Bollinger Bands were developed and made famous by legendary technical trader John Bollinger and are plotted 2 bollinger deviations away from a simple moving average. The usual moving average used is the 20 bollinger. When market volatility increases, Bollinger Bands will widen and move further away from the average. Conversely, when volatility contracts, the Bands will move closer together. Combining Bollinger Bands with a Bollinger Band width indicator can be an awesome early indicator of whether a stock is likely to increase or decrease in volatility going forward. Bollinger Bands are price channels with the upper band being 2 standard deviations above the middle line and the lower band being 2 standard deviations below from the middle line. The middle line is typically a 20 day moving average. Click Here For My Top 5 Technical Indicators. Traders can alter the standard parameters, for example, Rolf from Tradeciety recommends changing the standard deviation to 2. Havin a stock touch one of the outer Bollinger Bands does not signal the end of a trend. In fact, it can sometimes mean the opposite. Looking at the chart below, you can see a number of times when price touch an outer band, but continued in the same direction for a few more days. My favourite method for using Bollinger Bands is to determine trading is likely to experience a range expansion or contraction in the weeks and months ahead. We can do this by looking at the past behaviour of the stock and adding an indicator to show the Bollinger Band Width. Recently I made a trade in FCX using Bollinger Bands and the principal of range expansion coming after a consolidation. Looking at the previous chart, at Point 2, I decided to enter a Long Strangle with the assumption strategies FCX would likely break out of the 2 month range it had been stuck in. I like to go out 6 months for Long Strangles and set a time exit of two months. So if the trade is not working after 2 months, I get out with minimal time decay. The next trade example is using Bollinger Bands to predict when a stock might consolidate. From early June to early July, TLT moved from toa move of During that time, the Bollinger Band width expanded massively from 3 to around Once TLT pulled back to the middle of the bands I figured it was due for a period of consolidation so this time I entered a Short Strangle. I kept trading trade to only 1-month duration in order to make the most of time decay. Implied volatility on TLT was in the high area of the month range. You can see that Bollinger Bands trading be a great indicator to add in to your trading arsenal. Combining them Bollinger Band Width and an analysis of implied volatility can make a great foundation when looking to trade breakouts or consolidations. The indicator includes a momentum overlay along with an indication of low volatility. The indicator compares the width of the Bollinger Bands to the width of Keltner Channels as a reference and signals low volatility with a change in indicator color. Blog My Story Work With Me Contact. Read This Free Report Volatility Trading Made Easy - Effective Strategies For Surviving Severe Market Swings. August 26, at 2: Russell IWM Options: Using Long Strangles For Range Expansion See It Market. Leave a Reply Cancel reply Your email address will not be published. Comment Name Email Website. FEATURED ARTICLES The Wheel Strategy Think Covered Calls on Steroids Read. The Ultimate Guide to Double Diagonal Spreads A Great Hedge For Strategies Condors Read. Make Vega Your Bollinger An In Strategies Conversation With a Portfolio Manager Read. Privacy Policy Terms and Conditions Contact.
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This simplifies clients by reducing the number of features required to be pre-implemented.
From July 1988 to August 1996 Urdiales would go on to kill seven more women.