Trading Strategy With Bollinger Bands
You have to use Bollinger Bands in the analysis of trading? Of course you are very familiar with this indicator. Bollinger Bands quite popular in the financial world as one tool or indicator to analyze the market. John Bollinger, is the inventor of this indicator, he’s created in the 1980s. This indicator is used to help estimate the range / range of price movement. In this paper we will divide the trading techniques using Bollinger Bands to make a decision to open position Buy or Sell.
We often use Bollinger Bands in a way to open Buy position at lower prices through Bands Sell or open position when the price penetrated the Bands. And often the steps above backfired for us. At the moment we open position Buy / Sell, when prices penetrate the lower Bollinger Bands / up, prices do not rebound back up / corrected downwards as we expected, even the price continued to fall / rise and make a loss on the position we have created. (see graph 1.2 and 3)
Therefore, we need additional indicators or chart patterns as a confirmation to make a decision to open a more accurate position. We can add an indicator to confirm Stochastic overbought and oversold areas. To further determine whether prices will actually rise or fall after touching the bottom or top of Bands, we can use the level of resistance and support to confirm it. Let’s look at the example graph at right:
We use the example AUDUSD daily chart of Monex Trader Platform. We see candle on July 8, 2009. Candle is through and closed below the lower Bollinger Bands. Before we open position Buy, it’s good we are awaiting confirmation from several indicators supporters.
We see Stochastic (5, 3, 3) has reached oversold levels, which means prices are ready to buy. Well, we’re ready to open a Buy position. But wait … ..! To further ensure the longer we wait until the nearest resistance is formed and when the price through the resistance level, we can open a Buy position.
Target profit can one make in Bands Bands middle or at the top, while that can we put on the bottom of the price range of the previous candle.
So briefly, how to open a position by using Bollinger Bands. There are many combination of indicators that we can explore. For example, we can combine with Bollinger Bands chart patterns double top pattern, double bottom, a pattern or patterns W M.