ta seminar - bollinger bands (29 apr 2020)

Bollinger Band

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Disclaimer

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1. What is Technical Analysis?

2. Moving Averages

3. Bollinger Bands

Contents

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What is Technical Analysis?

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� A method of evaluating securities by analysing statisticsgenerated by market activity (eg past prices and volume).

� Technical analysts do not attempt to measure a security'sintrinsic value, but instead use charts and other tools toidentify patterns that can suggest future activity.

� Technical analysts believe that the historical performances ofstocks and markets are indications of future performance.

What is Technical Analysis?

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It is crucial to keep in mind that Technical Analysis is

not an exact science.

Rather, Technical Analysis deals with

probability distributions.

What is Technical Analysis?

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� Market Action Discounts Everything

� Prices move in Trends

� History tends to repeat itself

What is Technical Analysis?

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1. Market Action Discounts Everything

� Cornerstone of Technical Analysis

� The technical analyst believes that anything can possibly

affect the price and is actually reflected in the price of that

market

� Anything can be political factors, psychological reasons or

natural disasters, etc

What is Technical Analysis?

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2. Prices move in Trends

� The concept of Trend is essential to Technical Analysis

� Believe that market prices do exhibit Trends

� Purpose of charting price action is to identify Trends

What is Technical Analysis?

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3 Basic Trends of the Market

Uptrend Downtrend Sideways

� Uptrend has a pattern of rising peaks and troughs

� Downtrend has a pattern of lower peaks and troughs

� Sideways has a pattern of horizontal peaks and troughs

What is Technical Analysis?

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Uptrend has a pattern of rising

peaks and troughs

Uptrend has a pattern of

rising peaks and troughs

What is Technical Analysis?

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What is Technical Analysis?

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Downtrend has a pattern of

lower peaks and troughs

What is Technical Analysis?

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Sideways has a pattern of

horizontal peaks and troughs

What is Technical Analysis?

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3. History tends to repeat itself

� The study of human psychology

� Chart patterns reflect Bullish / Bearish psychology of the

market

� Key to understanding the future lies in the study of the past

or that “The future is just a repetition of the past”

What is Technical Analysis?

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Moving Averages

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• Most popular trend-following indicator

• Assist in smoothing market noise, reveal its “real” direction

• Calculated by averaging a number of past closing prices

• Most common time periods are 10, 20, 50 and 200 days

• Longer time period equals less sensitive and smoother

average

Moving Averages

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Moving Averages

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Common Applications of MA

� Identify the trend direction

� To determine Support and Resistance levels

Moving Averages

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Uptrend

Moving Averages

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Downtrend

Moving Averages

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Sideways

Moving Averages

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Bollinger Bands

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� Technical tool created by John Bollinger in the 1980s

� A band where its upper and lower boundaries are derived

from standard deviation

� Standard deviation is a mathematical formula that

measures volatility, showing how the stock price can vary

from its true value

Bollinger Bands

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Middle Band

Upper Band

Lower Band

What are Bollinger Bands?

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Middle band = 20-day Moving Average (MA)

Upper band = Middle band + 2 standard deviations

Lower band = Middle band - 2 standard deviations

What are Bollinger Bands?

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95% of price within the band

Characteristic

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5% occasion

Characteristic

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Price moves from one end

to the other

Characteristic

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In strong uptrend, price tends to

move between the upper and

middle bands

Characteristic

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Characteristic

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In strong downtrend, price

tends to move between the

middle and lower bands

Characteristic

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2 usages of Bollinger Bands

1. Breakout

2. Range boundary

Usages of Bollinger Bands

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Breakout

Squeeze

Breakout

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Breakout

Breakout

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Breakdown

Breakout

Breakout

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Breakdown

Breakout

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Breakdown

Breakout

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Is this the

squeeze?

Breakout

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Is this the

squeeze?

Breakout

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Range Boundary

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Range Boundary

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Range Boundary

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Exhaustion

Bollinger Bands

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Bollinger Bands

Exhaustion

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Bollinger Bands

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Exhaustion

Bollinger Bands

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Buy Signal:

When price > middle band

RSI > 50

W Bottom

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W Bottom

Buy Signal

RSI > 50

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Sell Signal:

When price < middle band

RSI < 50

M Top

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Sell Signal

RSI < 50

M Top

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Sell Signal

RSI < 50

M Top

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Sell Signal

RSI < 50

M Top

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Thank you

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