Catch the bottom using the Bollinger Band indicator

By default, the Bollinger Band indicator uses a 20 cycle SMA with a standard deviation of 2, which means that Bollinger Band will measure twice the average price volatility of the market. To determine the exact timing of the market at the bottom with high price movements, one should re-adjust the standard deviation of 2.5.

Here's how: after you open the Bollinger Band indicator, change the deviations box to 2.5 as shown below.

A standard deviation of 2.5 will indicate a broader price channel than the default Bollinger Band with a deviation of 2.0. Once the price goes above the upper and lower bands, that is, a 2.5 Bollinger Bands deviation will indicate higher price volatility. Take a look at the image below, with Bollinger Band 2.5 the price will better predict a reversal than the default Bollinger Band.

In the picture, Bollinger Band 2.0 is the inner band. Bollinger Band 2.5 is the outer band

The purpose of changing the standard deviation parameter is to help you filter as much noise as possible. You only need one trading opportunity exactly as shown above is enough to be able to continuously profit from the market.

Distinguish the price creating a real bottom from the trend in the sideways cycle

Next, you need to distinguish which is a valid trading signal. You need to distinguish between a sideways price wave (trend grind) and a real price peak (volatility spike), the second signal is what we need to care about.

With sideways price action, you will see candles moving in one direction and leaving no long shadows in each candle. When the price breaks out of the Bollinger Band, such price action will not generate enough force to reverse the market.

With a real low-peak price wave, especially a long candle "sticking out" quickly, a long shadow shows the instability of the candle, and immediately the price will quickly reverse inside the Bollinger Bands...

Establish a trading signal with a high probability of winning based on Bollinger Band

Now, let's look at a few examples to discover the signals with the highest probability of winning with Bollinger Band.

The two most important criteria are where the signal appears and the valid candlestick pattern. The illustration below shows a scenario that meets both criteria.

The price broke out of Bollinger Band and immediately hit the overhead support line at 76.363. There were many traders stuck in the situation, they mistakenly believed that the price successfully broke the resistance line on the chart.

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