The task of the Average True Range (ATR) indicator is to gauge volatility over a certain period of time. Keltner Channels and Starc Bands are examples of other systems for trading in which ATR is also used.
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How to use Bollinger Bands for Forex trading?
Discovered by John Bollinger, the Bollinger Bands is a simple moving average based tool that allows people in Forex trading to estimate the instabilities and trend in the Forex market. Let us have a brief look at the concept of Bollinger bands and how you can use it to improve your Forex trading strategy.
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Using Moving Averages
The purpose of moving averages is purely to determine the mean exchange rate or price of currency pair in a given period of time. The simple moving average (SMA) and the exponential moving average (EMA) are the most widely used types of moving averages. The former is done, for example, by registering the closing prices of the last 50 days, summing them and finally dividing the sum by 50. This gives us the simple moving average for a period of 50 days. Exponential moving averages are similar to simple moving averages, but they are more complicated to calculate. They give more importance to the latest closing prices and hence react more rapidly to recent changes. Luckily, EMAs are mechanically and immediately determined by the majority of charting packages.
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