![]() ![]() ![]() Despite such bearish price formations, the market did not fall much.Then, the following bar tried to rise above it but ended up as a bearish reversal bar. This tag of the Upper Bollinger Band met stiff resistance.This chart shows the daily candlesticks of Ameren Corp (NYSE). To highlight the lowest Band Width value in the past 120 periods, the charts below include a Donchian Channel applied on the Band Width values. Here, we use 120 periods on daily charts as an approximation. *John Bollinger stated six months in his book. Take on a short position when a candlestick closes below the 20-period Bollinger Lower Band.Wait for the 20-period Band Width to reach its lowest in the past 120 periods.Take on a long position when a candlestick closes above the 20-period Bollinger Upper Band.Wait for the 20-period Band Width to reach its lowest in the past 120 periods*.If you cannot find Band Width in your charting platform, use Standard Deviation instead.Īlthough they display different values, they work fine for relative comparison.īollinger Squeeze Trading Rules Long Squeeze The Bollinger Band Squeeze trading strategy relies on finding low values of Band Width to identify periods of low volatility.įrom there, we get ready for a Bollinger Band breakout from the consolidation area. An increasing Band Width shows increasing volatility.A decreasing Band Width shows decreasing volatility.The Band Width is a measure based on the width of the Bollinger Bands.īand Width = (Upper Band - Lower Band) / Middle Band Learn: How to Trade a Channel First Method: Bollinger Band Width What is the Band Width? This crucial characteristic is helpful for price analysis. Observe that the market seldom pushes far beyond the Bollinger Bands. The chart below shows the Bollinger Bands applied. 20-period SMA displaced downwards by two standard deviations (Lower Band).20-period SMA without displacement (Middle Band). ![]() 20-period SMA displaced upwards by two standard deviations (Upper Band).Type of moving average: Simple Moving Average (SMA)īased on the defaults above, the Bollinger Bands form a channel with three moving averages:.The measure of volatility here is the standard deviation. It is a channel that expands and narrows based on market volatility. John Carter’s Bollinger Bands with Keltner Channelįirst, let’s go through a short primer on Bollinger Bands.īollinger Bands form a volatility channel.To get an in-depth understanding of the Bollinger Squeeze strategy, we will cover two approaches in this tutorial: This innovative tactic uses not just Bollinger Bands but also a related metric called Band Width. John Bollinger designed the Bollinger Band Squeeze as a way to profit from markets that are poised to break out of a consolidation area. This Bollinger Bands tutorial introduces the Bollinger Squeeze trading strategy. Bonus: Bollinger Band Squeeze Resources.Review - Bollinger Squeeze Trading Strategy.Second Method: Bollinger Bands With Keltner Channel. ![]()
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