Trading With Bollinger Bands
Trend Trading Bollinger Bands Strategy
Bollinger bands are one of the important technical indicators that are used to measure the volatility in the market. Bollinger bands show the standard deviation of price away from its 20 period moving average. Most traders use Bollinger Bands (BBs) for range trading. But in this article, we will learn how to use the Bollinger Bands to trade trends.
Now, if we superimpose a second set of BBs with standard settings of 1 standard deviation on to a price chart that already has a BB with the default settings of 2, you will be surprised to find out as the price action tends to start trending in the market, it will be contained in the 1SD-2SD BBs.
These four bands form three dynamic zones on the charts. One is the buy zone that is formed between the upper 1 SD and 2 SD BBs. The other is the sell zone that is formed between the lower 1 SD and the 2 SD Bollinger bands. The zone between the 2 upper SD and the 2 lower SD Bollinger Band is a sort of no man’s land where price action is directionless.
So if the prices trade between the two upper BBs, it is an uptrend. If the prices trade between the two lower BBs, it is a downtrend. If price action is between the two upper and the two lower BBs, it is trendless without any direction. When price action closes in the buy zone, it is in an uptrend. So when to enter into a long trade?
When the price action enter the buy zone and closes within it, you can enter into a long trade at the close of the entry bar with the stop loss at the low of the entry bar. Exit the trade as soon as the price action enters into no man’s land.
In the same manner, when price action enters the sell zone and closes within it, enter into a short trade at the close of the entry bar with the stop loss at the high of the entry bar. Exit the trade when the price action enters into the no man’s land. You must have observed one thing that the stop in this Bollinger band strategy are tight. This is the beauty of this Bollinger Bands Trend Trading Strategy and makes this strategy a low risk strategy.
About the Author
Mr. Ahmad Hassam has done Masters from Harvard University. Get these 3
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ENTR trade – long swing using Bollinger Bands
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Bollinger on Bollinger Bands $49.95 “All in all, Bollinger on Bollinger Bands is a gem. …within 10 minutes of opening it, it went on my list of the five best technical analysis books ever.” – Active TraderThe First Comprehensive Traders’ Guide to Using Bollinger Bands­­from the Man Who Created ThemIncludes handy Bollinger Bands reference cardOver the past two decades, thousands of veteran traders have come to view Bollinger Bands as the most representative­­and reliable­­tool for assessing expected price action. Now, in the long-anticipated Bollinger on Bollinger Bands, John Bollinger himself explains how to use this extraordinary technique to effectively compare price and indicator movements.Traders can look to this techniques-oriented book for hundreds of valuable insights, including:Analysis of the primary indicators derived from Bollinger Bands­­%b and BandWidth How traders can use Bollinger Bands to work with­­instead of against­­commonly encountered trading patterns Strategic use of Bollinger Bands in short-, mid-, and long-term trading programs Three trading systems based on Bollinger Bands The essence of successful investing is to determine when a stock’s price is too high or too low and then act accordingly. While John Bollinger would be the first to argue that no techniques exist for definitively determining these levels, Bollinger on Bollinger Bands presents an insider’s examination of the one tool that­­if its widespread popularity is an accurate judge of its effectiveness­­comes closer than anything else. Concise yet comprehensive, it is one of today’s truly indispensable investment guidebooks.”The purpose of this book is to help you avoid many of the common traps investors get caught in, including the buy_low, sell-high trap, where the investor buys only to watch the stock continue downward or sells only to watch the stock |