They go long when the price breaks above the thin red line 4.
It is formed by a too long candlestick with a considerable lower shadow. Indeed, it is not a false signal. It is a bad signal. Thank you so much Chris you are indeed a angel. I do have a question though. Please how can one use this strategies to trade shorter time frames like 5, 10, 15, 30 minutes also can this be applied to binary options?
You can use the same way on any time frame or price chart. Just keep in mind that shorter time frames are riskier to trade. Do you mean that, if the closing price of a candle is above an upper band, there is no band breakout? But the closing price of the third candle of the first example, it closed above the upper band, so how can it be a BB breakout? Or were you doing simple technical analysis? Thank you very much. Oh sorry, english is not my first language.
But, about the middle band, you said we can use it to trade continuation signals, but you also said that is risky or riskier than your normal trading. So, how can I trade continuation signals, if there are no strong reversal signals? Thanks a lot for your time and help. You trade the strong candlestick patterns that for as continuation setups.
The power of the candlestick pattern which is agreeable to the trend is important. What about the double bollinger bands? Everything about that system is explained here: Yeah, I read it all, and I think is the easier continuation signal?
What do you think? Is the BB1 breakout, even realible for your sistem? My question is if a candle shadow break above the upper Bollinger, bullish or bearish candlestick, with out creating any pattern, how it can be explained.
It is just a strong price movement and deviation from the middle band. It means the related party is controlling the market strongly. When the shadow is too long, it means the opposite party is trying to take the control, but have not been successful yet.
Thanks Chris you always put the psychology of trading and traders in your articles which make them unique. For the first time in my life I can get a little feeling that I really understand how market works.
I just need to read your articles more carefully and do some highlights. Your explanation of Bollinger bands in this article was awesome. It means a big Bullish pressure is imposed to the market suddenly. What is happening Chris when the shadow occur above the candle? And the explanation is the same if the candle is Bearish?
Basically do we have to follow the candles when breaking out the bollinger bands or the shadows are most important. Hi Chris Once again i am surprised by your perfectly written Article. So many important sentences in this Article. Again your way of explaining the psychology of the market is so catching for me.
Please start from here: The stock ex tcs has reached the upper band ,still it is bullish one or some reason like some profit booking in tcs can reduce the stock little lower or the index like Nifty is consolidating so tcs can lower so that days the False signal is formed. If Nift is up or tcs has some gud news it will bounce back. If you short that time that will hit your stoploss.
Then only we can short. Hello Dear Chris I am Learning too much From Your articles but i am new learner so i am in little confusion after reading the analysis of strong piercing line pattern article that you said in above paragraph 2. Reversal trends 1st Paragraph how candle stick 1 and 2 make piercing line Pattern I mean in that pattern 1st candle is bearish and 2nd is bullish and close little below the 1st candle other wise it would be Bullish Engulfing…..
Can you suggest me how the Bolinger band average period and candle stick time 5 min,10 min,30 min ,1 hour chart for intraday trading. Now I use the Bolinger period average period as 12 days and 5 minutes candle chart for intraday trading in index. But some says the upper band is overbought area and lower band is oversold area. I though have one question; Is this Training based on long term period traders, 1 hour, 4 hour,1 day?
It is hard to check one chart by one chart especially during working hours. Appreciate if you could consider, thanks, Chin. About the bollinger bands, I have one question. For example, we know that if the bands are too close, it means that the interest on buying and selling is low. But, what does it mean, when one band is downward, while the other is upward? Market indecision and high volatily? If a chart is volatile and is trending down strongly, but the lower band points up, it is because, after an high volatily, the market is oversold, and will likely bounce up from close support level?
How do the bands relieve it? This occurs usually when the price starts taking a direction suddenly after a while of moving sideways. After few candlesticks, both bands will follow the price direction. It was among one of the old articles of this site. I am now reviewing and editing them. I have added some more tips and delete the obsolete parts. I hope you are fine.
Doji article is closed for comment,so I will ask you here. As usual, thank you for an excellent article. You also said that 8 was confirmation for the 7 formation.
What about the two candlesticks immediately following 7? One is a very small bodied bull candlestick followed by a large strong bodied bear candlestick that even breaks the Bollinger middle band. Why would you need 8 for confirmation when you have such a strong bearish engulfment pattern immediately following 7? Are there any negative points that would negate that bearish engulfment pattern?
Those small candlesticks are just 2 hours old candlesticks that were used to form on the platforms on Sunday afternoon on the daily chart. It was because of the broker sever time difference and market open on Sunday afternoon. They are not valid daily candlesticks. But sometimes is difficult to determine trend,because after strong trend the market is behaving strangely.
In chart below we had strong downtrend in previous structure. The angle is very steep, and after then we should wait for trend continuation setup,right.
But after that the price is start to go up and down, up and down,and we did not have a clear trend. You had to wait for a trend continuation setup after the price went up. But such a setup never formed. As a result, you stay out. This eBook shows you the shortest way to acheive Financial Freedom: Just before you go, did you check This System? Make sure to do it now, otherwise you will regret. Article by LuckScout Team. November 17, at December 1, at 2: December 28, at 3: March 13, at 1: March 12, at March 20, at April 7, at June 26, at 4: July 2, at 6: July 2, at 1: July 5, at July 16, at 2: August 15, at 2: August 15, at 3: August 15, at 9: August 26, at September 6, at September 13, at 2: September 14, at 4: September 14, at September 15, at 5: October 15, at 1: October 15, at 2: October 16, at 7: November 26, at 8: November 27, at 2: November 28, at 2: November 28, at November 29, at 6: November 29, at 3: November 29, at 7: November 30, at January 22, at 7: January 23, at 2: January 23, at 9: February 9, at 4: February 16, at 3: February 17, at 8: Because standard deviation is a measure of volatility, when the markets become more volatile, the bands widen; during less volatile periods, the bands contract.
Many traders believe the closer the prices move to the upper band, the more overbought the market, and the closer the prices move to the lower band, the more oversold the market. John Bollinger has a set of 22 rules to follow when using the bands as a trading system. Want to know more? Read The Basics of Bollinger Bands.
When the bands come close together, constricting the moving average, it is called a squeeze. A squeeze signals a period of low volatility and is considered by traders to be a potential sign of future increased volatility and possible trading opportunities. Conversely, the wider apart the bands move, the more likely the chance of a decrease in volatility and the greater the possibility of exiting a trade.
However, these conditions are not trading signals. The bands give no indication when the change may take place or which direction price could move. Technical analysis incorporates this technical indicator and many others to create actionable trading plans and strategies. Do you realize that these gains were largely made over 3 days' worth of trading?
I am getting a little older now and hopefully a little wiser and that kind of money that fast, I have learned is almost impossible for me to grasp.
The psychological warfare of the highs and the lows become unmanageable. So, it got me thinking, would applying bands to a chart of bitcoin futures have helped with making the right trade? I indicated on the chart where bitcoin closed outside of the bands as a possible turning point for both the rally and the selloff. But let's be honest here, this is a minute chart of a highly volatile security.
You must honestly ask yourself will you have the discipline to make split second decisions to time this trade, just right? The one thing the bands manages to do as promised is contain the price action, even on something as wild as bitcoin. I honestly find it hard to determine when bitcoin is going to take a turn looking at the bands.
It's not that the bands are doing anything wrong or not working. Bitcoin is just illustrating the harsh reality when trading volatile cryptocurrencies that there is no room for error. I personally do not trade bitcoin, but after looking at the most recent price swing using bands a couple of things come to mind:.
Pairing the Bollinger Band width indicator with Bollinger Bands is like combining the perfect red wine and meat combo you can find.
In the previous section, we talked about staying away from changing the settings. Well, if you really think about it, your entire reasoning for changing the settings in the first place is in hopes of identifying how a security is likely to move based on its volatility.
A much easier way of doing this is to use the Bollinger Bands width. In short, the BB width indicator measures the spread of the bands to the moving average to gauge the volatility of a stock.
Well, now you have an actual reading of the volatility of a security, you can then look back over months or years to see if there are any repeatable patterns of how price reacts when it hits extremes. Still, don't believe me? Look at the below screenshot using both the Bollinger Bands and Bollinger Band width. Notice how the Bollinger Band width tested the. The other point of note is that on each prior test, the high of the indicator made a new high, which implied the volatility was expanding after each quiet period.
As a trader, you need to separate the idea of a low reading with the Bollinger Bands width indicator with the decrease in price. If you had just looked at the bands, it would be nearly impossible to know that a pending move was coming. You would have no way of knowing that. This is just another example of why it's important to pair Bollinger Bands with other indicators and not use it as a standalone tool.
The above chart is of the E-Mini Futures. I want to dig into the E-Mini because the rule of thumb is that the smart money will move the futures market which in turn driveS the cash market. Looking at the chart of the E-mini futures, the peak candle was completely inside of the bands.
Other than the fact the E-mini was riding the bands for months, how would you have known there was a big break coming? Now that I have built up tremendous anticipation, let's see if there is a way to identify an edge.
Remember in Chapter 4, the Bollinger Band width can give an early indication of a pending move as volatility increases. In the above example, the volatility of the E-Mini had two breakouts prior to price peaking. If that wasn't enough to convince you, then the second break above the 8-month swing high of the Bollinger Band width was your second sign. After these early indications, the price went on to make a sharp move lower and the Bollinger Band width value spiked.
The inspiration for this section is from the movie Teenage Mutant Ninja Turtles, where Michelangelo gets super excited about a slice of pizza and compares it to a funny video of a cat playing chopsticks with chopsticks. Does anything jump out that would lead you to believe an expanse in volatility is likely to occur? Let me tell you, when you are trading in real-time, the last thing you want to do is come late to a party.
More times than not, you will be the one left on cleanup after everyone else has had their fun. It was very subtle, but you can see how the bands were coiling tighter and tighter from September through December. During this time, the VIXY respected the middle band. There was one period in late November when the candlesticks slightly jumped over the middle line, but the candles were red and immediately rolled over.
However, in late January, you can see the candlesticks not only closed above the middle line, but also started to print green candles. Now, one could argue that this wasn't enough information to make a trading decision. That is a fair statement. You would need a trained eye and have a good handle with market breadth indicators to know that this was the start of something real.
There is the obvious climactic volume which jumps off the chart, but there was a slight pickup in late January, which was another indicator that the smart money was starting to cash in profits before the start of spring break. This gives you an idea of what topics related to bands are important to other traders according to Google. Why is this important? It's safe to say bands is probably one of the most popular technical indicators in any trading platform. If memory serves me correctly, Bollinger Bands, moving averages and volume were likely my first taste of the life.
Well as of today, I no longer use bands in my trading. That doesn't mean they can't work for you, but my trading style requires me to use a clean chart. Therefore, the more signals on the chart, the more likely I am to act in response to said signal.
This is where the bands expose my trading flaw. For example, if a stock explodes above the bands, what do you think is running through my mind? You guessed right, sell! The stock could just be starting its glorious move to the heavens, but I am unable to mentally handle the move because all I can think about is the stock needs to come back inside of the bands.
Instead of taking the time to practice, I was determined to turn a profit immediately and was testing out different ideas. I decided to scalp trade. I would sell every time the price hit the top bands and buy when it hit the lower band.
It's really bad, I know. From what I remember, I tried this technique for about a week, and at the end of this test, I had made Tradestation rich with commissions. The key flaw in my approach is that I did not combine bands with any other indicator.
This left me putting on so many trades that at the end day, my head was spinning. Flashback to , when I was just starting out in day trading; I had no idea what I was doing. One of the first indicators I put to the test was Bollinger Bands.
It's one of the most popular indicators. Al Hill Click to tweet. At the end of the day, bands are a means for measuring volatility. So, it's not something you can just pick up and use for buy and sell signals. Just as you need to learn specific price patterns, you also need to find out how bands respond to certain price movements. This level of mastery only comes from placing hundreds, if not thousands of trades in the same market.
The thing that surprised me is that I couldn't find many other famous authors or experts in the space. I'm not sure if this is because there aren't many people interested or if other traders stay out of the bands arena because John is so actively evangelizing the bands. The books I did find were written by unknown authors and honestly, have less material than what I have composed in this article.
The other hint that made me think these authors were not legit, is their lack of the registered trademark symbol after the Bollinger Bands title, which is required by John for anything published related to Bollinger Bands. Conversely, when I search on Elliott Wave, I find a host of books and studies both on the web and in the Amazon store.