Before you dive into the content, check out this video on moving average crossover strategies. The video is a great precursor to the strategies and Bollinger Bands Explained Video Check out this quick video on bollinger bands. The video will help you familiarize yourself with the indicator and pr Please take the time to watch this video in its entirety. What you will notice is that I break down how much you can make based on trading for 1 a c Guys, this pattern keeps repeating itself over and over again.
If you guys have watched the videos that we have been putting together, you have he Hi Guys, it's Kunal from Tradingsim. Earnings season is here! This is the period of time where momentum traders do really well as many story stock One of the most powerful trading setups is the short squeeze.
A short squeeze occurs when you have a crowded trade on the short side. Today, were going to cover another low float parabolic stock, OPTT. There have been many of these types of trades in the last couple weeks. I saw a great trade example that I had to share with you guys; we are going to walk through how to day trade a bull trap. As many of you know, Valea Hi Guys, I've put a quick video together on a great trade from earlier in the week. The trade illustrates how you can use key support and resistance In this example, we are covering a buyout or takeover rumor on HOG: It was a broad based market rally that essentially retraced everything that Too often, traders are day trading UVXY a What I look for in the ORB is Trading low float stocks are a day traders dream, especially when there is a news event to trigger a run, it is like pouring gasoline on a fire.
This is Kunal from Tradingsim. We have received a ton of requests from you all on day trading education. I wanted to experiment by creating videos w Are you ready for the Volatility? You can be up handily in one second and then give b The bottom tail formation is a trend reversal pattern that comes at the end of a down move. Below is the setup for the bottom tail pattern: Why is Volume Important? Volume analysis is the technique of assessing the health of a trend, based on volume activity.
Volume is one of the ol Are you a day trader? If yes, then you will definitely find this article helpful as you begin to navigate the world of day breakouts. Today we are goi Check out this quick video on bollinger bands. The video will help you familiarize yourself with the indicator and provide a general overview of trade setups before we dig into the advanced strategies.
Odds are you have landed on this page in search of bollinger band trading strategies, secrets, best bands to use, or my favorite - the art of the bollinger band squeeze. Before you skip down to the section titled bollinger band trading strategies which covers all these topics and more; let me impart two additional resources on Tradingsim: At the end of this article, you will not only learn six bollinger band trading strategies, but more importantly, you will understand which strategy best matches your trading profile.
Bollinger bands are a powerful technical indicator created by John Bollinger. Some traders will swear that solely trading a bollinger bands strategy is the key to their success. Bollinger bands encapsulate the price movement of a stock. It provides relative boundaries of highs and lows. The crux of the bollinger band indicator is based on a moving average that defines the intermediate-term "trend" of the stock based on the trading time frame you are viewing.
This trend indicator is known as the middle band. Most stock charting applications use a period moving average for the default bollinger bands settings.
The upper and lower bands are then a measure of volatility to the upside and downside. They are calculated as two standard deviations from the middle band. Many of you have heard of popular technical analysis patterns such as double tops , double bottoms, ascending triangles, symmetrical triangles, head and shoulders top or bottom, etc.
The bollinger bands indicator can add that extra bit of firepower to your analysis by assessing the potential strength of these formations. Bollinger bands can help you understand whether or not the stock is trending, or even if it is volatile enough for your investment. Many times, large rallies begin from low volatility ranges. When this happens, it is referred to as "building cause.
Before we jump into the strategies, take a look at the below infographic titled '15 Things to Know about Bollinger Bands'. The information contained in the graphic will help you better understand the more advanced techniques detailed later in this article.
The initial bottom of this formation tends to have substantial volume and a sharp price pullback that closes outside of the lower bollinger band. These types of moves typically lead to what is called an "automatic rally.
After the rally commences, the price attempts to retest the most recent lows that have been set to test the vigor of the buying pressure that came in at that bottom. Many bollinger band technicians look for this retest bar to print inside the lower band. This indicates that the downward pressure in the stock has subsided and there is a shift from sellers to buyers. Below is an example of the double bottom outside of the lower band which generates an automatic rally.
To top things off, the candlestick struggled to close outside of the bands. Another simple, yet effective trading method is fading stocks when they begin printing outside of the bands. Now, let's take that one step further and apply a little candlestick analysis to this strategy. For example, instead of shorting a stock as it gaps up through its upper band limit, wait to see how that stock performs. If the stock gaps up and then closes near its low and is still completely outside of the bollinger bands, this is often a good indicator that the stock will correct on the near-term.
You can then take a short position with three target exit areas: As you can see in the chart, the candlestick looked terrible. The single biggest mistake that many bollinger band novices make is that they sell the stock when the price touches the upper band or buy when it reaches the lower band. Bollinger himself stated that a touch of the upper band or lower band does not constitute a bollinger band signals of buy or sell.
Take a look at the example below and notice the tightening of the bollinger bands right before the breakout. Notice how the volume exploded on the breakout and the price began to trend outside of the bands.
These can be hugely profitable setups, if you give them room to fly. I want to touch on the middle band again. Just as a reminder, the middle band is set as a period simple moving average in many charting applications.
Every stock is different, and some will respect the 20 period and some will not. In some cases, you will need to modify the simple moving average to a number that the stock respects.
This is curve fitting, but we want to put the odds in our favor. While curve fitting can work, you have to make sure you don't go crazy with analyzing corky settings. At any rate, the middle line can represent areas of support on pullbacks when the stock is riding the bands.
You could even increase your position in the stock when the price pulls back to the middle line. Conversely, the failure for the stock to continue to accelerate outside of the bollinger bands indicates a weakening in the strength of the stock.
This would be a good time to think about scaling out of a position or getting out entirely. Another bollinger bands trading strategy is to gauge the initiation of an upcoming squeeze.
John created an indicator known as the band width. The idea, using daily charts, is that when the indicator reaches its lowest level in 6 months, you can expect the volatility to increase. This goes back to the tightening of the bands that I mentioned above.
This squeezing action of the bollinger band indicator foreshadows a big move. You can use additional signs such as volume expanding, or the accumulation distribution indicator turning up. We need to have an edge though when trading a bollinger band squeeze because these types of setups can head-fake the best of us. It immediately reversed, and all the breakout traders were head faked.
You don't have to squeeze every penny out of a trade. Wait for some confirmation of the breakout and then go with it. If you are right, it will go much further in your direction. Notice how the price and volume broke when approaching the head fake highs yellow line.
To the point of waiting for confirmation, let's take a look at how to use the power of a bollinger band squeeze to our advantage.More...