Bollinger Bands

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Bollinger Bands

Bollinger Bands

Bollinger Bands are an Oscillator based indicator so should be used with say Chart Patterns, Trend Lines, S&R ie not another oscillator

Bollinger Bands were the first universally approved indicator to show us volatility was dynamic not static

The tell us whether the market is loud (far apart) or quiet (close bands)The purpose is to show is markets highs and lows relatively speaking ie

markets are high at the upper band and low at the lowerPrice tends to return to the middle band!Bollinger Bands act as Dynamic Support and ResistanceA close outside these band can be a breakout signal or you may see a

Bollinger Bounce back to the centre line

There are 3 bandsThe middle band measures the intermediate trend, hence usually a smaThe out bands are similar with a standard deviation apart

Possible Buy Signal

Top Bollinger Band moves to test the intra-day high, at the same time we see the start of a bounce from the bottom Bollinger Band

Once this is confirmed via candle formation or other indicators we have a confirmed Buy Signal likely to test the previous highs

Additionally we notice the bands were constricted/tightened prior to their ultimate expansion and than rapidly shot out hence signalling and trend change or intensification

Centre point of Bollinger Band can also be a major obstacle

The most frequent way to trade Bollinger Bands is to buy at the bottom and sell at the top, particularly where other indicators confirm this

Example 1: €/$ 1 Day Chart - Buy 2/12/10 and 12/1/11 support area/zone at 1.2900/1.3000 Close outside lower band – 12/1/11 and rally up through support

gives confirmed Bollinger Bounce – bands also widened telling the start of a dramatic move was occurring

Additionally we see upper Bollinger Band is testing 1.3400 Another Buy signal on 18/1/11 shows confirmed breach of

Resistance at 1.34 and still widened bands

Example 1 - €/$

The most frequent way to trade Bollinger Bands is to buy at the bottom and sell at the top, particularly where other indicators confirm this

Example 2: €/$ 1 Day Chart - Buy 14/2/11 exits lower band and rallies towards centre line with

stronger confirmation at 16/2/11 Candle Patterns show market floor Also previous resistance new support at 1.3400/1.3500

Example 2 - €/$

Current €/$ Example

Example 3: €/$ 1 Day Chart - Sell The market is at 1.4000 psychological barrier and Resistance Bollinger bands are narrowing so a breakout or reversal appears

imminent A trade may exist either above the current bands for an entry order

or below the centre line for a sell position

Example 3 - €/$

Example 4: Crude Oil 1 Day Chart - Sell Crude Oil has been pulling back from over 2 year highs on market

fundamentals Passed centre line on Bollinger Bands and appears to be gaining

momentum No major obstacle from a dropping perspective in near future

Example 4 – Crude Oil

Example 5: S&P500 1 Day Chart Market Floor at 1270 Close outside lower band and extremely strong rally to centre band

since Extremely bullish candle today Fundamentals driving market at moment as a result of Japanese

equation Large upside potential

Example 5 – S&P 500

Example 6: GBP/USD 1 Day Chart Previous Resistance at 1.6000 that turned into Support Needs to be strong confirmation towards centre line for trade

Example 6 – GBPUSD

Example 7: EUR/GBP 1 Day Chart .8650 strong resistance over time, bounce at outer band and close

below 0.8650, today's candle dictates how probable the trade is and its close above or below 0.8650 dictates if it’s the start of a new uptrend or return to the range

Example 7 – EUR/GBP