Learn to Trade -- Bollinger Bands
Updated
Hi,
Squeeze and Expansion is one of the famous ways to trade BB. In the following steps I will try to explain how I trade it.
# Look for a stock in long term uptrend but currently in correction. The 'Long Term' depends on time horizon of trading. For positional trader it could be daily while for intraday traders it could be hourly. So selection of stock would depend upon the trading style.
# Once the stock is found, jump to a lower time frame. This time frame is 4-6 times lower than the longer time frame taken above.
1) Wait for a strong impulse wave, which usually signals the beginning of an uptrend. One may see divergence on any momentum indicator for confirming change in trend. Many traders miss this wave due to many doubts but that's OK. The impulse is the first indication that there will be follow through.
# Normally such huge moves are associated with very wide separation in BBs. The upper band is moving Northward while the lower Southward.
2) Finally at the end of impulse the lower BB starts bending Northwards, and correction begins. The extent of correction depends on buyer-seller equilibrium but I am interested in looking for price action below the 20MA BB line. For further confirmation I use 55 EMA, whenever possible, means action near and preferably below this EMA decides the trade.
# An A-B-C type correction is preferred.
3) Upto this stage strong squeeze in BB can be observed.
4) Then wait for the price to move back above the MA or/and EMA as shown in this example. Price may take support at MAs, however strong spikes below MAs may be followed by closing candles above MAs which show strength.
# These spikes are a great for placing Stop orders.
5) Entry would be triggered as the price progresses beyond the upper BB, preferably also breaking a range or trendline, confirmed by above average volume.
# Another important confirmation is BB expansion on this break.
6) Take profit at a previous resistance/swing high or a Fib. level.
7,8) One may find another buying opportunity as the price pulls back, preferably near MAs.
# Price action near MAs would be the key for entry, see example. Stop could be placed below swing low.
9) After this late entry, the target would be previous high or one may exit as per any other exit strategy.
Although all this looks bookish but it actually happened on this stock and I also published the same idea. After all whatever is written in books is learned from experience.
Filtering a stock to apply a strategy is the hardest part but you know, there is no easy money in trading business. So good luck.
Trade safe and respect every trading strategy.
Hit like if you think this information is useful.
Regards
Bravetotrade
Squeeze and Expansion is one of the famous ways to trade BB. In the following steps I will try to explain how I trade it.
# Look for a stock in long term uptrend but currently in correction. The 'Long Term' depends on time horizon of trading. For positional trader it could be daily while for intraday traders it could be hourly. So selection of stock would depend upon the trading style.
# Once the stock is found, jump to a lower time frame. This time frame is 4-6 times lower than the longer time frame taken above.
1) Wait for a strong impulse wave, which usually signals the beginning of an uptrend. One may see divergence on any momentum indicator for confirming change in trend. Many traders miss this wave due to many doubts but that's OK. The impulse is the first indication that there will be follow through.
# Normally such huge moves are associated with very wide separation in BBs. The upper band is moving Northward while the lower Southward.
2) Finally at the end of impulse the lower BB starts bending Northwards, and correction begins. The extent of correction depends on buyer-seller equilibrium but I am interested in looking for price action below the 20MA BB line. For further confirmation I use 55 EMA, whenever possible, means action near and preferably below this EMA decides the trade.
# An A-B-C type correction is preferred.
3) Upto this stage strong squeeze in BB can be observed.
4) Then wait for the price to move back above the MA or/and EMA as shown in this example. Price may take support at MAs, however strong spikes below MAs may be followed by closing candles above MAs which show strength.
# These spikes are a great for placing Stop orders.
5) Entry would be triggered as the price progresses beyond the upper BB, preferably also breaking a range or trendline, confirmed by above average volume.
# Another important confirmation is BB expansion on this break.
6) Take profit at a previous resistance/swing high or a Fib. level.
7,8) One may find another buying opportunity as the price pulls back, preferably near MAs.
# Price action near MAs would be the key for entry, see example. Stop could be placed below swing low.
9) After this late entry, the target would be previous high or one may exit as per any other exit strategy.
Although all this looks bookish but it actually happened on this stock and I also published the same idea. After all whatever is written in books is learned from experience.
Filtering a stock to apply a strategy is the hardest part but you know, there is no easy money in trading business. So good luck.
Trade safe and respect every trading strategy.
Hit like if you think this information is useful.
Regards
Bravetotrade
Note
Examples:Note
Note
Note
As I said that filtering is the hardest part, we missed this beautiful opportunity twice marked in this chart.
JJ Singh
Trader/Investor
Moderator, TradingView
🚀Join t.me/jjsingh_2020 ,
A Free Education channel
🚀Tweet at twitter.com/JaySingh_2020
Trader/Investor
Moderator, TradingView
🚀Join t.me/jjsingh_2020 ,
A Free Education channel
🚀Tweet at twitter.com/JaySingh_2020
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