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Bollinger Bands Indicator Explained – Here’s What You Need To Know!
Bollinger Bands are a very popular indicator, but most traders are using them wrong. Here I will show you the Bollinger Bands secret.
Bollinger Bands are a super simple concept because it’s simply a moving average and 2 standard deviations.
If you bring up the Bollinger Bands on your charting software, no matter which software you are using, you will see a centerline which is the moving average, and a line for a standard deviation both, above and below the moving average.
My preferred settings for The Bollinger Bands:
1) Length – The standard length is either 20 or 21 days, and whichever your charting software suggests is fine.
2) Standard Deviation (StdDev) – The default in TradingView, the software I’m using, is 2 & I keep it here.
Now, this is where most people start using it wrong. Most traders use it as a “trend fading system,” and here’s what I mean.
In the video, you can see I applied the Bollinger Bands to a chart for IBM. You may notice that most of the time, the closing prices are within the Bollinger Bands. Based on my settings this will be 98% of the time.
Most people will wait for the price to close outside of the Bollinger bands, either below the bands to buy, or above to sell. In a sideways market, this is a viable strategy, but this is not the most powerful way to use them.
Looking at a chart for The NDX in the video, and the chart shows it is a trending market. When a market is trending upwards, The upper band is turning up, and prices will often touch the upper band.
When the market is trending down, the prices touch the lower band in the same way. So when you see the lower band is turning down and the prices are touching it, this means the market is in a downtrend.
These upper & lower trends continue until the bands either flatten or turn around.
If we look at a chart for VSTO, the Bollinger Bands at first are going sideways, but then the upper band starts turning up and prices start touching it. How long will it stay in an uptrend? As soon as the upper band starts flattening, or turning around, this is when the uptrend is over.
So why do I not use the Bollinger Bands? I found that the 3 indicators that I already use are perfect for this. I use the RSI, Stochastics, and MACD indicators.
Back on the chart, you can see that as the market is going up we see green bars, and we get green bars when the RSI and the Stochastics are above 50, and the MACD is above the moving average. Black bars mean the market is more likely to trend sideways, and when the Bollinger Bands start to turn around.
We start to see a downward trend when we see red bars and the Bollinger Band starts to turn downward.
So if you need help identifying a trend, Bollinger Bands can help a lot, and here’s a quick recap of how it works.
In an uptrend, the upper band will point up and the prices will constantly touch it. The uptrend continues as long as the band stays pointing up. Once it starts to turn sideways the trend is likely over.
In a downtrend, the lower band will point down and the prices will constantly touch it. The downward trend continues as long as the band stays pointing down. Once it starts to turn sideways the trend is likely over.
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Bollinger Bands Uptrends, Bollinger Bands Indicator Explained – Here's What You Need To Know!.
A Road Map To Success – A Successful Trading Plan
The author Dean Saunders does not add useless details simply to make his guide consist of more pages.
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Bollinger Bands Indicator Explained – Here's What You Need To Know!, Watch most shared videos related to Bollinger Bands Uptrends.
Utilizing Bollinger Bands For Trading Large Cap Stocks
Great indications to use are MACD, RSI, moving averages, stochastic and Bollinger bands. In quick moving market, routing stops are not recommended due to the volatility. Once again, it will be easy for you to get these charts online.
Technical analysis is an extremely essential part of forex trading. It uses numerous inferences. There are the pattern lines, the candlestick bars, the Bollinger bands and the Fibonacci grids. The last one is thought about essential in learning market movement. It finds out what may be right time for the marketplace to show or rally correction. At the exact same time, it talks about resistance and support levels.
I also look at the Bollinger Bands and if the stock is up against among the bands, there is a likely hood that the pattern might be concerning an end. I would not let this prevent me entering a trade, but I would keep a close search it. Likewise, if the stock is moving up or down and about to strike the 20 or 50 day moving average then this may likewise stop that directional relocation. What I look for are trades where the DMI’s have crossed over, the ADX is moving up through the gap/zone in an upward movement and that the stock has some range to move in the past striking the moving average lines. I have found that this system provides a 70%-75% success rate. It’s also a really conservative approach to utilize the DMI/ADX indicators.
If your trade rapidly approaches the limitation cost and all your indications say that the rate movement is just starting & not likely to quickly reverse on you, then you ought to first either eliminate your limitation price & let the rate run, or, raise your limit rate another 5-10 pips. Then raise your stop to either your entry point or past it, to secure either breakeven or some earnings in case the price suddenly reverses on you.
Bollinger Bands Trader bands plot a moving average in the middle, and the extreme bands are formed by basic variance lines around that moving average. Now do not be scared by the algebraic term standard discrepancies. You don’t have to understand how to determine them – the indication does that by itself.
In back screening, it appears that each time the slow and quick stochastics lines crossed each other, it was the precise Bollinger Bands point where there was an advantage or drawback swing.
So what we wish to do is just pick a couple of that you are really comfy with, then disregard whatever else. If it’s a buy or a sell, the point of these signs is to help financiers identify. They all state the very same thing however in their own method. So it is necessary to work with what you are comfy using and get rid of the extra fluff.
This is absolutely what you ought to perform in a price breakout. If the rate keeps going up in an extended breakout, you simply keep adjusting your stop upwards to lock in more earnings (this is called a tracking stop, more later on this subject) and keep raising your limitation likewise.
I know the theory however not how to put it to practise. This is certainly what you should carry out in a price breakout. This is more secure than buying either just a Call or just a Put.
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