Using Bollinger Bands

Hello and welcome to Diary of a traitor. Today’s video is going to be on Bollinger your bands and we’re going to explain how they work. What is their purpose and how to implement them into your training? There is a fairly common indicator and we’ve known about Bollinger bands for quite some time. They were created by a gentleman named John Ballinger. And he has a whole website dedicated to this indicator. And if you’re not familiar with where to find it on trading view you just go to indicators and if you just type in B B and we have Bolger bands right here OK. There are also two comforting indicators that you can use Bolger bandwidth and the percent but for right now will just look at the indicator itself. Now there are three components to the Bollinger bands. There’s an upper band a lower band and then the middle the middle is just a simple moving average and Trading View has a default of 20. But I believe John Bollinger had it set to 21. And without going into a lot of the specifics about the calculations that go into measuring these we just need to understand that Bollinger brands are a measure of volatility. So it’s measuring the action. And the direction and how powerful the drive up or down is and then that is reflected inside. Our Ballinger bands and so on. Looking at the Euro dollar right now and if we look at this zone here OK, we can see that as Price was moving down pretty heavy. The Bollinger bands they expanded are okay, they got very. They moved up they got wider so they formed like a B bubble. Okay and then it traded outside and came back in. And then what happened.

The Bollinger bands they constricted. This is called a squeeze or Bollinger band Squeeze or sometimes people just call it a squeeze. Now the squeeze, depending who you talk to, this is such a source of some contention here, whether there’s a squeeze happened before a move or does it happen after a move. This is one of those chicken and the egg argument. But that’s not really important. All we need to know is that after a big move we do see. Ballinger bands enter a squeeze which means we’re reduced volatility, it’s just consolidation and then we also know that squeezes precede breakouts and so when we know we are in a squeeze. This is the time for us to be aware this is the time for us to watch to see what is happening with the price. So we see some consolidation and then price moves beyond and up when it starts to trade above the cloud. This is called a kind of riding the cloud. This is generally a very very bullish while even if it’s bearish like down here. If price is riding the upper band that is a sign of a very powerful trend and you don’t want to trade counter to this Ballinger band. Will keep you in trades if you trade the smartly. All right. Now notice and observe what happens where. Alright, we started to enter a squeeze. Over a short period here, but then we traded up and it fell back down. So how do you know that this is going to fall? Well, this is where you start to use some other indicators. Let’s take a look at these to Kaster Karzai. And maybe, just the RSI itself. And we’ll get rid of these other two indicators for right now.

Now if you’re not familiar with these two indicators without going into a whole lot of detail we know that if prices trading above the seventh level on the RSI that that is considered to be an overbought market. So there’s a there’s a reduced chance of prices moving higher and increased chance of them moving lower. Similarly with stochastic czars with us to cassocks if we see a big spike like this if we see prices up trading in this range, then we know that prices may fall down and if they’re down here if the price is down here, then we know that prices may trade up and if we use them in combination with one another we have a very easy to identify a trading system that we can follow with the Bollinger bands. So let’s look at something different price or different to instead let’s look at the let’s look at the pound dollar. All right now. If we were not using any indicators we see that we have a squeeze here that forms the ball and your bands are tight and then they expand because prices trading and it comes back down and we’re moving here. And then we see prices fall down here only to trade back up and this is where somebody might think well I can go along now because the price was rejected lover. Well, this is where our indicators come into play. Right this is where we use other forms of market analysis to help us. If we saw price trading above the Bollinger advance. We know that automatically that that means that prices moving at an extreme. But then if I look at my stochastic case the stochastic is aside, I know that I’m at an elevated level. I know that it’s hard for price to continue higher here. The Orsatti is still neutral not overbought but it is near overbought level. So the highest probability of price and the direction is to go down and then we observe that all right we see it coming down. Falls below the moving average and then this is a good signal. When are in a squeeze and then you break out, whichever direction you break out wherever you retest the middle line here. That is usually a good pullback trade so you can re-enter a shot here. And so we would enter that short and that’s confirmed by well were not oversold. And we are elevated in the stochastic syndicator and so we would we would we would take a short. All right. And when we saw price getting back inside the Bollinger bands that’s our signal to consider selling and taking some profit. Additionally, prices right here and where’s the are sight indeed the oversold territory and it’s to cassocks our size and deep oversold territory. So this is where we could consider covering that short and possibly going long, but we want it, we don’t want to go along yet until we hold the above the 20. Okay, so you can see that the proper application of the Bollinger bands with other indicators can help yield very high quality and high probability trades. Lots of winning opportunities when you use the Bollinger bands with your indicators. Now it’s very important to notice. That when you’re looking for an instrument that is in a squeeze it can be in a squeeze moving up and it can be in a squeeze moving down. But a flat area trying to find them here for you. But a flat area of squeezing like right here. These indicators will help us find false breakouts. All right so we’re trading here and then we trade down okay, we start to trade below under that below the lower band here.

The Lord Bollinger band and these are telling us this is a fake breakout. Because we are in these extended conditions and our oscillator. And this is where we observe prices going to change and move in a different direction. All right. Thank you for watching this video. Hope you find it helpful. And we look forward to seeing you at our next video.

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