The Secret of Successful Bollinger Band Trading
There are many ways of bollinger band trading. In fact I personally use bollinger bands for 2-3 different usage. Sometimes we use price moving out of bollinger bands to be overbought or oversold situation. Sometimes we use formation and closure of two or consecutive bars out of the bollinger band to indicate strong trend. This strategy is one of my favorite bollinger band trading straegy.
Anyway, all you will have to take into consideration for that is that:
• sixty eight percent of a typical price action lie between plus or minus of same 1 deviations.
• ninety five percent of a typical price action lie between plus or minus 2 usual deviations.
• ninety nine percent of a regular price action lie between plus or minus 3 usual deviations.
So depending on this fact we can use multiple bollinger bands to create a complete trading strategy. Listed below are the Bollinger Bands you will have to put to your DAILY chart:
(There are 6 bollinger bands, and that looks like rather a lot, however simply do it!)
• BB(20,1.5) Lime
• BB(20,2) Yellow
• BB(20,2.5) Orange
• BB(20,3) Purple
• BB(20,3.5) Red
• BB(20,4) Blue
Additionally, add an ATR indicator with a parameter of 20. We can use the ATR to calculate our stop loss for the trades taken.
PLEASE learn all of the method to the top of the Counter Pattern part earlier than you begin trading this bollinger band trading way. You’ll in finding that probably the most starting stuff is relatively contradicting with the Counter Pattern part, however simply do what the Counter Development part says.
I hope you like rainbows!
Essentially, you have 13 lines. Each one is a resistance in this bollinger band trading method. I think the best way to show you this method is to show you a lot of examples, so eat your heart out. SO, the example above, let me show you when I would have entered and why.
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Indrajit is a professional blogger and Trading System developer, Amibroker expert, Wordpress expert, SEO expert and Stock market analyst. Trading since 2000, he has started the journey of StockManiacs.net on 2008. He follows Indian and world stock markets closely.