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No magic number exists here either. Choose a setting that aligns with the techniques below, for the asset being traded. The attached chart shows a one-minute crude oil futures chart with Bollinger Bands. Trendlines have been drawn to show the trend direction based on Bollinger Band guidelines discussed below.
As an example of a more complex pattern combination, a reversal candlestick piercing a Bollinger band on a RSI divergence can be a high probability reversal setup as you can see on the daily GBP/JPY chart below.
Considered the most fundamental component of the Bollinger Bands, the squeeze, occurs when the bands come together narrowing the moving average. Traders consider this period a potential opportunity to make trades as a squeeze signals a time of low volatility with the expectation there is greater volatility later. On the other hand, when the bands widen apart the volatility levels subside and traders typically close out of trades.
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.
And if the is price near the lower Bollinger Band, it’s considered “cheap” because it’s 2 standard deviation below the average.
Learn how forex traders use Bollinger Bands ... We think it’s more important that we show you some ways you can apply the Bollinger Bands to your trading.
This trading strategy which is called “Double Bollinger Bands” or DBB, is very simple, because although you use candlesticks in this system, you don’t have to be worried about the candlestick patterns. You don’t have to know the weak and strong candlestick patterns and differentiate them from each other. You don’t have to know anything about technical analysis and other complicated techniques.
Or if you want to focus on a few specific trading environments or tools, that’s cool too. It’s good to have a specialist when installing your electricity or plumbing in a house, just like it’s cool to be a Bollinger Band or Moving Average specialist.
The purpose of Bollinger Bands is to provide a relative definition of high and low prices of a market. By definition, prices are high at the upper band and low at the lower band. This definition can aid in rigorous pattern recognition and is useful in comparing price action to the action of indicators to arrive at systematic trading decisions. 
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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.
You may see Bollinger Bands denoted in brackets (20,2) . The Period and Standard Deviation are set to 20 and 2, respectively.
Now for the entry and exit rules. In Nicks book, he uses 100 period Bollinger Bands so we’ll do the same. The upper Bollinger Band will be 3 deviations from the central line, the lower Bollinger Band will be 1 deviation below the central line.
Entry: Buy on the Open the day after a stock closes above the top Bollinger Band
Exit: Exit on the Open the day after a stock closes below the lower Bollinger Band
The two standard deviations (UBB and LBB) are a measure of volatility. A typical Bollinger Bands strategy is to look for a break when the two standard deviations are moving away from each other.
In our pro Forex trading course , you will learn how to use the Bollinger Bands ® to find and time entries step by step as well with one of our many setups which we teach and trade.
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