Environmentally Conscious Investing

The world we live in is undergoing some major transformations. And although, it may appear unlikely, almost every change on the national and international scene does have the potential to directly affect our personal and professional lives. Global recession, political unrest, terrorism, fundamentalism, and environmental challenges are some of the grave issues that have caught the attention of world leaders in recent times.

Of the ones listed above, the task of protecting the environment is probably the biggest challenge and also the most urgent one. That's because if we do not act fast to build a global consensus for protecting planet earth, we may have little left to call our own. There is enough empirical evidence available to substantiate claims on global warming and climate change, something that calls for fast and effective action.

As a global citizen, you may always have had that persisting urge to contribute your own towards protecting the environment. Chances are that you may already be playing your part in environment conservation by increasing your reliance on renewable sources of energy such as solar, wind, and bio-fuel. But, will that be enough? Well, we certainly encourage every small contribution, but then we also expect that you contribute the max you can towards environment protection and conservation.

Now, don't start thinking that you have to fly to the jungles of Amazon to fight the timber mafia operating there. If you are not already aware, it would be better to tell you that you can make your contributions felt even without stepping out of your home. The only thing you need to do is channel your investments towards businesses that support and promote environment protection and conservation. You will still be making normal profits on your investments, but the added advantage is that your money will be used in a way that will aid environment protection and conservation.

When you choose environmentally-conscious investing, you do a lot more than just use solar or wind power to generate electricity or use bio-fuel for your car. You contribute to global businesses that may have ongoing environment conservation projects running into millions of dollars. For example, a 220 MW power generation unit that uses solar energy will be doing a lot more good to the environment in comparison to what you may be doing in and around your home. With environmentally-conscious investing, you can ensure that projects like these get the right support they need.

Through environmentally-conscious investing, when you make your preferences felt for environment-friendly businesses, you are also telling non-compliant businesses that they need to change their ways. The collective might of environmentally-conscious investors like you provides the right motivation to other businesses to start contributing their own towards environment protection and conservation. With environmentally-conscious investing, you will thus be creating and sustaining a major transformation that will be no less significant than a revolution in environment conservation.

There are plenty of options available for environmentally-conscious investing. If you are new to this, you can start with mutual funds that meticulously follow the tenets of environmentally-conscious investing. Gradually, as you gain more information and experience, you can start investing directly in businesses that might be actively contributing towards overcoming environmental challenges.

How To Outperform The Market

All investors must re-evaluate and refine their investing styles and strategies from time to time. As we gain investing experience and knowledge, our view of the market is likely to change and most likely broaden how we envision the extent of our investing capacity. Those who want to try to outperform the market - that is, realize returns greater than the market average - might consider an active trading strategy, even if only for a portion of their portfolio. Here we explain what active trading is, how active traders view the market, their tools and investment vehicles and finally, the risks associated with their style.

What Is Active Trading?

The best way to understand active trading is to differentiate it from buy-and-hold investing, which is based on the belief that a good investment will be profitable in the long term. This means ignoring day-to-day market fluctuations. Using a buy-and-hold strategy, this kind of investor is indifferent to the short-term for two reasons: first, because he or she believes any momentary effects of short-term movements really are minor compared to the long-term average, and second, because short-term movements are nearly impossible to exactly predict. 

An active trader, on the other hand, isn't keen on exposing his or her investments to the effect of short-term losses or missing the opportunity of short-term gains. It's not surprising then, that active traders see an average long-term return not as an insurmountable standard but as a run-of-the-mill expectation. To exceed the standard, or outperform the market, the trader realizes that he or she must look for the profit potential in the market's temporary trends, which means trying to perceive a trend as it begins and predict where it will go in the near future.

Below is a chart that demonstrates the difference between the long- and short-term movements of the market. Note that even though the security moves upward over time, it experiences many smaller trends in both directions along the way.

Performance and the Short Term 

Traders are "active" because for them the importance of the market's short-term activity is magnified - these market movements offer opportunity for accelerated capital gains. A trader's style determines the time frame within which he or she looks for trends. Some look for trends within a span of a few months, some within a few weeks and some within a few hours. Because a shorter period will see more definitive market movements, a trader analyzing a shorter time frame will be more active, executing more trades. 

A greater number of trades don't necessarily equal greater profits. Outperforming the market doesn't mean maximizing your activity, but maximizing your opportunities with a strategy. An active trader will strive to buy and sell (or vice versa in the case of shorting) at the two extremes of a trend within a given time frame. When buying a stock, a trader may try to buy it at the lowest point possible (or an upwards turning point, otherwise known as a bottom) and then sell it when there are signs that it has hit a high point. These signs are generally discerned by means of technical analysis tools, which we discuss below. The more the trader strives to buy and sell at the extremes, the more aggressive - and risky - is his or her strategy. 

Maximizing returns or outperforming the market isn't just about reaping profits, it's also about avoiding losses. In other words, the trader will keep an eye out for any signs that the security is about to take a surprising turn in an undesirable direction. When these signs occur, the trader knows that it is time to exit the investment and seek profits elsewhere. A long-term trader, on the other hand, stays invested in the security if he or she has confidence in its value, even though it may be experiencing a downward shift - the buy and hold investor must tolerate some losses that the trader believes are possible to avoid. 

Technical Analysis

You need particular analytical techniques and tools to discern when a trend starts and when it will come to an end. Technical analysis specializes in interpreting price trends, identifying the best time to buy and sell a security with the use of charts. Unlike fundamental analysis, technical analysis sees price as an all-important factor that tells the direction a security will take in the short term. Here are three principles of technical analysis:

• For the most part, the current price of a stock already reflects the forces influencing it - such as political, economic and social changes - as well as people's perception of these events.
• Prices tend to move in trends.
• History repeats itself.

From these three principles emerges a complicated discipline that designs special indicators to help the trader determine what will happen in the future. Indicators are ways in which price data is processed (usually by means of a calculation) in order to clarify price patterns, which become apparent when the results of the indicator's calculation are plotted on a chart. Displayed together with plotted historical prices, these indicators can help the trader discern trend lines and analyze them, reading signals emitted by the indicator in order to choose entry into or exit from the trade. Some examples of the many different types of indicators are moving averages, relative strength and oscillators. 

Fundamental analysis can be used to trade, but most traders are well trained and experienced in the techniques of charting and technical analysis. It is a blend of science and art that requires patience and dedication. Because timing is of the utmost importance in active trading, efficiency in technical analysis is a great determiner of success. 

Leverage 

The short term approach of investing offers opportunities to realize capital gains not only by means of trend analysis, but also through short-term investing devices that amplify potential gains given the amount invested. One of these techniques is leveraging, which is often implemented by something called margin. 

Margin is simply the use of borrowed money to make a trade. Say you had $5,000 to invest: you could, instead of simply investing this amount, open a margin account and receive an additional, say, $5,000 to invest. This would give you a total of $10,000 with which to make a trade. So, if you invested in a stock that returned 25%, your $10,000 investment turns into $12,500. Now, when you pay back the original $5,000, you'd be left with $7,500 (we'll assume interest charges are zero), giving you a $2,500 profit or a return of 50%. Had you invested only $5,000, your profit would've been only $1,250. In other words, margin doubled your return. 

However, as the upside potential is exacerbated, so is the downside risk. If the above investment instead experienced a 25% decline, you would have suffered a loss of 50%, and if the investment experienced a 50% decline, you would've lost 100%. You may have already guessed that, with leverage, a trader can lose more than his or her initial investment! As such it is a trading tool that should be used only by experienced traders who are skilled at the art of timing entry into and exit from investments. Also, since margin is borrowed money, the less time you take to pay it back, the less interest you pay on it. If you take a long time to try to reap profits from a trade, the cost of margin can eat into your overall return. 

The Risks 

Active trading offers the enticing potential of above-average returns, but like almost anything else that's enticing, it cannot be achieved successfully without costs and risks. 

The shorter time frame to which traders devote themselves offers a vast potential but, because the market can move fast, the trader must know how to read it and then react. Without skill in discerning signals and timing entries and exits, the trader may not only miss opportunities but also suffer the blow of rapid losses - especially if, as we explained above, the trader is riding on high leverage. Thus, learning to trade is both time consuming and expensive. Any person thinking of becoming an active trader should take this into account.

Also the higher frequency of transactions of active trading doesn't come for free: brokerage commissions are placed on every trade and, since these commissions are an expense, they eat into the trader's return. Because every trade costs money, a trader must be confident in his or her decision: to achieve profits, the return of a trade must be well above the commission. If a trader is not sure of what he or she is doing and ends up trading more frequently because of blunders, the brokerage costs will add up on top of any losses. 

Finally, because securities are being entered and exited so often, the active trader will have to pay taxes on any capital gains realized every year. This could differ from a more passive investor who holds investments for numerous years and does not pay capital gains tax on a yearly basis. Capital gains tax expense must also be factored in when an active trader is calculating overall return. 

The Bottom Line

As you gain more education and experience as an investor, you may become curious about the different ways to reach returns. It is important to be willing to learn about different strategies and approaches, but it is equally important to know what suits your personality, skills and risk tolerance. You may have guessed that active trading is best suited to those who are committed to taking control over their portfolio and pursuing their goals quickly and aggressively. All of this requires a willingness to not only take risks, but also keep up skills and efficiency. If this sounds like you, it may be time to start learning more!

Believing in Your Forex Investment Method

Like anything else in life, if you believe in what you are doing, chances are higher that you will succeed in your attempts. Doing something in a lackluster, random manner often brings in dreary, uninspiring results.

Setting goals and methods of advancement in trading may not guarantee tremendous profits. But it does have more of a chance of success than working with no guidelines at all. A trader must set down in writing what methods make sense to him and then follow them.

There are several trading methods used in Forex:

Day trading has become very popular of late. Day trading involves sitting in front of your computer all day and sometime nights as well. You make money by buying and selling on small price movements. Day trading is typically trading that is based on technical indicators with the occasional news thrown in. Day trading requires skill that is honed through experience. Novice Forex traders should not choose to day trade Forex.

Scalping is another popular method of Forex trading. The main goal of scalping is to buy or sell a number of shares at the bid or ask price and then quickly sell them a few cents higher or lower for a profit. Many small profits can easily compound into large gains if a strict exit strategy is used to prevent large losses. You can be successful at scalping for a while, but it is really more like gambling than trading and you can end up losing far more often than wining.

The most successful method of trading is to look at the big picture. A trader can study the charts, interpret the financial indicators and look for the trends that the Forex currency pairs move in over a few days or weeks. This is the most basic method of Forex trading and one that is the least stressful. Setting targets and trading in small quantities can bring small profits but over time, these can accumulate into larger amounts.

Today’s most popular Forex trading method of late is the automated trading. There are several automated versions such as using signal providers. But the newest introduction to automated trading is the robot or EA. This allows the trader to set up a system which will run on auto pilot during the night or any time the trader is not physically available to trade. These robot programs are made available by most brokers but can also be obtained by ordering them through Amazon or other suppliers and installing them in one’s computer. Still, it does take a Forex account with a Forex broker in order to place a trade.

Depending on automation to trade removes much of the excitement of trading and leaves the control in the ‘hands’ of a machine. Still that seems to be the way of the world today and Forex is always one step ahead of the trend.

Always choose the method that works the best for you. But no matter how you plan to trade, always keep your emotions in check, mange your risk/reward ratio, and seek assistance when you need it. Believe in what you are doing and enjoy the ride. 

GCM is a group of elite markets traders, experienced in trading the world’s largest financial market with huge turnover volume in a day. We foresee that the future trend in the capital markets, gold futures will continually transforming and challenging world of online trading. Hence, GCM is committed and will be one of the most outstanding trading services provider in the region.

GCM trader team experts in gold trading, with low risk high return trading strategy. Nowadays, gold is too expensive to buy and hold for a long period for purposes either in hedging financial stress or investment. Hence, with our strategy, we allow you to earn the profit from gold growth with only little of your investment capital required. On top of that, we have a safeguard for your investment, a safe heaven to protect your investment capital from being risky in gold trading and investment.

Hence, we are able to provide a low risk and high return investment from gold trading for you. Start your gold trading now today with GCM!

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Where to Invest in Malaysia Hotspots for Property Investment

Where are the Klang Valley hotspots for property investment to make more money? Everyone is so interested to know where to invest in property hotspots at KL and PJ. Therefore, I keep collecting the information released from our Malaysia property experts and consultants regarding the hotspots for property investment, especially residential property at KL and PJ.

MALAYSIA KL AND PJ PROPERTY HOTSPOTS FOR INVESTMENT

• Northeastern Petaling Jaya (Bandar Utama, Taman Tun Dr Ismail, Mutiara Damansara, Kota Damansara, Sri Damansara, Desa ParkCity and Valencia)
• Subang Jaya – Shah Alam belt
• Damansara Heights
• Sri Hartamas
• Bangsar
• Taman Seputeh
• Taman Desa

From the locations listed on above, medium cost up to high end properties are available for different group of people. So, where is your favorite and preferred location for property investment during this slowdown economic? Keep an eye for all the new launch property or completing soon project at the locations abovementioned. Get ready to make more money from hotspots property! More importantly, get your money be prepared! Cash is King!!!

Many property investors are adopting a “wait and see” attitude. Nothing to be surprised, do thing last minute always is Malaysian style! For me, there are three groups of investor in whatever type of investment:

1. Sense first, get first （先知先觉）
2. Sense later, get later （后知后觉）
3. Never sense, never get （不知不觉）

So, sense more and get more! Go visit more property showrooms, do more actual site survey, read more property investment books, do more analysis, and etc. Put for afford and just do it!

Dealing with Forex Trading Volatility

The currency markets are generally considered to be volatile in nature. The volatility is usually magnified by the use of leverage by the participating traders. There are certain things that traders have to do to survive volatile markets. This is a short guide to surviving a volatile currency trading environment.

Trading Psychology

Trading psychology is about controlling your emotions. The mood of the trader can have a profound effect on how he or she views the market. Here are a few major psychological hurdles that are particular during volatile markets.

Deal with your losses

Sometimes you just have to admit when you are plain wrong about a trade that you made. If an extra volatile market, even holding on to a bad trade for an extra day can cost you plenty. It is better to admit when you are clearly wrong and cut a small loss before it can become a sizable loss.

Deal with your gains

It might seem silly, but you have to also figure out a rational way to deal with your winning trades. It seems simple, but winning trades can put you off balance by making you feel like you cannot make a mistake. It’s important to keep an objective eye, even if you are making a large amount of winning trades.

Know when to back off

Sometimes the market lacks any kind of sense whatsoever. It will keep pulling you in, and then taking out your stop and dragging your account balance down. It’s ok, to step back and leave the market for awhile until it settles down. There is money to be made every day.

Risk Management

There could be no better time to use proper risk management than during a volatile market. Risk management can save your trading account!

Position Sizing

When the swings are wild, trade smaller. The size of the moves will make up for smaller position size. A large position size will just make you feel nervous as the market whips around with your trade. This could make you do something you will regret later when the market takes off on your intended direction.

Correct use of Stops

Special care needs to be taken on the placing of stops in an overly volatile market. Most of the time, tight stops will not work at all in a wild market. Trades will need room to breathe. Otherwise traders can be stopped out often by price whipsaws. If using the proper position sizing, it is ok to use a wide stop to let your trade breathe.

Lock in gains often

Once the market moves in your preferred direction and your trade is in the money, do not hesitate to adjust your stop and lock in some of those gains. There is no shame in getting stopped out for a gain, large or small. When markets are out of control, you have to use every little edge you can get. Locking in your gains as often as you can will insure that you end up with gains rather than losses.

Mistakes to Avoid

There are some forex mistakes that traders need to avoid in general. Those mistakes can hurt 10 times as much if you make them in a volatile market.

Large Position Sizes

I cannot stress this enough, take a smaller position size. Take a position size that you could handle seeing terribly negative, if you had to. It’s not to say that you want to have negative trades sitting on your account, but having smaller position sizes will keep your head level if they come under pressure. You might not make a fortune on each trade, but your account will survive to see the next trading day.

Averaging Down

Averaging down is when you are in a losing trade, and you take another position to try to make your average entry price lower. This is a strategy that can work under certain conditions, but it is very dangerous in a volatile market. Most traders will try to keep averaging down because they expect that the trade will turn at any moment. The losses will get larger and larger, more than you might have ever imagined, and you end up with a blown account. It is generally a bad idea to average down at all, it usually results in disaster.

Picking tops and bottoms

Do not try to pick the point where you think price will turn around. This is one of the number one killers of trading account equity. Picking tops and bottoms has to do with trader ego. It is not necessary to beat the market by figuring out the turn. You can simply follow the trends and use reasonable stops and you will make money. You will find that volatile markets can surprise you on how far they will go, and how fast they will get there. Stay away from trying to pick tops and bottoms and avoid becoming a casualty of a fast market.

Summary

Take care of yourself as a trader. When markets are volatile, be conservative and follow the rules of the trading road. Volatile markets plus leverage can be painful to your account. There are old traders, and there are bold traders, but there are no old and bold traders. There is a reason for that!

Income Investing

Income investing, which aims to pick companies that provide a steady stream of income, is perhaps one of the most straightforward stock-picking strategies. When investors think of steady income they commonly think of fixed-income securities such as bonds. However, stocks can also provide a steady income by paying a solid dividend. Here we look at the strategy that focuses on finding these kinds of stocks.

Who Pays Dividends? 

Income investors usually end up focusing on older, more established firms, which have reached a certain size and are no longer able to sustain higher levels of growth. These companies generally no longer are in rapidly expanding industries and so instead of reinvesting retained earnings into themselves (as many high-flying growth companies do), mature firms tend to pay out retained earnings as dividends as a way to provide a return to their shareholders. 

Thus, dividends are more prominent in certain industries. Utility companies, for example, have historically paid a fairly decent dividend, and this trend should continue in the future. 

Dividend Yield 

Income investing is not simply about investing in companies with the highest dividends (in dollar figures). The more important gauge is the dividend yield, calculated by dividing the annual dividend per share by share price. This measures the actual return that a dividend gives the owner of the stock. For example, a company with a share price of $100 and a dividend of $6 per share has a 6% dividend yield, or 6% return from dividends. The average dividend yield for companies in the S&P 500 is 2-3%. 

But income investors demand a much higher yield than 2-3%. Most are looking for a minimum 5-6% yield, which on a $1-million investment would produce an income (before taxes) of $50,000-$60,000. The driving principle behind this strategy is probably becoming pretty clear: find good companies with sustainable high dividend yields to receive a steady and predictable stream of money over the long term. 

Another factor to consider with the dividend yield is a company's past dividend policy. Income investors must determine whether a prospective company can continue with its dividends. If a company has recently increased its dividend, be sure to analyze that decision. A large increase, say from 1.5% to 6%, over a short period such as a year or two, may turn out to be over-optimistic and unsustainable into the future. The longer the company has been paying a good dividend, the more likely it will continue to do so in the future. Companies that have had steady dividends over the past five, 10, 15, or even 50 years are likely to continue the trend. 

An Example 

There are many good companies that pay great dividends and also grow at a respectable rate. Perhaps the best example of this is Johnson & Johnson. From 1963 to 2004, Johnson & Johnson has increased its dividend every year. In fact, if you bought the stock in 1963 the dividend yield on your initial shares would have grown approximately 12% annually. Thirty years later, your earnings from dividends alone would have rendered a 48% annual return on your initial shares! 

Here is a chart of Johnson & Johnson's share price (adjusted for splits and dividend payments), which demonstrates the power of the combination of dividend yield and company appreciation: 

This chart should address the concerns of those who simply dismiss income investing as an extremely defensive and conservative investment style. When an initial investment appreciates over 225 times - including dividends - in about 20 years, that may be about as "sexy" as it gets. 

Dividends Are Not Everything 

You should never invest solely on the basis of dividends. Keep in mind that high dividends don't automatically indicate a good company. Because they are paid out of a company's net income, higher dividends will result in a lower retained earnings. Problems arise when the income that would have been better re-invested into the company goes to high dividends instead. 

The income investing strategy is about more than using a stock screener to find the companies with the highest dividend yield. Because these yields are only worth something if they are sustainable, income investors must be sure to analyze their companies carefully, buying only ones that have good fundamentals. Like all other strategies discussed in this tutorial, the income investing strategy has no set formula for finding a good company. To determine the sustainability of dividends by means of fundamental analysis, each individual investor must use his or her own interpretive skills and personal judgment - for this reason, we won't get into what defines a "good company". 

Stock Picking, not Fixed Income 

Something to remember is that dividends do not equal lower risk. The risk associated with any equity security still applies to those with high dividend yields, although the risk can be minimized by picking solid companies. 

Taxes Taxes Taxes 

One final important note: in most countries and states/provinces, dividend payments are taxed at the same rate as your wages. As such, these payments tend to be taxed higher than capital gains, which is a factor that reduces your overall return. 

Trading Double Tops And Double Bottoms

No chart pattern is more common in trading than the double bottom or double top. In fact, this pattern appears so often that it alone may serve as proof positive that price action is not as wildly random as many academics claim. Price charts simply express trader sentiment and double tops and double bottoms represent a retesting of temporary extremes. If prices were truly random, why do they pause so frequently at just those points? To traders, the answer is that many participants are making their stand at those clearly demarcated levels. 

If these levels undergo and repel attacks, they instill even more confidence in the traders who've defended the barrier and, as such, are likely to generate strong profitable countermoves. Here we look at the difficult task of spotting the important double bottom and double tops, and we demonstrate how Bollinger Bands® can help you set appropriate stops when you're trading these patterns.

An example of a double top in EUR/USD forming as longs.

A very tight double bottom leads to a 150 point explosion.

React or Anticipate? 

One great criticism of technical pattern trading is that setups always look obvious in hindsight but that executing in real time is actually very difficult. Double tops and double bottoms are no exception. Although these patterns appear almost daily, successfully identifying and trading the patterns is no easy task. 


There are two approaches to this problem and both have their merits and drawbacks. In short, traders can either anticipate these formations or wait for confirmation and react to them. Which approach you chose is more a function of your personality than relative merit. Those who have a fader mentality - who love to fight the tape, sell into strength and buy weakness - will try to anticipate the pattern by stepping in front of the price move.

Anticipatory trader will set an entry zone.

The strategy works if the trader is able to obtain an excellent entry.

The strategy runs the risk of failing.

Reactive traders, who want to see confirmation of the pattern before entering, have the advantage of knowing that the pattern exists but there's a tradeoff: they must pay worse prices and suffer greater losses should the pattern fail.

Patience has viture for the reactive trader.

Waiting for confirmation will often leave the trader buying the top.

What's Obvious Is Not Often Right 

Most traders are inclined to place a stop right at the bottom of a double bottom or top of the double top. The conventional wisdom says that once the pattern is broken, the trader should get out. But conventional wisdom is often wrong. 

Leaving the trade early may seem prudent and logical, but markets are rarely that straightforward. Many retail traders play double tops/bottoms, and, knowing this, dealers and institutional traders love to exploit the retail traders' behavior of exiting early, forcing the weak hands out of the trade before price changes direction. The net effect is a series of frustrating stops out of positions that often would have turned out to be successful trades.

A stop here is a big mistake.

What Are Stops For?

Most traders make the mistake of using stops for risk control. But risk control in trading should be achieved through proper position size, not stops. The general rule of thumb is never to risk more than 2% of capital per trade. For smaller traders, that can sometimes mean ridiculously small trades.

Fortunately in FX where many dealers allow flexible lot sizes, down to one unit per lot - the 2% rule of thumb is easily possible. Nevertheless, many traders insist on using tight stops on highly leveraged positions. In fact, it is quite common for a trader to generate 10 consecutive losing trades under such tight stop methods. So, we could say that in FX, instead of controlling risk, ineffective stops might even increase it. Their function, then, is to determine the highest probability for a point of failure. An effective stop poses little doubt to the trader over whether he or she is wrong.

Implementing the True Function of Stops 

A technique using Bollinger Bands can help traders set those proper stops. Because Bollinger Bands® incorporate volatility by using standard deviations in their calculations, they can accurately project price levels at which traders should abandon their trades. 

The method for using Bollinger-Bands stops for double tops and double bottoms is quite simple: 

• Isolate the point of the first top or bottom, and overlay Bollinger Bands with four standard-deviation parameters.
• Draw a line from the first top or bottom to the Bollinger Band. The point of intersection becomes your stop.

At first glance four standard deviations may seem like an extreme choice. After all, two standard deviations cover 95% of possible scenarios in a normal distribution of a dataset. However, all those who have traded financial markets know that price action is anything but normal - if it were, the type of crashes that happen in financial markets every five or 10 years would occur only once every 6,000 years. Classic statistical assumptions are not very useful for traders. Therefore setting a wider standard-deviation parameter is a must. 

The four standard deviations cover more than 99% of all probabilities and therefore seem to offer a reasonable cut-off point. More importantly they work well in actual testing, providing stops that are not too tight, yet not so wide as to become prohibitively costly. Note how well they work on the following GBP/USD example.

An anticipatory trader can survive.

More importantly, take a look at the next example. A true sign of a proper stop is a capacity to protect the trader from runaway losses. In the following chart, the trade is clearly wrong but is stopped out well before the one-way move causes major damage to the trader's account. 

This is clearly wrong but is stopped out well before there are damages.

The Bottom Line 

The genius of Bollinger Bands is their adaptability. By constantly incorporating volatility, they adjust quickly to the rhythm of the market. Using them to set proper stops when trading double bottoms and double tops - the most frequent price patterns in FX - makes those common trades much more effective.