March 20, at 2: For example, if a stock explodes above the bands, what do you think is running through my mind? The other point of note is that on each prior test, the high of the indicator made a new high, which implied the volatility was expanding after each quiet period. I am learning from your article and that would be really helpful for all of us basically for me. August 29, at 7:
The Bollinger Band-Width
There are two types of tops that you need to know about: This signal is usually accompanied by an RSI divergence 2 During a consolidation, price spikes into the outer Bands which get rejected immediately The screenshot below shows both scenarios.
If you continue to use this site we will assume that you are happy with it. The break away gap in the last graph at 7 which was tagged relatively true reversal signal is also a confirmation of change in polarity. This occurred just after the bearish engulfing pattern at 7.
My question is does break away gap join in fundamental analysis of a trend in such suitation? Thank you so much. The fact that you explain everything so clearly is amazing. The fact that you also involve real life examples of stocks and having us do questions helped the info sink in even more!
The above article is clear to understand. Mainly, because they are in the Middle Band region and since it is in Middle Band, it could be retesting the Middle Band or breaking away from the Middle Band, how can a novice trader consider continuation and confirmation as a trade setup? I know we can consider the close price to determine the direction. But, going back on some charts and seeing such signals — it proves to be quite a tricky setup with chance.
We have talked about the candlesticks that need confirmation in different articles:. Also this article talks about the continuation trade setups in more details: Hey Chris my confidence in trading confidently increases by every article of yours I read even without paying a dime More grease to your elbow and more assets in your arsenal,you did quite well and God will bless all your pips Thanks. I am new trader and start trading right now. Explain in a very simple and more efective ways. Chris Pottorff for a such a nice article which specially very helpful for New trader….
Which one should I choose to have exactly the Bollinger Bands you are using to trade? What time frame is suitable? Here is the answer about time frame: Are you new to Rezze? Then please read this article first: You know I have got it, when I ask less questions. But at the moment, like a sponge I am absorbing your materials.
And they are all good and consistent. Referring to point 2 above on reversals. Does it matter to the strength of the setup if in the piercing line above, the upper shadow is also very long. What if both candles with beautiful size and long shadows were out of the BB range, and none made back or crossing into the BB range?
What do you make out of the strength of such a setup? Do you wait for another confirmation? Yes, it is a negative point for a long trade setup: What if the candlestick preceeding 1 was also outside the BB range? Say it went bearish body and shadows under the lower BB, and candlestick 1went up bullish strongly but still outside the lower BB? Would it have been a good setup? Is this a strong trade setup? What would you score it? Yes, it a score trade setup that we took it and we use it to compare the other short trade setups with: I suggest you to read all the articles listed on the below post carefully and patiently.
What I understand from the number of questions you ask while you have not read the articles carefully, is that you are excited and in a hurry. This is not good for a trader: Thank you for your wisdom. I really appreciate your helpful attitude and being extremely patient with me.
You are right that I am excited and in a hurry to understand it. I too have lost a lot of money, and we are not talking about just tens of thousands. In fact, I had decided to not trade again but to just invest using value investing.
But I still got burnt on good companies because of there are just too many variables, e. Hence, I find currencies are much purer. And the market size is so large that it is not easily manipulated. Having said that, I have actually read so many of your articles. Including the one you mentioned above. But because I read so much, whilst I may remember the pattern, I may not remember the currency pair and the dates.
Chris, your article https: I am actually talking about a bullish entry on Are you talking about the same thing? You did go long on This is question was to illustrate whether a breakout where the candles are still outside the range and not making it back into the BB range can still be considered as a strong trade?
Now, you are right about not too hurry it up, and read up the articles patiently. A very important advise. I promise to remind myself on that. I am trying to do backtesting now, and see what the outcome is. We also talked about that too strong weekend gap that GBP cross currency pairs opened with: It was a strong setup on the weekly, but on the daily it formed on a too bearish market when the So we avoided it on the daily.
Dear Chris When we look for nearest resistant or support lines some of them turns from downside to upside the other opposite. So if we think about going long or short which one we should consider? Both or opposite turning point? I hope explanation of my question is clear enough. English not my first language Thank you Dogan. When there is a downtrend or range, a descending resistance is a better choice to go long. And visa versa for going short. Thank you for time to answer me.
I hope this is not a silly question. When I want to go long as using line chart over the price level there are some turning points. I know old support and resistance turning to to each other.
Do I need to consider all this turning points as resistance or just only clockwise? Your candlestick explaination is simply superb, i have learned and practised in demo account and was successful. How can I change that and see exactely what I see in your charts?
Hello Chris, thanks for sharing your knowledge and experience. Just a quick question about engulfing strategy, does it also work on weekly and monthly timeframes? With my shortage of experience I think I will probably take 4 false signal because of many positive points. Too strong engulfing candle which is break BUB and engulf too many candles. Abandoned baby candle above BUB before engulfing candle 3. There are signs of exhaustion and bears pressure. Consolidation for almost three weeks after 3 false signal, which I will consider like hesitation.
Based on that market condition I will probably take this trade signal with riskier SL which is good and after being stopped out, continuation candle while gave me new signal to enter on trade.
It is formed by a too long candlestick with a considerable lower shadow. Indeed, it is not a false signal. It is a bad signal. Thank you so much Chris you are indeed a angel. I do have a question though.
Please how can one use this strategies to trade shorter time frames like 5, 10, 15, 30 minutes also can this be applied to binary options? You can use the same way on any time frame or price chart.
Just keep in mind that shorter time frames are riskier to trade. Do you mean that, if the closing price of a candle is above an upper band, there is no band breakout? But the closing price of the third candle of the first example, it closed above the upper band, so how can it be a BB breakout? Or were you doing simple technical analysis? Thank you very much. Oh sorry, english is not my first language. But, about the middle band, you said we can use it to trade continuation signals, but you also said that is risky or riskier than your normal trading.
So, how can I trade continuation signals, if there are no strong reversal signals? Thanks a lot for your time and help. You trade the strong candlestick patterns that for as continuation setups. The power of the candlestick pattern which is agreeable to the trend is important.
What about the double bollinger bands? Everything about that system is explained here: Yeah, I read it all, and I think is the easier continuation signal? What do you think? Is the BB1 breakout, even realible for your sistem? My question is if a candle shadow break above the upper Bollinger, bullish or bearish candlestick, with out creating any pattern, how it can be explained. It is just a strong price movement and deviation from the middle band. It means the related party is controlling the market strongly.
When the shadow is too long, it means the opposite party is trying to take the control, but have not been successful yet.
Thanks Chris you always put the psychology of trading and traders in your articles which make them unique. For the first time in my life I can get a little feeling that I really understand how market works. I just need to read your articles more carefully and do some highlights. Your explanation of Bollinger bands in this article was awesome. It means a big Bullish pressure is imposed to the market suddenly.
What is happening Chris when the shadow occur above the candle? And the explanation is the same if the candle is Bearish? Basically do we have to follow the candles when breaking out the bollinger bands or the shadows are most important. Hi Chris Once again i am surprised by your perfectly written Article. So many important sentences in this Article. Again your way of explaining the psychology of the market is so catching for me.
The selling pressure was clearly in oversold territory. The strategy called for a buy on the stock the next trading day. Like the previous examples, the next trading day was a down day; this one was a bit unusual in that the selling pressure caused the stock to go down heavily.
The selling continued well past the day the stock was purchased and the stock continued to close below the lower band for the next four trading days.
Finally, on March 5, the selling pressure was over and the stock turned around and headed back toward the middle band. Unfortunately, by this time the damage was done.
The strategy calls for buying Apple shares on December The next day, the stock made a move to the downside. This is case where the selling continued in the face of clear oversold territory. During the selloff there was no way to know when it would end. There are times, however, when the strategy is correct, but the selling pressure continues.
During these conditions, there is no way of knowing when the selling pressure will end. Therefore, a protection needs to be in place once the decision to buy has been made.
The strategy correctly got us into that trade. Both Apple and IBM were different because they did not break the lower band and rebound.
Instead, they succumbed to further selling pressure and rode the lower band down. This can often be very costly. In the end, both Apple and IBM did turn around and this proved that the strategy is correct. The best strategy to protect us from a trade that will continue to ride the band lower is to use stop-loss orders. In researching these trades, it has become clear that a five-point stop would have gotten you out of the bad trades but would have still not gotten you out of the ones that worked.