Bollinger Bands is one of the most commonly used legendary indicators in technical analysis today, referring to Bollinger Bands, you have been using it or at least have known it. Using this indicator is also quite wide, Bollinger Bands are combined with many other types of indicators to create a trading strategy. However, in this article, I will only introduce to you 6 pure uses of Bollinger Bands including:

  1. Bollinger Bands with a double bottom pattern;
  2. Bollinger Bands with alternating points;
  3. Riding the bands;
  4. Bollinger Bands squeeze (squeeze band);
  5. A price recovery in trend;
  6. Trading in the Bollinger Bands pipeline.
Talking about this indicator, the reason why Bollinger Bands is called a legendary indicator is because of its popularity as well as its effectiveness when applying to trade. There are even veteran Traders claiming that trading with the Bollinger Bands alone can be successful.

Bollinger Bands provide Traders with visual view of price with two upper and lower borders with price movement and centerline (SMA) acting as a trend determination tool.


[Even sisters love Bollinger Bands 😂]


Bollinger Bands - HOW TO CALCULATE
  • Centerline = SMA (default with period 20)
  • Upper Border = Centerline + Standard Deviation
  • Lower Border = Centerline - Standard Deviation
Unlike most other indicators, Bollinger Bands can tell us both trend and range market types. Periods in which the market shrinks to prepare for a strong price burst, etc. So if Trader uses patterns such as: Two peaks, two bottoms, head and shoulders ... then the Bollinger Bands will help Trader have more information about the "deliciousness" of these models.

Before going back to the main problem of this article, here are a few things to keep in mind when using Bollinger Bands:

  • Bollinger Bands are a great tool for understanding price movement from top to bottom and vice versa;
  • Be careful with narrow bands, before big storms are usually quiet;
  • Don't waste time testing the parameters at random, you should use the default parameters;
  • The "Riding the Bands" strategy is effective but remembers, only 20% of the time is the market in the trend;
  • Price recovery to the SMA in a strong trend is usually a very good opportunity to enter;
  • Bollinger Bands can be combined with other tools such as trend-lines, Fibonacci retracement level to increase the "aroma" of the trade;
  • Keep the stop loss very small when trading in the pipeline of Bollinger Bands because at a certain point the price will break out strongly;
  • Beware of out-of-band candlesticks, it doesn't mean the price will automatically retract, it's usually just the start;

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