Double bollinger bands settings

Check out double quick video on bollinger bands. Settings video will help you familiarize yourself with the indicator and provide a general overview of trade setups before we dig into the advanced strategies.

Odds are you have landed on this page in search of bollinger band trading strategiessecrets, settings bands to use, or my favorite - the art of the bollinger band squeeze. Before you skip down to the section titled bollinger band trading strategies which covers all these topics and more; let me impart two additional resources on Tradingsim: At the end double this article, you will not only learn six bollinger band trading strategies, but more importantly, you will understand which strategy best matches your trading profile.

Bollinger bands are a powerful technical indicator created by John Bollinger. Some traders will swear that solely trading a bollinger bands strategy is the key to their success.

Bollinger bands encapsulate the price movement of a stock. It provides relative boundaries of highs and lows. The crux of the double band indicator is based on a moving average that defines the intermediate-term "trend" of the stock based on the trading time frame you settings viewing. This trend indicator is known as the middle band.

Most stock charting applications use a period moving average for the default bollinger bands settings. The upper and lower bands are then a measure of volatility to the upside and downside.

They are calculated as two standard deviations from the middle band. Many of you have heard of popular technical analysis patterns such as double topsdouble bottoms, ascending triangles, symmetrical triangleshead and shoulders top or bottom, etc.

The bollinger bands indicator can add that extra bit of firepower to your analysis by assessing the potential strength of these formations. Bollinger bands can help you understand whether or not the stock is trending, or even if it is volatile enough for your investment. Many times, large rallies begin settings low volatility ranges.

When this happens, it is referred settings as "building cause. Before we jump into the strategies, take a look at the below infographic titled '15 Things to Know about Bollinger Bands. The information contained in bollinger graphic will help you better understand the more advanced techniques detailed later in this article.

The initial bottom double this formation tends to have substantial volume and a sharp price pullback that closes outside of the lower double band. These types of moves typically lead to what is called an "automatic rally. After the settings commences, the price attempts to retest the most recent lows that have been set to test the vigor of the buying pressure that came in at that bottom.

Many bollinger band technicians bollinger for this retest bar to print inside the lower band. This indicates that the downward pressure in the stock has subsided and there is a shift from sellers to buyers.

Below bollinger an example of the double bottom outside of the lower band which generates an bollinger rally. Bands setup in question was for FSLR from June 30, To top things off, the candlestick struggled to close outside of the bands. Another simple, yet effective trading method is fading stocks when they begin printing outside of the bands.

Now, let's take that double step further double apply a little candlestick analysis to this strategy. For example, instead of shorting a stock as it gaps up through its upper band limit, wait to see how that stock performs. If the stock gaps bands and then closes near its low and is still completely outside of the bollinger bands, this settings often a good indicator that the stock double correct on the near-term.

You can then take a short position with three target exit areas: In the below chart example, the Direxion Daily Small Cap Bull 3x Shares TNA from June bollinger,bollinger a nice gap in the morning outside of the bands but closed 1 penny off the low. As you can see in the chart, the candlestick looked terrible. The single biggest mistake that many bollinger band novices make is that they sell the stock when the price bands the upper band or buy when it reaches the lower band.

Bollinger himself stated that a touch of the upper band or lower band does not constitute a bollinger band signals of buy or sell. Take a look at the example below and notice the tightening of the bollinger bands right before the breakout. Notice how the volume exploded on bands breakout and the price began to trend outside of double bands.

Bands can be hugely profitable setups, if you give them room to fly. I want to touch on the middle band again. Just as a reminder, the middle band is set as a period simple moving average in many charting bands.

Every stock is different, and some will respect the 20 period and some will not. In some cases, you settings need to modify the simple moving average to a number that the stock respects. This is curve fitting, but we want to put the odds in our favor. While curve fitting can work, you have to make sure you don't go crazy with analyzing corky settings. At any rate, the middle line can represent areas of support on pullbacks when the stock is riding the bands.

You could even increase your position in the stock double the price pulls back to the middle line. Conversely, the failure for the stock to continue to accelerate outside of bollinger bollinger bands indicates a weakening in the strength of the stock. This would be a good time to think about scaling out of a position or getting out entirely.

Another bollinger bands trading strategy is to gauge the initiation of an upcoming squeeze. John created an indicator known as the band width.

The idea, using daily charts, is that when the indicator reaches its lowest level in 6 months, you can expect the volatility to increase. This goes back to the tightening of the bands that I mentioned above. This squeezing action of the bollinger band indicator foreshadows a big move. You can use additional signs such as volume expanding, or the accumulation distribution indicator turning up.

We need to have an edge though when trading a bollinger band squeeze because these types of setups can head-fake the best of us. Settings immediately reversed, and all the breakout traders were head faked. You don't have to squeeze every penny out of a trade. Wait for some confirmation of the breakout and then go with it.

If you are right, it will go much further in your direction. Notice how the price and volume broke when approaching the head fake highs yellow line. To the double of waiting for confirmation, let's take a look bands how to use the power of a bollinger band squeeze to our advantage.

Below is a 5-minute chart of Research in Motion Limited RIMM from June 17, Notice how leading up to the morning gap the bands were extremely tight. Now some traders can take the elementary trading approach of shorting the stock on the open with the assumption that the amount of energy developed during the tightness of the bands will carry the stock much lower.

Another bands is to wait for confirmation of this belief. So, the way to handle this sort of setup is to 1 wait for the candlestick to come back inside of the bollinger bands and 2 make sure there are a few inside bars that do not break the low of the first bar and 3 short on the break of the low of the first candlestick. Based on bands these three requirements you can imagine this does not happen very often in the market, but when it does, it's something else. The below chart depicts this approach.

Now let's take a look at the same sort of setup but on the long side. Below is a snapshot of Google from April 26, Notice how GOOG gapped up over the upper band on the open, had a small retracement back inside of the bands, then later exceeded the high of the first candlestick.

These sort of setups can prove powerful settings they end up riding the bands. This strategy is for those of us that like to bollinger for very little from the markets. Essentially you are waiting for the market to bounce off the bands back to the middle line. You are not obsessed with getting in a position and it wildly swinging in your favor. Nor are you looking to be a prophet of sorts and try to predict bollinger far a stock should or should not run.

By not asking for much, you will be able to safely pull money out of the settings on a consistent basis and ultimately reduce the wild fluctuations of your account balance, which is common for traders that take big risks.

The key to this strategy is waiting on a test of the mid-line before entering the position. Bands can increase your likelihood of placing a winning trade if you go in the direction of the primary trend and there is a sizable amount of volatility. As you can see in the above example, notice how the stock had a sharp run-up, only to pull back to the mid-line.

You would want to enter the position after the failed attempt to break to the downside. You can then sell the position on a test of the upper bands. If you have more of an appetite for risk, bollinger can ride the bands to determine where to exit the position. This is honestly my favorite of the strategies. If I gave you any other indication that I preferred settings of the other signals, forget whatever I said earlier. First, you need to find a double that is stuck in a trading bollinger.

The greater the range, the better. Now, looking at this settings, I feel a sense of boredom coming over me. However, from my experience, the guys that take money out of the market when it presents itself, are the ones sitting with a big pile of cash at the end of the day.

In the above example, you just buy when a stock tests the low bands of its range and the lower band. Conversely, you sell when the stock tests the high of the range and the upper band. The key to this strategy is a stock having a clearly defined trading range. This way you are not trading the bands blindly, but are using the bands as a means to gauge when bollinger stock has gone too far.

You could argue that you don't need double bands to execute this strategy. However, by having the bands, you can bollinger that a security is actually in a flat or low volatility phase, by reviewing the look and feel of the bands.

So, instead of trying to win big, you just play the range and collect all your pennies on each price swing of the stock.