The Bollinger Bands is not only a good trend indicator but also a great reversal indicator. As mentioned in the previous post.

Considering the way of trading Bollinger Bands, usually, a reversal signal called beautiful will be formed when a certain candle crosses the upper / lower boundary of the BBs and the next candle will be another candle color and reversed (that candle is the confirmation candle). Let's look at the example below:


Can you see the number 1 candle? It is completely outside the boundary below the BBs, it is also a pin bar (signal number 1). Tree 2 is a bullish candle, its body covers the entire body of tree 1 (signal 2). These two candles form a familiar reversing candlestick position called Bullish Engulfing (roughly translated: candle sticking up, it's best not to translate).

Such an Engulfing candlestick is outside the BBs, which is a very strong reversal signal. And at this time, we only have one option: BUY order and collect money from the market into the pocket.

Continuing with the second example:


A long-tailed pin bar stretches outward on the BBs. Then a candle has a bullish candle covering the entire trunk of the pin bar. A bearish engulfing candlestick formed. Place SELL orders and collect money.

Continuing with one more example:


We have one more candlestick position, which is also quite effective and works for the reversal method with BBs.

Such candles are called Dark Cloud Cover (dark clouds cover something). And of course it must be outside the BBs to enter the SELL order.

THERE WILL BE FAKE ISLAND SIGNALS THAT ARE EASY TO EAT!

Surely someone will read all of the above and start thinking. There will come a time when the market will give us false signals of reversal, after which the price will move on again and we lose money. So how to signal it.

Fake signals are always present everywhere, not only in the market but also in this life. Fake signals are sometimes more than real signals. Therefore, the first thing is that you must have the thought of accepting and accepting it.


But the good news for you is that real signals are usually easier to spot because prices now carry more force and a higher probability of reversal.

This is a false reversal signal. After only a few bearish candles, the price went up strongly again.


So how do you know if the above signal is a fake island signal?

1. First, the trend is going very strong, with no signs of weakening. If it is so strong, then when the price falls slightly, it is time to buy BUY orders, not go SELL.

2. considered a reversal signal because:
  • The number 2 is not big enough, the bearish candle is too weak compared to the trend. The selling force is not strong.
  • The tail on PK 2 is too short, proving that the SELL force from the top is not strong, can not win the current trend.

The first two signals are fake, you know, don't say it again. So what about the third signal, it's a strong reversal, but the problem is that it generated at the wrong time so it won't be of much use. Currently, the uptrend is very strong and apart from the pin bar at the 3rd signal, there is no sign that the trend is weakening.

However, at the 3rd signal, you can still enter a SELL order, but eat it short because it is not in the main trend.

Now to the next example:


Why is the number 3, 4, and 6 of the fake signal, please try to answer. Comment below for everyone to discuss.

Can you see that the middle band of BBs works very well, especially at 8.9 and 10? The price all tested the middle band and gave a signal of selling down. We can SELL at those levels very easily.