Trading forex with bollinger bands,can i make money trading stocks,best trading sites for penny stocks,option trading log - PDF 2016

14.11.2015 admin
We have long been taught that to be a successful trader, your objective should be to buy low and sell high or buy high and sell higher (and vice versa for shorts). There are two broad schools of thought for equity income investing: The first pays the highest dividend yields and the second focuses on healthy yields. The technical indicator known as Bollinger Bands can be an effective tool in any forex trading strategy. Numerous systems abound for interpreting the width of the Bollinger Bands (the distance between the upper and lower bands) to predict price movement.
When the slope of the bands is minimal, in other words, when the upper and lower bands flatten it predicts a reversal as price touches and retreats from the flat band.
There is something for every forex trader using this technique from the scalper seeking to capture numerous 5 pip moves in a day to the position trader playing for several hundred pip moves over the course of several weeks. The bollinger bands strategy with 20 period moving average is almost similar to the other two bollinger band trading strategies listed below(you can click the links to check them out).
The market is in a downtrend and then price rises up to touch the middle bollinger band line. Or you can wait to see if a bearish reversal candlestick is formed first before you place your sell stop order. Like all trading systems and strategies, they have faults or weaknesses when market behaves somewhat different to the conditions they were designed to perform well in.
However, just because prices have hit the upper Bollinger does not necessarily mean that it is a good time to sell.
Wait for next candle and make sure that the next candle's low is greater than or equal to the previous candle's low and that the high is also less than or equal to the previous period's high. Wait for next candle and make sure that the next candle's high is less than or equal to the previous candle's high and that the low is also greater than or equal to the previous period's low.


In Figure 1, we see that the price hits the upper Bollinger, we wait for an inside day to form where the high and low of the candle is engulfed by the previous candle. Therefore, the bands naturally widen and narrow in sync with price action, creating a very accurate trending envelope.
The answer is different for each individual trader, but one reasonable possibility would be to close the long trade if the candle turned red and more than 75% of its body were below the "buy zone".
Note, however, that counter-trend trading requires far larger margins of error as trends will often make several attempts at continuation before capitulating.
I would like to share a unique interpretation of the bands that works particularly well with trading forex and that interpretation is to evaluate not the width of the bands but rather the slope. The relative steepness or flatness of a band can be seen visually and does not require a complicated formula to assess. In the next section we will examine strategies for timing forex trade entries using Bollinger Bands in various time frames.
The main disadvantage of the bollinger bands strategy with 20 period is that in  a non trending market, this trading system will perform poorly. Strong trends will 'ride' these bands and wipe out any trader attempting to buy the 'low' prices in a downtrend or sell the 'high' prices in an uptrend. If, in an uptrend, volatility begins to slow and the market fails to make a new high (as illustrated by the inside candle), then we can deduce that strength is waning and that the chance for a reversal exists. The uptrend remained intact for one month, allowing us to exit the trade at 1.1618 on April 5, 2006 for a 254 pip profit. Creating a trading strategy is not rocket science, but those that treat it as such usually end up frustrated and confused and - worse still - with a losing trading record. In range-bound markets, this technique works well, as prices travel between the two bands like balls bouncing off the walls of a racquetball court.


Illustration 1 shows Bollinger Bands with the default settings of two standard deviations plotted above and below a 20 period simple moving average.
Good trend traders can make great sums of money in the long term with just a few big winners. Traditional trend trading (buying and selling breakouts) seems far too challenging from a psychological point of view, but for a novice trader, picking tops and bottoms at the same time is simply dangerous. Therefore, just buying at the lower band and selling at the upper band is out of the question. The reason for the second condition is to prevent the trend trader from being "wiggled out" of a trend by a quick probative move to the downside that snaps back to the "buy zone" at the end of the trading period. Putting it just above the swing high will practically assure the trader of a stop-out as price will often make many probative forays to the top of the range, with buyers trying to extend the trend. By definition, price makes new highs in an uptrend and new lows in a downtrend, which means that they will naturally be hitting the bands.
In this way, we trade for the big move; not necessarily selling the low tick or buying the bottom tick but definitely buying near the relative bottom and selling near the relative top. In those markets, traders who continuously try to "sell the top" or "buy the bottom" are faced with an excruciating series of stop-outs or worse, an ever-mounting floating loss as price moves further and further away from the original entry.
Note how in the following chart the trader is able to stay with the move for most of the uptrend, exiting only when price starts to consolidate at the top of the new range. The best time frames to look for the inside days are daily charts, but this strategy can also be used on hourly, weekly and monthly charts.



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