Trading Bollinger Bands

 

 In my Previous Post about my trading Setup, I used Bollinger Band in the main chart with default setup (20 Period of SMA with 2.0 Deviation). What I liked about this Indicator is because it has an Upper Band and a Lower Band. As Bollinger himself said that "when price touches the Upper Bollinger Band, the Price is High, and when price touches the lower Bollinger Band, the price is Low".

  Buy Low and Sell High is the key to every trading, this is a concept I embedded in my Trading strategy. By using the Bollinger Band, I can determine when the price is relatively high or when the price is relatively low. Upper and Lower of the Bollinger Band act as a Support and Resistance, this dynamic support and resistance based on deviation from the middle band.

   There are several ways to trade with the Bollinger Band :

1. Trading Breakout

2. Trading Reversal

3. Trading Retracement

 

Gold Breakout Example:

   Price breakout is usually preceded by Bollinger Squeeze, which means before any breakout can happen, prices are consolidating by moving in range. Psychologically speaking, the market at this point is undecided, most investors are wait and see. When a breaking news happen, investors are no longer wait and see, they are ready to take stance and therefore start pouring their money to the market, The result of the fight between The Bulls and The Bears will come to light.

    Upside Breakout movement as shown in the chart above follows the upper Bollinger Band until it consolidates made some retracement because some people books some of the profit. After a retracement, prices continue to move higher.

 

Things to remember when trading Breakout:

1. Market are consolidating, there are no winner between the Bulls and the Bear. In other words market are ranging for some times,

a. prices are heading towards the Upper Bollinger Band and then bounce back to the Lower Bollinger Band.

b. Line of the upper and the lower Bollinger Band are flat or almost flat.

These are the signs that market is consolidating and ready for a Breakout.

2. Confirm with other indicators, in my trading setup, I'm using AO for Breakout confirmation. 

3. Breakout trading in a smaller time frame has to be inline with the Trend on the Higher Time Frame, this will increase success rate. 

4. Beware of False Breakout. False Breakout is where sudden high volatility enters the Market and then sending the price break through the Upper or Lower Bollinger Band, but different with the real breakout which price will follow through the upper and the lower band, false breakout is only temporary. After breaking out the Upper/Lower Bollinger Band it lost its momentum and start reversing in direction.

a. Candle stick or barchart have to be closed above or below the Upper/Lower Bollinger Band.

b. to Protect against sudden reversal, move stop loss at the entry price.

 

EUR/USD Reversal Example:

   When price breakthrough the Upper/Lower Bollinger Band but failed to close beyond the Upper/Lower Bollinger band, this means that this pair has probably lost its momentum and ready to reverse. Price are reversing because they can not break through the Support and Resistance, since there are no way forward the only solutions is backward/Reverse.

   My rules for trading reversal using Bollinger Band is:

1. Wait until Heiken Ashi Candle breakthrough the Upper/Lower Bollinger Band but failed to close beyond the Upper/Lower Band.

2. Straight line at the Upper/Lower Band are preferred when making entry.

3. the smaller the space between the candle stick and the Upper/Lower Bollinger band is better for the possibility to success.

4. Different color of Heiken Ashi Candle after the failure of break out is preferrable when making entry decision.

5. Put stop loss at the point of the Upper/Lower Bollinger Band. 

6. Always confirm with another indicator.

7. Pin point your entry on smaller time frame for better price (I'm using M5).

 

 

 

 

 

Sharing my Trade Setup

  In My search for "Holy Grail" in trading this is by far the most suitable trading setup for me, yes.. the most suitable not the perfect one. This is the setup I feel most comfortable to.

 I've read many books about trading, Forex, and etc. There are no one have said they found a "Holy Grail" of Trading, a Setup that will never lose, a Method that will win 100%.  If  somehow You met someone that claim they have "Holy Grail" Method, then it is better to Ignore him and run away because the only "Holy Grail" they have is how to clear out Your pocket.

 

Trade Setup:

Main Chart:

Bollinger Bands (20, 0, 2.0)

Heiken Ashi CandleStick

Alligator

Parabolic SAR

Custom Indicator : SywaAlert

 

Indicator Chart:

     - Awesome Oscillator with Alert

 

 

 Setup explanation:

 - Upper and Lower Bollinger Bands act as Support and Resistance, I use these lines as entry Point.

- Parabolic SAR is used for the confirmation

- Alligator lines (Lips, Jaw and Teeth) are used as short term target level (profit or stop loss), and as confirmation.

- Awesome Oscillator are used together with Bollinger Band for Entry.

- Heiken Ashi Divergence are used for Entry.

 

So, I have three priority entry Condition in sequence from the most important to less are : Awesome Oscillator, Upper and Lower Bollinger Band, and Heiken Ashi.

While other Indicator act as secondary confirmation.

 

 

 

 

USD/ZAR Trading 13-08-2019 (Updated)

 To be honest, I lost this trade.. I stop out before the price eventually goes down. Fear is one of the reason why this trade failed. Trading USD/ZAR and Trading Gold (XAU/USD) are difficult for Me because of the wide spread and fast movement. Trading USD/ZAR and Gold is like riding a fast race car, one mistake and whole account can be blown up.

  There is nothing wrong with the setup, but trade have to be executed with confidence and proper money management.

 

 

USD/ZAR Trading 13-08-2019

 I have been watching this pair since last week, price has been up for sometimes and currently at the monthly resistance. Chart above is on TF H4. Awesome Oscillator, Parabolic SAR shows signs of Retracement. I put a sell order with target profit at the middle of Bollinger Bands.

  However I make a mistake by entering to early at the Asian market Time, USD/ZAR tends to have bigger spread at Asian Market and therefore it is not recommended to trade this pair at Asian market.