Bollinger Bands Bounce Trading Strategy

 

Bollinger Bands are a technical analysis tool, specifically they are a type of trading band or envelope. Trading bands and envelopes serve the same purpose, they provide relative definitions of high and low that can be used to create rigorous trading approaches, in .

These can be changed accordingly. With this strategy, we only use the one trade that we initially make, but if your rules allow you to make multiple trades at a time with the same currency pair, then adding a second position at the middle line may be something you would want to consider. John Bollinger answers "What are Bollinger Bands? The middle band consists of a 20 period moving average, while the upper and lower are two standard deviations below and above the moving average in the middle. From mid-January until early May, Monsanto closed below the lower band at least five times.

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Using the SPY as a surrogate so we can calculate volume indicators, we find that both day Intraday Intensity and Accumulation Distribution are quite positive, suggesting that if a breakout were to occur here it would be to the upside. That stands in marked contrast to our more cautious approach to the market as a whole, so we will be monitoring this set-up quite carefully Bollinger On Bollinger Bands.

John Bollinger developed Bollinger Bands in the early s and since their introduction 30 years ago they have become one of the most widely used technical indicators worldwide. Learn how to use Bollinger Bands from the man who developed them. John Bollinger teaches you the basics of Bollinger Bands so you can use the effectively.

Bollinger on Bollinger Bands: For the 30th anniversary of Bollinger Bands, John Bollinger held a special two-day seminar teaching how to use his Bollinger Bands and which indicators to use for confirmation. The theme for the seminar was Bollinger Bands: The Market Timing Report is a collection of charts John Bollinger uses to forecast stock market movements. It is updated weekly and is available to all BollingerBands.

The middle band consists of a 20 period moving average, while the upper and lower are two standard deviations below and above the moving average in the middle. All standard deviation means is that it is a statistical measure that offers a great reflection of the price volatility. When you see the band widen that simply means that there is volatility at that time.

When the price moves very little, the band will narrow which means that there is little volatility. I prefer to use this trading strategy using the 1 hour or 4 hour time chart. After examining the picture, it may seem wise to buy every time the price hits the lower band or sell every time the price hits the upper band.

This can technically work, but is a risky way of trading using the Bollinger Bands. Sometimes strong trends will ride these bands and end up stopping out many unfortunate traders who used that method. Also read the way bankers trade in forex market. The RSI indicator is used in this strategy to see how the currency is weakening or strengthening. Tap here for another RSI trading strategy article. These indicators should come standard on your trading platform.

There is no need to adjust these, as we will use the default settings. Here You can learn on How to fade the momentum in Forex Trading. The only element would suggest performing before you start, is to draw a horizontal line on the You will find out exactly why soon. The rules are the same concept only the exact opposite for a SELL trade.

The currency is in an uptrend and then it will pull back to the lower Bollinger Band. From there, if it follows the rules, we will execute a trade. Finding a trending market is very simple. You can use channels, trend lines, Fibonacci lines, to determine a trend. Find higher highs or lower lows and place a trend line on them.

If the line is going up it is an uptrend, if its going down, it is a downtrend. It needs to be trending up or down, not a sideways trend. As you can see in the example that price came all the way back down, from the uptrend, and touched the bottom band. The price hit the Bollinger band, the RSI when the price touches the bottom band needs to be in between 50 and You want to see the RSI go up, in this case, in the direction of the trade.

Remember that it should be in between the mark. In a sell trade the RSI would need to be in between the mark and going downward. You need to see that the trend is moving upwards, in this case, before you enter a trade. If the candlesticks are moving to a point where it is making a new low, this would not be a good time to enter a trade. However, once the candles fail to make a new a low watch to see if it forms a bullish formation. Here is an example of master candle setup.

In this example, I bumped down to a one hour chart to make an entry. This is perfectly fine to do. This could give you a more accurate place to make an entry point. As I said, the 4 hour and 1-minute time frames are the preferred time frames for this strategy. Yes, there is less of an opportunity for a trade, but the signals are very strong when you are in a higher time frame. Always remember to be placing a stop loss, and having a good target area. With this strategy, we recommend using a pip stop.

The Bollinger bands are a great indicator to use in any market. When you combine these with the RSI indicator, it should give you great entry points. Here is another strategy called trading volume in forex. Something else you can consider is when the price touches the middle band you can make a second entry to press your winners.

This can potentially give you double the profit. With this strategy, we only use the one trade that we initially make, but if your rules allow you to make multiple trades at a time with the same currency pair, then adding a second position at the middle line may be something you would want to consider.

Tap here to read another great trading strategy! This one requires no indicators, just pure price action! Please leave a comment below if you have any questions about Bollinger Bands Bounce Strategy! Grab the Free PDF Strategy Report that includes other helpful information like more details, more chart images, and many other examples of this strategy in action!

Please Share this Strategy Below and keep it for your own personal use! Yes this can work as a scalping strategy. Really the time frame is all depending on how you trade. Entry areas can be seen in the 1 minute time frame, just as they can be found on a 4 hours chart. Yes, timing is key. Many people fail to wait for trades to develop and end up getting in too early or exiting to quickly.

Stay sharp and develop a strict set of rules to follow. You may not always win, but the key is to press your winners, follow your rules, and learn from your past mistakes.