the best forex trading platform for beginning and advanced traders.

Digital Equity said...

Hi i am Magan, i use the daviation indicator with precision and analyze to make money from Forex Market. Overall the indicator is very good but due to some broker tweaks sometimes the indicator do not work perfectly as the brokers try to revamp the charts and edit it. After changing a lot of brokers i finally got a better broker where there is no manipulation. The broker is ECNCAPITAL.com. They are very honest with their conditions and their chart is up to the mark. I am really happy trading with them and also pretty impressed.

Md Torikul said...

Forex is very hard at the beginning so a new trader should struggle hard to conquer the market. A good broker can help their new traders to know them about market. I got this full support from my broker Trade12 is an excellent broker. They use three important tips for providing knowledge like free e book, video tutorial, Forex glossary etc.

shahriar mahmud said...

I can make good profit from forex with my broker trade24. Without any loss, they make my trading career safe and smooth. They provide me the best trading platforms. The services I can get from them are fund security, fast execution, good leverage, lowest spreads, news feed, free signals and many more. They make me feel very secure. Till now I had no issues with the broker and with their support I really feel comfortable.

Md Torikul said...

Forex is being popular day by day because of it’s special feathers. I am trading with Trade12 broker having high leverage like 1:400, low spread, quick execution and there is no dealing desk and reqoutes. It has high liquidity sources. They cash back withdrawn money in just time. It’s a nice facility I have been enjoying. Forex is the largest economic business where currencies of different countries are the main ingredient of trading.

Hasan Forex said...

No need for any channel analysis when you have the best thing to trade and make profit with. I trade options with lxmarkets and they provide such guidelines and proper execution with best reliability that you will be amazed to see how well it behaves. The best trading experience of options come with this broker only.

shahriar mahmud said...

Forex trading is the business which can make your life better than ever. Everyone attracted to this market because of huge opportunities of making money without spending full day. You just need to choose the right broker who can lead you all the way through this market. I am trading with trade24 and now I am earning handsome amount of money with them. They have good leverage facility and fast withdrawals.

Andi Winata said...

Great post,, nice share, thank you.

forex book for beginner

Md Torikul said...

Standard division is a channel of trading. It has two parallel lines for trading. Here prices movement from top to bottom is objectives. New highs are created when the optimism of the market participants increases. New losess become the result of the participants pessimism accordingly. It is used for knowing the proper trend of market. I use to draw this channel. Trade12 is very helpful from every sight of my trading.

Blogger said...


Professional trading signals delivered to your mobile phone every day.

Follow our trades NOW and make up to 270% per day.

sabaku tense said...

Experienced traders have realized that FXB Trading has got the answers to all their queries. They could ask any question, regardless of whether they pertained to regulations or trading; the answers would all be there on its website. For many traders like me, their trading experience has significantly improved after they shifted to its website

Blogger said...

GPS robot tripled the $100k deposit [live proof]

I just finished a webinar with Mark and his partner, Antony, two days ago and it was AWESOME.

During the webinar Mark and Antony shared their secrets to success and answered questions about their new version of the GPS Forex Robot that is coming out TODAY!

Blogger said...

ForexTrendy is a revolutionary software capable of detecting the most profitable continuation chart patterns. It scans through all the forex pairs, on all time frames and analyzes every possible breakout.

alitergalen said...

Stay up-to-date with important economic news and announcements with our Economic Calendar.

zoha khan said...

"Which Forex pair and time frame is best to trade" is the frequently asked question and I want do give you the DEFINITE ANSWER.

Are you expecting that I am going to say something like EUR/USD on 5-minute time frame or GBP/USD on daily...? No, it is not so simple, but SIMPLE ENOUGH we can figure it out!

The "PROBLEM" is that markets change over time. If GBP/USD was a well trending currency pair a few years ago, today it is another one.

I actually want to let you know about a SPECIAL TOOL that I use to find the BEST TRENDING PAIRS among all the Forex pairs.

==> http://www.forextrendy.com?casjdgciua834

The software scans 34 Forex pairs on all time frames from minute to monthly. This way you pick the best trending pair and time frame at the current time.

The system is running on our powerful computers, so you have nothing to download and install. Just join in and start using it within a FEW MINUTES! Get it on the link below:

==> http://www.forextrendy.com?casjdgciua834

zoha khan said...

Let me explain the basic principle how most Forex systems work. They are tuned up to work in a specific market condition. They often make money in a trending market, but loose money in a choppy market. It is not a problem as long as the market is trending and the system is making more money than it loses. Such a system can be profitable for several months and you would be happy with it. BUT...


Market change over time. A well designed system starts with trend analysis to stay away from potentially losing trades. There are two problems of how a Forex system recognizes the trend.


The system responds only to immediate price action. An explosive price movement that is usually the result of news release is tempting people to jump in and make a profit. It looks like a "strong trend", but what usually happens next is a hard fall.

To avoid falling into this trap, check for the SOLUTION to find a REAL trend:

==> http://www.forextrendy.com?vgcvasdiugf9g87346


Most systems use various indicators to determine the trend. Actually, there is nothing bad about using indicators. One Simply Moving Average can do the job. The problem comes with the question: "Is the market trending NOW?" Whether the market is trending or not trending is not like black and white. The correct question is: "How well the market is trending?"

And here we have something called TREND RELIABILITY.

Trends exist and they can be traded up and down for a profit. You have to focus only on the most reliable market trends. "Forex Trendy" is a software solution to find the BEST trending currency pairs, time frames and compute the trend reliability for each Forex chart:

==> http://www.forextrendy.com?vgcvasdiugf9g87346