Middle of the Bands.
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If you are quick and get your stop to breakeven you can look to exit this trade somewhere between one or two times the risk distance between your entry and initial stoploss. Ideally, if you risked 10 points you want to be taking between 10 and 20 points profit from a trade. If the move has been sharp you may want to try and lock in some profits, as often it can retrace quickly.
Start moving your stoploss up from breakeven or from the middle Bollinger and trail it underneath the low of every candle that closes up. The next highlighted area on the above chart shows a sell trade. Once again you are looking for the lower Bollinger band and the middle Bollinger average to push below the exponential moving average.
Then you are looking for a candle that closes down, and the entry is triggered when the low of this candle is broken.
Your stoploss is placed at either the last small high in the price, or at the middle Bollinger level, or at your maximum you are willing to risk on the trade. Bear in mind you want to keep the risk as small as possible on these trades to make this work. Once the price has moved down towards touching the lower Bollinger band you need to get your stop quickly to breakeven. Then either start to trail it down locking in your profit, or closing the trade between one or two times your risk.
As the price starts to push down to the lower Bollinger band you get your stop quickly to the breakeven level. At worst you should have been stopped out at breakeven. Because the last low is quite far away I would suggest placing your stoploss at the middle Bollinger average as the price starts to break in your trade direction. The price quickly moves towards your upper Bollinger band and at this point is around 1.
Here you can either close out for a profit, or trail your stoploss under the low of each one minute candle until the price reverses and closes the trade. You might get another few points reward doing this. You will notice on the chart above that price continued up after the first trade. When you are first learning this system I would suggest you only take the first trade in any new direction. As you become more aware of how this system behaves, you might want to use the same entry and exit techniques to trade continuations of the trend.
If it is a strong move and the price is above the middle Bollinger, every consequent touch of the outer Bollinger bands can lead to a profitable move which fits with your risk.
I would suggest you set up a chart with the indicators as shown. Leave it open on your desktop and follow the idea visually for a few days. Even without placing a trade you can get a feel for how this works, and you will see where the opportunities are when the price touches the extremes at the Bollinger bands. There are tools available for certain broker trading platforms such as Interactive Brokers which will help manage your stoploss is and exit points for you.
You can set them up to complete tasks, such as move your stoploss 2 points, by clicking the software once to perform the action. They can also enter a trade and automatically place a stoploss at your maximum risk level at the same time. Tools like this are invaluable when trading such a fast-moving system.
This is software which records any actions you make on your PC browser and saves them as scripts. For instance you could have one set up which places a trade and your maximum stoploss with one click, then you could have another set up which moves your stoploss by X amounts of points each time you click, and another which closes your position. Fast-moving trading systems need some sort of automation to help manage positions.
Carl is an active trader of forex, stocks and commodities who mainly uses charting and candlestick strategies. An author on various trading websites and is admin here!. Price moves outside the bands — trend continuation When price moves and closes outside the Bollinger upper or lower bands, it implies a continuation of the trend.
With it Bollinger Bands continue to widen as volatility rises. But it is not always straight forward: Bollinger Bands alone are not able to identify continuation and reversal patterns and require support from other indicators, such as often RSI, ADX or MACD — in general all types indicators that highlight markets from a different than volatility and trend prospective momentum, volume, market strength, divergence etc. Trend reversal patterns with Bollinger Bands As a rule, a candle closing outside Bollinger Bands followed later by a candle closing inside the Bollinger Bands serves as an early signal of forming trend reversal.
Since long aggressive trend develop not that often, there will be on general more reversals than continuation cases, still only filter signals form other indicators may help to spot true and false market tops and bottoms.
Speaking of the last, Bollinger Bands are also capable of aiding double top and double bottom pattern recognition and trading. With Bollinger Bands it occurs when the following sequence take place: In fact, a very conservative trading approach requires price to cross and close on the other side of Bollinger Bands middle line before the trend change is confirmed.
This Simple Moving Average SMA is by itself a widely used stand alone indicator, which help Forex traders identify prevailing trends and confirm trading signals. The trademark is registered for "Financial analysis and research services". Great Job, but could you put a file link for us to free download these indicators int our MT4, to work on them live trading. Another well known approach is to use 2 sets of Bollinger bands: Bollinger bands 20, 2 and Bollinger bands 20, 1 together on one chart.
What it does, it creates a set of channels, the borders of which can be effectively used to gauge the strength of a trend. Red patch - a strong downtrend is clearly visible in the red highlighted area as price moves in between the bands 20, 1 and 20, 2.
Yellow patch - price returns back inside the BB 20, 1 - no trend. Green patch - a strong uptrend, followed by a tall bullish candle - an acceleration of a trend, which soon pauses - price retraces back inside the BB 20, 1. You'll be able to find it here: I had seen several strategies and explanations before but, until reading your explanation the light never came on about how useful Bollinger Bands are.