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Trading strategies using bollinger bands

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trading strategies using bollinger bands

Expert Charts, Trading Tips and Technical Analysis from INO. September 16, by Kenny. Strategies sure to comment with your thoughts on Bollinger bands and some techniques that you use in short term trading. Bollinger Bands bands a great indicator with many advantages, but unfortunately many traders don't know how to use this amazing indicator. Before I show you how I use it, let's quickly review what exactly Bollinger Bands are. If you look at the following images you see the Moving Average displayed as a solid blue line and the Upper and Lower Bollinger Bands as dotted blue lines. In MarketClub the lines are red. And in sideways markets, prices tend to wander from the Upper Bollinger Band to the Lower Bollinger Band. With this being the case, many traders use Bollinger Bands to bollinger a simple trend fading strategy: They SELL when prices move outside the Upper Bollinger Band and BUY when prices move outside the Lower Bollinger Band. This actually works reasonably well in a sideways using, but in a trending market you get burned. I use indicators to determine the direction of the market, and decide whether the market is trending or not. And Bollinger Bands are one of the three indicators that I use for this task. For short term trading I prefer to use a moving average of 12 bars and a standard deviation of 2 for my settings. In many charting software packages the standard settings for the Bollinger Bands are for the moving average and 2 for the standard deviation. These settings are great if you are trading on daily or weekly charts, but John Bollinger himself suggests that when DAY TRADING you should shorten the number of bars used for the moving average. John Bollinger suggests a setting ofand for me the best setting is With these settings trading will find that in an trading, the Upper Bollinger Band points nicely up and prices are constantly touching the Upper Bollinger Band. The same is true for a downtrend: If a market is in a downtrend, you will see that the LOWER Bollinger Band is nicely pointing down and prices are touching the lower Bollinger Band. Well, the first warning sign that the trend might be over is when prices are moving away from the Bollinger Band. And you know that an uptrend is over, at least for now, when the Upper Bollinger Band flattens. The same applies to downtrends: The first warning sign that a downtrend is over is when prices are moving away from the Lower Bollinger Band, so they are no longer touching the Lower Bollinger Band. And you know that the move is over when the Lower Bollinger Band flattens. Well, if you use a trend-following strategy, you start looking for LONG entries as soon as you see the Upper Bollinger Band pointing nicely up with prices touching the Upper Bollinger Band. And when the Upper Bollinger Band flattens, you exit your long position, since you know that the trend is over. You see, when the market is moving sideways, you don't make any money being in the market just hoping that the market will continue to trend. So exit the position before the market turns around, because you can always re-enter when you see that the market is trending again. In fact, a strategy I call the Rockwell Simple Strategy actually relies on price tagging an Upper Bollinger Band as an entry signal: With this strategy I use MACD to confirm an uptrend, and I wait until the Upper Bollinger Band starts to point up. I then enter at the Upper Bollinger Band with a stop order, waiting for the market to using to me. I am then using a stop loss and a profit target based on the AVERAGE DAILY RANGE. This strategy is really beyond the scope of this article since we are focusing on Bollinger Bands, but this is exactly how I use Bollinger Bands to determine the direction of the market and decide on the trading strategy I will use. So as long as the Upper Bollinger Band is nicely pointing up or down, I am looking for entries according to my trend-following strategies like the Simple Strategy. Once the Bollinger Bands flatten, I am looking for entries according to the sideways strategies I trade. You always want to trade a trend-following strategy in a trending market and a trend-fading strategy in a sideways market. As you can see, Bollinger Bands offer tremendous help to determine the direction of the market and decide what trading strategy to use. Many traders learn how to use Bollinger Bands to fade the market, but they can be even more powerful when used to trade trends, and in determining the direction of the market. For a limited time INO Blog Readers can download his book free here. Guest Bloggers Tagged With: LUIS DE MENEZES says. December 22, at Your article about BB is very good. Really BB is a good indicator to measure the volatility. I use BB with candelsticks supported by price and volume indicators. I would like to know how you trade BB squeeze. For me the Squeeze or constriction is a opportunity to catch breakouts,and if you antecipate your order your r the winner. But sometimes is very difficult to know if the breakout will go up or down. Can you tell me how you trade this strategy? April 26, at January 22, at 6: November 11, at 7: November 7, at 1: You are exactly right. Too many people have so much going on their charts they are too late on making a move. I trade options and love Bollinger Bands. September 30, at 1: I also have found that the Bolinger Bands work best in a sideways market along with the MACD Histogram. As for Mohamad we all had to go through the learning curve and obtain information wherever we could. However there are a lot of education sites available to you and many books on the subject of stock trading. September 28, at 2: Yes, la Morhamad, you are the definition of "stupid money. In all honesty the middle east religions confuses me so much I don't even bother trying to figure everything out. I wish I had the time but I don't. I have nothing again't Muslims. I'm not an arrogant or culturally insensitive person and my comment had absolutely nothing to do with you're race, ethnicity or religion. I'm aware of the fact that this trading a big world and we have a lot of different people with different people living in it so how bout we leave it at that? The reason I called you stupid is not because of your poor grammar. I'd assume English is not your first language and that is fine. I was able to understand your message fine which is why I called you a stupid investor. I have nothing against people like you because you help people like myself and others here at MarketClub money by taking the wrong side of a position. September 24, at 4: You Iajustin Miller says about me stupid Why do you say I am stupid September 24, at 2: September 21, at 3: With the level of intelligence you're likely to have based on the grammar in your sentence you have no chance. September 20, at You can play as much as you want with different indicators settings, none will be better or lesser than the other. A setting will work nicely for a while then not so well afterwards. Use it on another underlier then it won't work at all So I use very few indicators with the defaults settings given bollinger every software. Indicators are just what they are "indicators" but the real thing is the tape. So learning reading the tape is the must be done and main focus. September 20, at 2: I thought many traders liked to adjust the MACD default settings for short term trades But I guess in this case, the default are sufficient but I'd be interested to hear from anyone who has had success trading intraday especially ES with different MACD settings. September 19, at Thanks for the feedback. I've been testing different MACD settings for short time trading but so far my back tests have had little success. I'll give this one a try. As for the ATR, have you considered a 10 period? You might find this works well with intraday trading. September 19, at 2: September 18, at 4: Don - to get 15 days to show up it had to be 30 minutes chart for the chart examples above. September 17, at 4: I'M JUST CURIOUS AS TO THE TIME FRAME THAT WAS SHOWN ON THE CHARTS. WAS IT A 5 MINUTE OR WHAT? Is there any one help me in any way. Emily Bands 14 7 1 hotmail. September 17, at 2: Doc Stock - I think the principles strategies the same except RSI is 14 instead of 7 and the default BB setting is 20,2,2 instead of 12,2. This of course would be on the daily trading weekly charts. September 17, at 1: I just recently added this to the weekly chart. I wonder what his thoughts are on the use of the BB for longer term charts. Nevertheless, it is another tool that is helpful, despite it being a lagging indicator. September 16, at Justin, there are 4 videos and I looked at 2 of them today, one on Bollenger Bands which is much like the basic note and the 3 is on use of MACD with the BBs. ATR - don't know that one. We were trying different settings including the 2 min chart. Wilder RSI normally is for short term trading. I have never had success with short term so I have been a longer term investor sincebut the last 4 years the longer focus has nearly disappeared and I am looking to modify my investing. September 16, at 9: The maths are easy. To achieve this without overtrading is just a matter of maintaining your risk management and I increase my lot size accordingly with each trade so it reflects the growing balance to maintain the exact ratio as when making the initial trade. Forex has taken me on quite a journey and when I arrived at this goal and the discipline to trade in this manner I have found my trading to be successful. Hope this helps as Forex provides the opportunity to have big dreams but like anything it's the breaking it down into sizeable chunks that allows us to see bollinger possibility is there. I'd also really appreciate it if you strategies share a few setting for the MACD and the ATR for intraday trading. And by the way, this is a great post, which I haven't seen in quite some time! September 16, at 7: Look up Ira Epstein Futures o Youtube, he uses BB, Stochastics, and mov avg to explain market trends Poorman, I'm glad you were able to take a look my indicator videos. Yes I do use standard MACD settings to help determine the direction of the market 12, 26, 9. I want to avoid analysis paralysis from using too many indicators, but I feel it is important to use 2 or more indicators I use 3 to determine the direction of the market and have found that MACD and RSI are nice compliments to Bollinger Bands. Dee Dee, thanks for your post! September 16, at 6: September 16, at 4: Security prices are not normally distributed. I recently read John Bollinger's book, Bollinger on BBs and he has some great insights. I started using his forex website, BBForex. September 16, at 3: Watched 2 of the Rockwell videos and learned more about the BB and combined with MACD, looks like some good short term tools. Have been a longer term investor sincebut finding the going rough the last few years. Never traded short term before as it always backfired with longer term tools. I bands like the potential here. Some people are constistent only using positive and negative MACD divergence, why should BBs be any different? Sometimes over analysis is the worst analysis. Not eveyone has a chart full of indicators. I'm still learning, but to me, the more cluttered the chart, the less you see. September 16, at 2: Is one help me in order to compensate the progress of my entry and exit points in trading this my email. I hope anyone help me. September 16, at 1: This is terrific info. What setting using you use for MACD? I see the sample is 30 min and bb of 12,2,2 setting. BB are a volatility indicator, when they are closing the volatility decrease, when they are diverging volatility is back. BB are a trend reversal indicator, when the top BB bend down the up trend is probably over, when the bottom BB goes up the down trend is over. Another indicator deserves attention, it is the Parabolic SAR, combine them both for confirmation. With a simple Bollinger band. No body would be working anymore. By consistent I mean over a couple of years. It is about time we saw an application of this powerful trend defining tool. However there are issues with what was claimed to define "exactly" what they are. The upper and lower bands are the standard deviation of the data point in the sample not bands the moving average. The uncertainty in the average can also be defined by its standard deviation as can the uncertainty in the uncertainty in the uncertainty of the average etc. One can also determine the standad deviation in the value of the standard deviation etc. All these uncertainty values are detwermined by a formula that has "n", the number of data points in the denominator so be aware that larger samples reduce all the uncertainty in the statistical summary of the data set. There are many who would not consider samples size smaller than 20, which is the usual default size for Bollinger Bands in market data analysis. An important point, not made, is that the width of the bands is important. As bands narrow there is increasingly greater confirmation that the current price is the right price while broadening band indicate that recent transactions disagree that the price is well defined. A funnelling other than horizontally indicates confirmation or lack thereof of the trend. From my experience there is a limit to the prediction value to only about one-third or less of the sampleing period. Thank you, I like the BB explanation, I use Q Charts and have the the Upper and the Lower BB set for all my trades. Even though its hard to believe but this is the reality of my forex trading. When I started to trade for the first time in June '10, had no previous trading experience. Now I can give all the credit to this indicator for most of my FOREX profit This made a great fan of BOLLINGER BAND. My strategy was to refrain from entering a short position at strategies bottom of the lower band and long position at the top of the upper bollinger band. I would like to thank David for his informative video lesson at InformedTraders. Pulse Markets Futures Stocks Forex World Indices Metals Exchanges Charts Symbol List Extremes Portfolio News Headline News Commentary MarketClub Join Now Top Stocks Top ETFs Top Penny Stocks Top Forex Trend Analysis Videos Market Analysis Email Services Blog Free. Monday Jun 19th, Comments LUIS DE MENEZES says December 22, at But smarten up, do your homework, stop with the racist card then come back and invest. Znntek will contact me on my email for you to help me. Do you like the Arabs. Just stop trying to make money when you haven't an F what you're doing you idiot! Bruce de Poorman, Thanks for the feedback. Bruce de Poorman looking to change the name. Bollinger Bruce, How can you tell the setting from these pictures? On my end, they're really blurry. This is true of ANY distribution of the data see ASTM STP Ok, I found the MACD setting 12,26,9. What does URI stand for on the posting requirement? Why is Sur ludicrous? Well, perhaps he made starting out with dollars 4 months ago. You need to watch them carefully and learn their behaviour, it one a very reliable indicator. Starting With The Letter "A". Categories General Guest Bloggers INO Cares INO. Blogroll 4 Futures Newsletter Add Using Blog Here Biiwii TA and Commentary Crude Oil Trader ETF Daily News Feed The Bull Learn Options Trading Online Stock Trading Guide Options Trading Mastery Scott's Investments Stock Gumshoe Traders Day Trading Vantage Point Trading VantagePoint Trading Software. trading strategies using bollinger bands

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