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What are Bollinger bands?Bollinger bands are one of the most used trading indicators by market operators to compare the changes in the price of any asset and the relative value of its price over a period of time.
This indicator was created in the 1980s by John Bollinger and consists of three bands that are drawn superimposed on the price evolution chart.
The standard deviation is a statistical parameter that provides a good indication of changes in market value, since it takes into account the variation of the values that comprise the average.
For example: a period of 9 and another of 11 give 10 as an average ((9 + 11) / 2 = 10), and that average will have a standard deviation of 1. On the other hand, the resulting standard deviation of a average between 1 and 19: the mean, again, will be equal to 10 ((1 + 19) / 2 = 10), but the standard deviation will be 9.
Therefore, the use of this parameter to calculate the bands ensures that they will respond quickly to price variations, reflecting periods of high and low probability of change. Likewise, the band between the upper and lower bands contains, statistically, almost 90% of the possible price variations. This means that any price movement outside the bands is highly unlikely and thus of particular importance.
For these reasons Bollinger bands are used to:
Volatility indicatorThe value of the standard deviation of a series increases as the value of the product increases and decreases as the value of the product decreases. Therefore, since the width of the band is determined by the value of the deviation (it is equal to four times the standard deviation), the bands automatically widen when the value of the price increases and narrow when it decreases, bringing the prices closer together. upper and lower bands.
When this narrowing in the bands occurs in a drastic and sudden way, it can be interpreted as a warning of an imminent and significant movement in prices. The direction in which the prices will move will be determined by the position of the price in relation to the moving average within the narrowing of the bands.
In the example above, which corresponds to the daily price of the NYSE Index, it can be seen how the sudden narrowing of the bands registered in early December 2016, in which the price moved above the moving average throughout of the entire duration of the tightening, anticipated the strong upward movement with which the index ended the year 2016.
Therefore, if a sustained narrowing of the upper and lower bands is noted, a sudden price movement can be assumed. Its direction will be expressed by the side the price is on with respect to the moving average band, along that narrowing:
Identify price trend changesBollinger bands are also used in technical analysis as a complement to the study of trend reversal figures:
Formation of a W figure or double bottom.In technical analysis, a double bottom or W is formed in a downtrend and is a figure that usually anticipates a change in trend. Bollinger bands are a very helpful instrument to confirm the formation of said figure, as explained below:
The first signal to watch out for is a price closing (first floor) below or close to the lower band. This is followed by a bullish reaction that drives the price towards the central band, ie the moving average. The next sign is a further drop and the formation of a second bottom, which should be above the lower band, indicating less weakness than the first bottom.
Finally, the signal that confirms the change in trend figure is a strong upward movement that leads the price to even exceed the upper band. An example of the formation of this reversal W figure is shown in the following chart, which corresponds to the daily price of Apple:bollinger bands chart example
Formation of an M figure or double top.In , a double top or M forms in an uptrend and is a figure that anticipates a change in trend. As in the previous case, although in an inverse way, the Bollinger bands are a very helpful instrument to confirm the formation of said figure:
The first signal to watch out for, in this case, is a price closing (first top) below or close to the upper band. As can be seen, from the beginning, the M figure or double top follows steps very similar to those of the W or double bottom, although with the opposite direction. What follows is a bearish reaction that drives the price towards the central band.
The next signal is the formation of a second top, which should be below the upper band, indicating less strength than the first top. Lastly, the signal that finally confirms the change in trend figure is a strong downward movement that leads the price to break the lower band. The following chart, which corresponds to the daily price of Exxon, shows an example of the formation of this trend reversal M figure:
Identify strength or weakness in the price trendFrom a technical point of view, by the very definition of the bands, prices are considered relatively high when they touch the upper band and relatively low when they touch the lower band. However, movements above or below the band are not trend signals by themselves. Rather they should be viewed as indicators of the strength of that trend.
In the case of an uptrend, such as that depicted in the Apple daily stock chart below, price closes above the upper band are indicators of the strength of the move. It must be taken into account that the upper band is formed by adding 2 times the standard deviation to the moving average, which gives an idea of the important upward momentum that the price must have in order to overcome said upper band.
The same reasoning, but in reverse, can be applied in the case of a downtrend, where price weakness would be indicated by successive closes below the lower band.
In addition to comparing and indicators in parallel to better visualize price trends.
The Bollinger Bands SqueezeAnother characteristic of Bollinger bands to keep in mind is “the squeeze”, also known in English as the squeeze , which happens when the bands narrow enough upwards that they seem to come together or coincide.
Hence the name, when the bands "tighten" or converge the price, and this event helps to indicate a price with low price variation and a consolidated market environment, so it could be considered as an opportunity to make trading .
It is common for breakout traders, a trading strategy based on breakouts of pre-set price levels, to look for such periods and wait for another trading opportunity to appear from this consolidation to take advantage of this new trend. .
Regardless of what type of operator you are, the following points must be taken into account:
How to set Bollinger bands on your platform?
ConclusionBollinger bands are widely used indicators in technical analysis in trading. These bands are very useful for traders to compare the price changes of a specific asset over a period of time (its last 20 periods over time.)
It is important to remember that markets experience both periods of low price variation and high variation, and Bollinger bands help identify these periods. Likewise, the bands serve to identify the strength or weakness of the price trend, or the possible changes in these price trends, so it is essential to understand them and know how to read their charts.
Finally, although bands are a very useful indicator, they should not be used in isolation or as the only trading instrument , but rather as a complement to other important technical analysis indicators.
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Double Bollinger Bands Investment StrategyIn this article we are going to explain a trading technique called Double Bollinger which is basically a recent development whose general idea I found interesting. It is based on the use of the Bollinger Bands indicator.
It employs two time frames, a higher one for filtering trades and a lower one for inputs. In this case, the author recommends using a 1-hour frame in conjunction with a 15-minute frame. Likewise, it is best to avoid periods when important news is announced and the period between the end of the New York session and the opening of the Asian session.
As with any trading system, it is recommended to first evaluate it on a demo account.
System indicators- Main window (1 hour time frame):
System rulesTrend identification
The trend is identified by the 55 EMA (main window) and the 8 EMA (secondary window). When the price is above the 55 EMA this suggests an uptrend. Likewise, when the 8 EMA is above the 50 level of the RSI this indicates an uptrend.
The opposite applies for negative trends. Trend lines (on price, RSI and the 8 EMA) can also be applied in conjunction with higher highs (uptrends) or lower lows concepts.
This system provides 4 types of trading signals which are described below:
Transaction A&D > Transaction B > Transaction C
Regarding money management, each trader must set their limits regarding the amount they want to risk in each transaction based on the total capital in their account. Regarding the management of open positions, we must respect the stop loss at all times. If the market moves in our favor, we can close the position at the nearest support/resistance or use trailing stops.
You can download the template and indicators developed to apply this strategy in Metatrader 4, through the following link:
Double Bollinger trading system template and indicators
Forex System Example Charthttps://preview.redd.it/7fz65lq5pnh91.png?width=625&format=png&auto=webp&s=f54ca80923c740459007177864a2c3ba40ad8a50
In the previous image we see 3 examples of trading signals generated with this system. Signals 1 and 2 are examples of Transaction A . In both cases the signals produced winning trades that generated a nice profit.
On the third signal, an example of Trade C, a position should not have been opened as there were resistance levels between the entry point and the take profit target, so the price started to fall. As we indicated above, Transaction C is the riskiest.
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Time frame 15 min exiperes time 60 min.
Momentum (period 11);
Bollinger bands (20. 2).
Buy Call Conditions:
Momentum line is > 100;
The price close below above middle band of Bollinger Bands;
Buy call, at the open next bar.
Momentum line is <100;
The price close below middle band of Bollinger Bands;
Buy put, at the open next bar.
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Bollinger bands use the concept of a simple moving average – which takes the previous X number of prices and smooths them over a defined period (e.g., 20 periods/days, 50 periods/days) to see how far away the current price is from the average. Bollinger Bands - is one of the basic indicators available right on Binomo trading platform. This tool lets you estimate the inequality coefficient of the current price position on the chart with regard to its expected position. By overlapping on the chart it shapes the price corridor based on the population standard deviation for the specified... Teknik Rahasia Setting Indikator Bollinger Bands Terbaik Dan Paling Akurat Strategi trading menggunakan indikator paling akurat dan trik jitu untuk trading binary atau forex di iq option salah satunya menggunakan indikator Bollinger Bands. Indikator trend paling akurat yang sering dipakai para trader adalah Bollinger bands,dan akan lebih mantap lagi jika dikombinasikan dengan indikator lainnya. Bollinger bands settings for binary options. How to use cci indicator on binary options. Indicadores meta trader 5 para opções binárias > VIEW PACKAGING. Higher Education > LEARN MORE > VIEW PACKAGING. Automotive Sales > LEARN MORE > VIEW PACKAGING. Automotive Services > LEARN MORE > VIEW PACKAGING. Platform . Platform Overview > LEARN MORE. Conversation Editor > LEARN MORE. FAQ > LEARN ... May 8, 2016 - Explore Ahmad Hatem's board "Bollinger bands forex", followed by 231 people on Pinterest. See more ideas about Forex, Forex trading, Stock trading. Undoubtedly, we could trade only on signals of the Bollinger Bands. But we will work on second price charts, on which, as you know, there is a lot of market noise. For this reason, to filter all false indicators from a technical tool, we will use additional oscillatory analysis tools that can clearly identify the market reversal, the beginning of a fresh short-term trend and the intensity of ... The Forex Raff and Bollinger Robot is intended for trading on a real account. Two channels are being constructed: Hilbert Raff and John Bollinger. The external Raff channel allows you to determine the direction of the global trend. Inside it, in the Bollinger channel, trade is conducted on a trend. Provision is made for disabling martingale and money management, transactions are protected by ... Bollinger Bands ® are among the most reliable and potent trading indicators traders can choose from. They can be used to read the trend strength, to time entries during range markets and to find potential market tops.The indicator is also not a lagging indicator because it always adjusts to price action in real time and uses volatility to adjust to the current environment. Final tips when using Bollinger Bands and RSI to trade on Binomo. Using Bollinger Bands and RSI to trade on Binomo may seem easy, but there are a couple of things that you should remember first before attempting to use this indicator pair. First of all, they should only be used to trade longer trading positions, never short positions. That’s ... Bollinger Bands can be used to find market turning points. Using the Bollinger Bands indicator on the Binomo platform is not very complicated. All you have to do is to watch the bands of the indicator carefully. The points of your interest are the points where the price cuts the bands through. You should open a buy position whenever the price ...
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