Although I have read before, still this is invaluable article to remind me. The longer the time frame, the stronger the signals. The trading and investing signals are provided for education purposes and if you use them with real money, you do so at your own risk. April 9, at 7: Bollinger Bands work well on all time frames. I know I am. You can increase your likelihood of placing a winning trade if you go in the direction of the primary trend and there is a sizable amount of volatility.
All you have to do is adding two sets of Bollinger Bands indicator. That is why this trading system is called “Double Bollinger Bands Trading Strategy”. Use the default settings for the first Bollinger Bands: Period: 20 Deviations: 2 Shift: 0. In this article, I refer to this Bollinger Bands indicator as BB2, because its deviations is set to 2.
BREAKING DOWN 'Bollinger Band®'
Many Bollinger Band technicians look for this retest bar to print inside the lower band. This indicates that the downward pressure in the stock has subsided and there is a shift from sellers to buyers. Below is an example of the double bottom outside of the lower band which generates an automatic rally. In addition, the candlestick struggled to close outside of the bands. Another simple, yet effective trading method is fading stocks when they begin printing outside of the bands.
Now, let's take that one step further and apply a little candlestick analysis to this strategy. For example, instead of shorting a stock as it gaps up through its upper band limit, wait to see how that stock performs.
If the stock gaps up and then closes near its low and is still entirely outside of the bands, this is often a good indicator that the stock will correct on the near-term.
You can then take a short position with three target exit areas: As you can see from the chart, the candlestick looked terrible. The single biggest mistake that many Bollinger Band novices make is that they sell the stock when the price touches the upper band or buy when it reaches the lower band. Bollinger himself stated a touch of the upper band or lower band does not constitute a buy or sell signal. Notice how the volume exploded on the breakout and the price began to trend outside of the bands; these can be hugely profitable setups if you give them room to fly.
I want to touch on the middle band again. Just as a reminder, the middle band is set as a period simple moving average in many charting applications. The middle line can represent areas of support on pullbacks when the stock is riding the bands. You could even increase your position in the stock when the price pulls back to the middle line.
Regarding identifying when the trend is losing steam, failure of the stock to continue to accelerate outside of the bands indicates a weakening in the strength of the stock. This would be a good time to think about scaling out of a position or getting out entirely.
Another trading strategy is to gauge the initiation of an upcoming squeeze. John created an indicator known as the band width. The idea, using daily charts, is that when the indicator reaches its lowest level in 6 months, you can expect the volatility to increase. This goes back to the tightening of the bands that I mentioned above. This squeezing action of the bollinger band indicator foreshadows a big move.
You can use additional signs such as volume expanding, or the accumulation distribution indicator turning up. We need to have an edge when trading a bollinger band squeeze because these setups can head-fake the best of us. It immediately reversed, and all the breakout traders were head faked. You don't have to squeeze every penny out of a trade.
Wait for some confirmation of the breakout and then go with it. If you are right, it will go much further in your direction. Notice how the price and volume broke when approaching the head fake highs yellow line. To the point of waiting for confirmation, let's look at how to use the power of a Bollinger Band squeeze to our advantage. Notice how leading up to the morning gap the bands were extremely tight. Now some traders can take the elementary trading approach of shorting the stock on the open with the assumption that the amount of energy developed during the tightness of the bands will carry the stock much lower.
Another approach is to wait for confirmation of this belief. So, the way to handle this sort of setup is to 1 wait for the candlestick to come back inside of the bands and 2 make sure there are a few inside bars that do not break the low of the first bar and 3 short on the break of the low of the first candlestick.
Based on reading these three requirements you can imagine this does not happen very often in the market, but when it does, it's something else. The below chart depicts this approach. Now let's look at the same sort of setup but on the long side. Below is a snapshot of Google from April 26, Notice how GOOG gapped up over the upper band on the open, had a small retracement back inside of the bands, then later exceeded the high of the first candlestick.
These sorts of setups can prove powerful if they end up riding the bands. This strategy is for those of us that like to ask for very little from the markets. Essentially you are waiting for the market to bounce off the bands back to the middle line. You are not obsessed with getting in a position and it wildly swinging in your favor. Nor are you looking to be a prophet of sorts and try to predict how far a stock should or should not run.
By not asking for much, you will be able to safely pull money out of the market on a consistent basis and ultimately reduce the wild fluctuations of your account balance, which is common for traders that take big risks. The key to this strategy is waiting on a test of the mid-line before entering the position. You can increase your likelihood of placing a winning trade if you go in the direction of the primary trend and there is a sizable amount of volatility.
As you can see in the above example, notice how the stock had a sharp run-up, only to pull back to the mid-line. You would want to enter the position after the failed attempt to break to the downside. You can then sell the position on a test of the upper band. If you have an appetite for risk, you can ride the bands to determine where to exit the position. This is honestly my favorite of the strategies.
If I gave you any other indication that I preferred one of the other signals, forget whatever I said earlier. First, you need to find a stock that is stuck in a trading range. The greater the range, the better. Now, looking at this chart, I feel a sense of boredom coming over me. However, from my experience, the guys that take money out of the market when it presents itself, are the ones sitting with a big pile of cash at the end of the day.
In the above example, you just buy when a stock tests the low end of its range and the lower band. Conversely, you sell when the stock tests the high of the range and the upper band. The key to this strategy is a stock having a clearly defined trading range. This way you are not trading the bands blindly but are using the bands to gauge when a stock has gone too far.
You could argue that you don't need the bands to execute this strategy. However, by having the bands, you can validate that a security is in a flat or low volatility phase, by reviewing the look and feel of the bands. So, instead of trying to win big, you just play the range and collect all your pennies on each price swing of the stock.
Like anything else in the market, there are no guarantees. Bollinger Bands can be a great tool for identifying volatility in a security, but it can also prove to be a nightmare when it comes to newbie traders. Don't skip ahead, but I will touch on this from my personal experience a little later in this article.
Not exiting your trade can almost prove disastrous as three of the aforementioned strategies are trying to capture the benefits of a volatility spike. For example, imagine you are short a stock that reverses back to the highs and begins riding the bands.
What would you do? While bands do a great job of encapsulating price movement, it only takes one extremely volatile stock to show you the bands are nothing more than man's failed attempt to control the uncontrollable. While there is still more content for you to consume, please remember one thing - you must have stopped in place! Let me help you out if you are confused - kill the trade!
While bandsdo a great job of encapsulating price movement, it only takes one extremely volatile stock to show you the bands are nothing more than man's failed attempt to control the uncontrollable. Strategy 5 - Snap back to mthe iddle band, will work in very strong markets.
It is explain in the article that you should add two sets of Bollinger Bands indicator. One with the default settings and the second one with Deviations: Open your mt4 account or platform and go to the insert button click it select bollinger bands a box should pop up click the parameters it should be 20, 2, Repeat this process and add change the deviation to 1 you should have two sets.
If yes, please share that as well. Surely it is always defeating my understanding! Thank you kamel, been using your strategy for a while now and love it, so simple yet very effective!! I think I have to start using this strategy combine with master Chris strategy and see what result it will give. I love your article so comprehensive. Hi Chris and Kamel and everyone one who works in this site.
I am new to your site and just registered few days ago. I have been reading your articles about DBB strategy and I found it so amazing. I looked at so many patterns specially in EURUSD and I kind of feel the pattern of the candle stick or maybe the length of them or the distance they have from the BB1 upper or lower band can make a difference. Thanks a lot for your help and support and your amazing information.
I just want to say thankyou for posting this article because It will help me start making profitable trades. Up until now In have only made small profits and mostly losses trying to trade the shorter time frames.
Thanks again and keep posting. Could this be due to algorithmic trading killing market inefficiencies? As I explained once, you can use BB1 and locate the strong candlestick signals. There are so many traders who do it. Algorithmic trading cannot affect market. Please kindly share a screenshot as an example, so that I can see what you are talking about exactly.
My broker is CM UK. Could you give me advice on this? Pardon for the many questions, I just registered an account and bursting with questions Thanks a lot again! Yes, the daily candlestick close time can make the candlesticks shapes different.
In most of my screenshots I use the FxPro charts. You can do the same for your analysis, and then use your broker platform only to take the positions. Thank you sir for this new strategy of trading.
I would like to know how to add second set of BB to my screen. I tried but could not succed. Thank you so much sir Kamel, you have solved me alot of headache especially in determining the target and stop loss.
How to use this strategy in Amibroker software? Can the DBB strategy be profitable using 4 hour charts? Or is it better to stick to Daily and longer time frames with this strategy?
The longer the time frame, the stronger the signals. Shorter time frames will have more losing positions. I would like to know when you mentioned you check only 15 minutes a day to check for a setup, does that mean you are only looking for 1st candlestick and 2nd candlestick close below Upper BB1 and 3rd candlestick close above Upper BB1 setup only?
I hope you understand my question. We should check the last 3 closed candlesticks. Please also read this article: The 3rd candle was 2 days ago, but i think the price still ok to take position. I just want u guys too take a look the chart and confirm for thia signal, cause im new for this DBB system. Hello Anton Praja I have opened position on this currency pair on I am still still holding the position. I have 2 doubts to clarify 1. Does the color of the candle candle no. Is this strategy valid if candle 2 and 3 touches BB1 bottom line and BB2 bottom line.
That method seems interesting, I will give it a try. Sorry if there has been already an answer, but is the strategy suitable with CFD and metals charts? And if no, why? Dear Chris,So thankful for your hard work you have done so far to improve our trading skills.
Special thanks to Kamel for this simple and effective DBB strategy. Thank you for back test Report of this strategy by JojoW. HI Kamel Another confusion.
After 14th March, there was a selling signals but after Candle stick 3, which was closed down BB1 lower band, prices startd going up all of a sudden. Hi Kamel and Chris. Found the LuckScout website only yesterday and am in the process of reading through your articles. How do I set up the alerts indicator?
Do you always set a market order when an eligible candle closes, or is a pending order an equally plausible entry? If so, would a pending order have to be cancelled if not triggered within one bar?
So you will have to give more time to the market to hit the order. Did you test this, or is it more a style-of-trading thing? Thanks, and happy trading. Thank you Kemal for the article. Although I have read before, still this is invaluable article to remind me. I like that you guys are simple and realistic. I look forward to many more great articles. This eBook shows you the shortest way to acheive Financial Freedom: Just before you go, did you check This System?
Make sure to do it now, otherwise you will regret. Article by LuckScout Team. October 25, at October 26, at 3: October 25, at 1: October 25, at 2: October 25, at 3: October 26, at 1: December 9, at 4: October 25, at 4: October 25, at 5: October 26, at 5: October 26, at 9: October 26, at October 27, at October 25, at 6: October 25, at 7: October 25, at 8: October 26, at 4: October 26, at 6: October 26, at 8: October 27, at 2: October 26, at 2: October 27, at 1: October 27, at 3: October 27, at 5: October 27, at 4: October 27, at 6: October 27, at 7: October 27, at 8: March 2, at 7: October 29, at 9: October 30, at 2: October 31, at November 5, at November 8, at November 9, at 1: November 9, at 8: November 9, at November 17, at 5: November 17, at November 28, at November 29, at 9: December 9, at 7: December 18, at 6: December 20, at 1: December 18, at 7: Michael stJohn van Eeden says: December 21, at 6: March 2, at 6: January 3, at 3: January 3, at 2: January 4, at 2: January 5, at 4: January 9, at January 10, at January 11, at 4: January 12, at 5: February 3, at 5: June 2, at 3: February 18, at 4: February 18, at 1: February 19, at February 26, at February 26, at 1: July 4, at February 28, at 3: March 1, at 4: February 28, at March 1, at 5: March 2, at 8: March 3, at 1: March 4, at March 4, at 4: March 4, at 5: March 4, at 3: March 4, at 7: March 5, at 2: March 5, at 3: March 5, at March 27, at 1: March 25, at 3: March 25, at 6: March 25, at 5: March 25, at 7: March 27, at 5: March 26, at 1: March 27, at April 9, at 1: April 9, at 2: April 10, at 7: April 10, at 1: April 9, at 7: April 10, at 5: April 11, at 2: April 17, at 7: April 21, at May 2, at 9: May 4, at May 5, at 2: May 15, at 7: May 22, at 9: May 29, at Md Shafiqul Islam says: May 29, at 1: May 30, at 1: May 30, at 2: June 3, at 4: June 10, at June 30, at July 1, at 2: July 1, at 5: July 2, at 3: July 2, at July 2, at 4: July 2, at 7: July 7, at July 4, at 6: July 6, at 8: July 11, at July 12, at July 12, at 2: July 12, at 4: July 12, at 9: July 21, at July 24, at 9: This guide assumes that you have opened a chart.
Every trader needs a trading journal. Use this link to get the discount. Right-click the indicator that you want to delete you will have to be exact on the line of the indicator to get the menu shown below.
Why Get month Premium Membership for free. How to log into MetaTrader 4 a minute. Opening a chart in MetaTrader 4 a minute. How to modify a chart in MetaTrader 4 2 minutes. How to set up a template and pivot points a minute. Manage your trades in MetaTrader 4 a minute. How to add a template to MetaTrader 4 a minute.
What is a 'Bollinger Band®'
Double Bollinger Bands are 2 sets of BBs, using default settings set at the usual 2 standard deviation distance above and below the 20 period simple moving average line in the middle, as well as a second set of BBs plotted just 1 standard deviation above and below that central moving average. Part 1 Is An Introduction To Double Bollinger Bands, Part 2 Is A Continuation That Presents Specific Rules And Examples, Part 3 (coming soon) Is A Quick Summary This is part of FXEmpire’s continuing series of special features on trader education, and provides a solid basis for understanding double Bollinger bands. For more detailed coverage. These default parameters set the bands 2 standard deviations above/below the simple moving average. Users can change the parameters to suit their charting needs. Bollinger Bands (50,) can be used for a longer timeframe or Bollinger Bands (10,) can be used for a shorter timeframe. Click here for a live example.