Contracting bands warn that the market is about to trend: the bands first converge into a narrow neck, followed by a sharp price movement. The first breakout is often a false move, preceding a strong trend in the opposite direction. A contracting range [C] is evident in June 1998: the bands converge to a width of $2, followed by a breakout in July to a new high.
Similarly you can trail stop your profitable buy trades by moving stop loss behind the low of every candlestick until you get stopped out.
Keltner believed that a close above the upper band, or below the lower band, is evidence of a strong move and should be traded as a breakout.
Under such a condition, overbought or oversold, there is the highest chance of forming the reversal signals. Weak reversal signals usually take the price to the middle band again, and then the price follows the same course again. Therefore, strong continuation signals form close to the middle band when the market is trending.
The idea is to sell when the price reaches above the upper band and to purchase when the market gets below the lower Bollinger Band. The Bollinger Band works very well for fading trends when the market is range bound and choppy. However, when markets are trending strongly, using the Bollinger Bands for picking tops and bottoms is highly discouraged. Many traders make this mistake and end up paying a hefty price for using the Bollinger Band in strong trending markets.
Depending on the settings, Bollinger Bands usually contain 99% of the closing prices. And in sideways markets, prices tend to wander from the Upper Bollinger Band to the Lower Bollinger Band. With this being the case, many traders use Bollinger Bands to trade a simple trend fading strategy: They SELL when prices move outside the Upper Bollinger Band and BUY when prices move outside the Lower Bollinger Band. This actually works reasonably well in a sideways market, but in a trending market you get burned.
They are mainly used when determining when there are overbought or oversold levels. Selling when the price touches the upper band and buying when the price touches the lower band.
The bollinger bands are a technical indicator similar to the keltner channel as they are both bands and a measure of volatility. One main difference is the keltner channel uses average true range for the calculation. Unlike bollinger bands, keltner channels after a big price movement does not have the “balloon” effect that the bollinger has.
Important: the ex4 files works with 1090 build (or later) of Metatrader 4 . The ex4 files are compressed into zip with folders, simply extract to the mt4's root folder. you can download the files separately or in one zip file here (current version: ) :
And if the is price near the lower Bollinger Band, it’s considered “cheap” because it’s 2 standard deviation below the average.
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This is A Simple Forex Trading Strategy. The Middle Bollinger Band Forex Trading Strategy Can Also Be used As A forex scalping system
The Bollinger Band Squeeze is straightforward strategy that is relatively simple to implement. First, look for securities with narrowing Bollinger Bands and low BandWidth levels. Ideally, BandWidth should be near the low end of its six month range. Second, wait for a band break to signal the start of a new move. An upside bank break is bullish, while a downside bank break is bearish. Note that narrowing bands do not provide any directional clues. They simply infer that volatility is contracting and chartists should be prepared for a volatility expansion, which means a directional move.
M-Tops were also part of Arthur Merrill's work that identified 16 patterns with a basic M shape. Bollinger uses these various M patterns with Bollinger Bands to identify M-Tops. According to Bollinger, tops are usually more complicated and drawn out than bottoms. Double tops, head-and-shoulders patterns, and diamonds represent evolving tops.