Bollinger bands are a powerful indicator. After using Bollinger bands for over 10 years in I have some powerful insight that will allow you to enter trades more precisely with less risk, stay in trades longer that are going to continue to move, AND ext trades with such precision that you will literally more times than not get out on a high EXACTLY where price begins to go against you. Will it always go this way for you? NO, but I can certainly say with 110% confidence that these simple tricks will allow you to experience a level of accuracy that will shock you from time to time. I can remember 100's of trade, both entries and exits where Bollinger bands got me in to the degree that I was 100% confident of a move in my favor and exits where I was absolutely certain that price was DONE moving. So many times when I got out I watched price just rocket against me, but because of the accuracy Bollinger bands allowed I was already out of the trade with MAXIMUM profit. There isn't too many indicators that will allow you this kind of accuracy. In fact I can't think of 1 single indicator that will allow you this type of precision. This manual is intended to be short and to the point. I will cover the basics AGAIN short and to the point, and then we will get into the advanced stuff that you won't find anywhere else. The techniques that I will share with you here I have been using for several years. Although I have been using Bollinger bands for over 10 years I really didn't harness the power until recently. You have to get beyond the Bollinger band squeeze, and Bollinger band contraction to truly realize the power of this incredible indicator. So we should first thank John Bollinger for coming up with what just might be the best indicator ever developed, because I truly believe it is the best indicator I have ever used. I would like to add before we start that there are times and situation where Bollinger bands can be used alone, always with addition of a MEAN or moving average that defines the MIDPOINT between the bands. Usually a 21 period moving average. This moving average is often a default addition to the bands but sometimes you have to add it. That said, YES you can use the bands with a 21 period moving average by themselves for many great setups but the addition of an indicator or two can greatly benefit you and your accuracy. I will cover with you some details on how I create my cash-flow through my trading with Bollinger bands and a few other tools. So let's get started...
1|Page Copyright 2011 MTD Inc.
Bollinger bands - The Basics Let's start by defining Bollinger bands and their defined purpose for existing. Here is Wikipedia's definition of Bollinger bands - Bollinger Bands is a technical analysis tool invented by John Bollinger in the 1980s. Having evolved from the concept of trading bands, Bollinger Bands can be used to measure the highness or lowness of the price relative to previous trades. Now it's a good thing we aren't relying on Wikipedia for any insight into Bollinger bands because that's about the lamest explanation of Bollinger bands I've ever heard. According to Wikipedia again here is the "Interpretation" of how to use Bollinger bands and this explanation in itself presents a new problem...
************************* The use of Bollinger Bands varies widely among traders. Some traders buy when price touches the lower Bollinger Band and exit when price touches the moving average in the center of the bands. Other traders buy when price breaks above the upper Bollinger Band or sell when price falls below the lower Bollinger Band.[3] Moreover, the use of Bollinger Bands is not confined to stock traders; options traders, most notably implied volatility traders, often sell options when Bollinger Bands are historically far apart or buy options when the Bollinger Bands are historically close together, in both instances, expecting volatility to revert back towards the average historical volatility level for the stock. When the bands lie close together a period of low volatility in stock price is indicated. When they are far apart a period of high volatility in price is indicated. When the bands have only a slight slope and lie approximately parallel for an extended time the price of a stock will be found to oscillate up and down between the bands as though in a channel. Traders are often inclined to use Bollinger Bands with other indicators to see if there is confirmation. In particular, the use of an oscillator like Bollinger Bands will often be coupled with a non-oscillator indicator like chart patterns or a trend line; if these indicators confirm the recommendation of the Bollinger Bands, the trader will have greater evidence that what the bands forecast is correct. ************************* Additionally this is a clip from John Bollinger's website http://www.Bollingerbands.com Bollinger Bands are a technical trading tool created by John Bollinger in the early 1980s. They arose from the need for adaptive trading bands and the observation that volatility was dynamic, not static as was widely believed at the time. 2|Page Copyright 2011 MTD Inc.
The purpose of Bollinger Bands is to provide a relative definition of high and low. 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. Bollinger Bands consist of a set of three curves drawn in relation to securities prices. The middle band is a measure of the intermediate-term trend, usually a simple moving average, that serves as the base for the upper band and lower band. The interval between the upper and lower bands and the middle band is determined by volatility, typically the standard deviation of the same data that were used for the average. The default parameters, 20 periods and two standard deviations, may be adjusted to suit your purposes. ********************************
The Real Low Down on Bollinger Bands I wanted you to have some insight in what "others" say about Bollinger bands and I also recommend anyone wanting to really study Bollinger bands to buy John book on Bollinger bands because he is the inventor of the bands and there is some good insight into the book. If you just want the "GOLDEN NUGGETS" the stuff that's going to make you money consistently then just continue with this report and the emails that follow as well as the videos, and you my friend will know more about generating profits with Bollinger bands than 99% of all experienced traders. To begin with we need to talk about the 2 Bollinger band STAPLES. The ROOT of Bollinger bands. The Bollinger band SQUEEZE, and EXPANSION. We are only truly interested in EXPANSION, but a SQUEEZE tells us of a coming EXPANISON, because in order to EXPAND we need to CONTRACT or SQUEEZE. It's the EBB and FLOW of Bollinger bands. A SQUEEZE is really the result of a slow in price volatility. In other words when price begins to SLOW DOWN it's day to day MOVEMENT or VOLATILITY Bollinger bands begins to SQUEEZE to reflect this. The bands will narrow and this indicates, let's just say, dead price action. Price can become stagnant. When price does this it's hard to make money, HOWEVER it also points to the fact that and EXPANSION of volatility or MORE AGGRESSIVE price movement is inevitable. In fact and always remember this, AFTER A SQUEEZ COMES EXPANSION. Further DECREASED VOLATILITY BEGETS INCREASED VOLATILITY.
3|Page Copyright 2011 MTD Inc.
This is an important observation because it is a fact that a low volatility environment is always followed by a higher one. You just need to know how to take advantage of what follows low volatility. Let's look first at a Bollinger band SQUEEZE and Expansion
Figure 1
In figure 1 we have a Bollinger band squeeze as well as expansion. Notice that prior to the squeeze price, for almost 1 full month really slowed down and remained within a very narrow price range, then the bands came to a head closing in on each other and price EXPLODED to the upside and continued to rocket upward. This is a typical picture of Bollinger bands squeezing and expanding. The opportunity of course lies in the expansion. Now one thing to make note of is that a Bollinger band expansion NEVER dictates DIRECTION just MOVEMENT. In other words this could have just as easily exploded to the downside as it did the upside. More on this later. When I really began to use Bollinger bands to an extremely accurate level was when I realized that it's not just about expansion or contraction, it's about...
4|Page Copyright 2011 MTD Inc.
How the Bands React To Approaching Price Action! and not just the band that's being approached. it's about what BOTH BANDS do as price approaches either band. I'm going to use the same image above to demonstrate the KEEN INSIGHT Bollinger bands offers in this simple example.
Figure 2
Notice as price moved down to the red circle the lower band moved with it. Both headed downward ever so slightly. Then at the red circle BEFORE the explosion in price. The lower band hooked UPWARD. 5|Page Copyright 2011 MTD Inc.
I call this the BRICK WALL of Bollinger bands. This clearly told us that for now at least, price WAS NOT going down any further. Pay attention to this, it's very important and very reliable in either direction. Notice that it was actually 3 bars back that the lower band started to flatten out and STOPPED going down. Then when price hit the band it MARKED THE END of the move down. Now keep in mind that sometimes price isn't so close to the band when this happens so I have a rule of thumb to keep in mind.
The Closer Price Is To the Band (Whichever band) The More Accurate Your Reading. In this case price was right on top of the lower band at the red circle. I would now like to introduce you to a short cut chart I made to help you interpret the varying Bollinger band signals.
6|Page Copyright 2011 MTD Inc.
Figure 3
7|Page Copyright 2011 MTD Inc.
Let's take a look at each of these indications from Bollinger bands on a 1 by 1 basis because if you get to know them all intimately you will become a top trader any asset class any time frame from any place on the planet. From New York to Bangladesh !
Figure 4
Take a close look. Bollinger bands could be doing a number of things on the left, traversing sideway slightly bearish, it could even be slightly bullish, the bottom line is the bands got real close (contraction) and then they both expanded to the point of a NORTH and SOUTH bound almost vertical band on the TOP and BOTTOM. This is extremely bullish.
Figure 5
This is the opposite of figure 4, extremely Bearish. Literally just the exact opposite as the first one. Price could be doing many things up to this point, but right here the bands began to close in on each other first, and then BAM right here we get a NORTH and SOUTH bound UPPER and LOWER band. This again is a transition from low volatility to high volatility. 8|Page Copyright 2011 MTD Inc.
Figure 6
In figure 6 price is moving down to a Bollinger band that won't. This is a sure sign that FOR NOW the downward momentum is over.
Figure 7
Same here in Figure 7, the move up is HALTED by a stubborn Bollinger band.
9|Page Copyright 2011 MTD Inc.
Figure 8
Figure 8 is even more certain that Figures 6 & 7. In Figure 8 the Bollinger band heads up to CUTOFF price action on its way down. You can trade this set-up in more ways than 1! Price is DONE at least for now.
Figure 9
Same here with Figure 9, the upper band comes down and heads price off at the pass! Price is not going anywhere but down for the time being.
10 | P a g e Copyright 2011 MTD Inc.
Figure 10
Here we have a slightly bearish stance as the lower band heads down and the upper, rather than expand to the upside and give us the expansion we like to see remains flat. Price is likely to continue down, just not aggressively.
Figure 11
Figure 11 is the same as 10, but its bullish. Price will likely continue up in a moderate fashion.
11 | P a g e Copyright 2011 MTD Inc.
Figure 12
Both bands headed down is classic downward momentum. These are the kind of moves you see with bank stocks or trending blue chip high volume movers. Ideally with this type of Bollinger band momentum you look to swing structure to identify key low risk entry levels.
Figure 13
The same with figure 13, look to swing structure to pinpoint low risk entry into these moderate to slow movers.
You will notice that I say "AT LEAST FOR NOW" a lot about most of these set-ups. I say that because no matter how great the set-up price can always and often does change direction. Yet no matter how much this happens I can still be so darn accurate with these set-ups that its almost magical.
12 | P a g e Copyright 2011 MTD Inc.
Always keep in mind as you enter your trades that although you will be right most of the time price can always turn on you, that's why it's so important to keep an eye on swing structure. The swing highs and swing lows tell you so much about overall strength and weakness regarding the trend. Watch those swing highs and lows for clues about your trade. Combine swing structure with Bollinger bands and you will have tremendous power at fingertips. No Joke ! If you want to learn all my secrets on Bollinger bands and swing structure, as well as have access to over 10 webinars on the subject I have arranged a very special offer for you here -
Sincerely,
Mark Deaton
[email protected] 780 Falls Ave. #320 Twin Falls Idaho 83301
U.S. Government Required Disclaimer - Commodity Futures Trading Commission Futures and Options trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the stock/options markets or forex. Don't trade with money you can't afford to lose. This is neither a solicitation nor an offer to Buy/Sell futures or options. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed in this manual. The past performance of any trading system or methodology is not necessarily indicative of future results. CFTC RULE 4.41 - HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN.
13 | P a g e Copyright 2011 MTD Inc.
