If you are new to trading, you are going to lose money at some point. I hope you understand my question. Reversal Patterns with Bollinger Bands Indicator A great way to learn how does Bollinger Bands work is to look for reversal patterns given by Japanese candlestick techniques. However, from my experience, the guys that take money out of the market when it presents itself, are the ones sitting with a big pile of cash at the end of the day.
Then, buy orders are placed within the lower zone and sell orders in the upper zone, increasing execution probability. In theory, these are all profitable trades, but traders must develop and follow the methods exactly in order for them to pan out. Setting Limits First, a trader must understand how Bollinger Bands are set up. Reading Volatility Since Bollinger Bands measure deviation from the average, they react and change shape when price fluctuations increase or decrease.
Backup Plans Sometimes reactions are not as intense, and traders can miss profits by setting orders directly on the upper and lower Bollinger Bands. Understand what metrics are most commonly used to assess a security's volatility compared to its own price history and that Learn the most commonly used technical indicators of stock market volatility that are watched by stock market traders and Learn how to identify when a market is range-bound and what some of the technical indicators are that work best for trading Learn the basics of volatility in the stock market and how the increased risk provides greater opportunities for profit for Find out about a common strategy that traders use with the volume-weighted average price, including the use of VWAP with See what kind of technical indicators and oscillators work best in conjunction with Fibonacci retracements to confirm stock This strategy has become one of the most useful tools for spotlighting extreme short-term price moves.
As you see, after the squeeze, the prices breaks out to the downside, and enters a sustained downtrend. The Bollinger band squeeze breakout provides a good premise to enter the market when the price extends beyond one of the bands. This would provide for support in favor of the range bound market coming to an end and the likelihood of price entering into a new trend phase.
As a result, a bullish bounce could occur, creating a long trading opportunity. Think of this as a hidden support level based on an extreme volatility reading.
However, if the price starts falling quickly at the lower band instead, and the distance between the two bands continues to increase, then we must be careful of entering a long trade. When the bands are expanding and we see strong price momentum below the lower band, this is a clue that a bearish bias should still be in play. The same scenario is in force but in the opposite direction. We look at the upper band as a hidden resistance level based on an extreme volatility reading.
However, if the bands expand and the price starts closing candle after candle above the upper band, then we expect further bullish expansion. The breakout in the Bollinger Bands Moving Average is a confirmation signal, which usually comes after a price interaction with the bands.
If the price bounces from the upper band and then breaks the period SMA in bearish direction, we get a strong short signal. If the price bounces from the lower band and breaks the period SMA upwards, then we get a strong long signal. In this manner, the period SMA breakout can be used to set exit points after entering a Bollinger Bands trade.
The black arrow points out a Bollinger Bands squeeze. The red arrow shows the price trending while breaking the lower Bollinger Band and the green arrow shows up trends on the upper Bollinger Band. Now that we are familiar with the structure and the signals of the Bollinger Bands, it is now time to shift our focus a bit, and take a look at a couple of trading strategies that can be incorporated using the Bollinger Bands.
One reliable trading methodology utilizing Bollinger Bands, is combining Bollinger Bands and Candlestick analysis. Basically, you could go long after the price touches the low Bollinger Band and then closes with a reversal candlestick pattern. And on the flip side, you could short the Forex pair when the price hits the upper band and then forms a reversal candle.
For this setup, you should place a stop loss order beyond the reversal candlestick. I prefer to close half of the trade when the price reaches the Bollinger Bands Moving Average.
We can stay in the trade for the other half of the position to take advantage and any prolonged price move. And so in this case, if the price keeps trending in our direction, we can use the Bollinger Bands Moving Average Breakout as an exit signal. Just close the trade right away instead. This chart illustrates a long position initiated by a reversal candlestick chart pattern.
The big black arrow on the chart shows a Bollinger Band squeeze. The bands are relatively close to each other squeezing the price action and the indicator. Afterwards, the price starts to decline. Suddenly, the bands start expanding rapidly during the decrease. Soon we see the price action creating a bullish Tweezers reversal candlestick pattern, which is shown in the green circle on the image. A stop loss order should be placed below the lowest point of the Tweezers chart pattern as shown on the image.
The price then starts increasing. For example, when your stop loss is 60 pips, then you can move the stop loss to breakeven if the price goes up for 60 pips. Sometimes, candlestick 3 not only breaks above the BB1 upper band, but also reaches the BB2 upper band too. This happens when the security is trending strongly:. When candlestick 3 is too long, you can set the stop loss higher than its low price, not to have a too wide stop loss.
Candlestick 3 on the below chart has closed below BB1 lower band while candlesticks 1 and 2 have closed above it.
This is a short trade setup. Like the long trade setups, the stop loss has to be set at the high price of candlestick 3, and target can be at least twice of the stop loss size 2 x SL. You can move the stop loss to breakeven if the price goes down for 1 x SL. As I explained above, this trading system is good in catching the trends. When there is a strong trade setup, you can also take two positions with the same stop loss, when there is a trade setup based on the Double Bollinger Bands trading system.
Set a 2 x SL target for the first position, and no target for the second one. In case of a long position, hold the second position as long as the candlesticks form between the BB1 and BB2 upper bands, or above the Bollinger Middle Band. Close the second position when candlesticks start crossing the BB1 upper bands, or when one of the candlesticks breaks below the Bollinger Middle Band:.
It means you should not expect to make hundreds of pips from each trade setup. You can trail the stop loss if you like. Double Bollinger Bands Trading Strategy works on all time frames, but I use it on the daily and longer time frames, because it is easier, safer and more profitable.
Never think that you will make more profit if you apply this trading system on 5min or 15min charts. Trading the shorter time frames is nothing but headache, and you will not make more profit. I spend about minutes checking the charts every day, but I am more profitable than day traders who sit at the computer for several hours per day, every day. Hi Kamel, your strategy looks great, I like that I can use it with Chris strategy together.
Hi Kamel, I read your article again, and I would like to ask you one question, are there any specific rules for ranging and sideways markets? I love articles along with Chris ones. Whole trading system in one page with easy words…. Very much helpful for beginner like me. I will increase my investment using this strategy. Will start following this strategy from the beginning of next week. Thank you Kamel, looks interesting and simple.
Is there no use for the BB2 middle band in this strategy? You can start from here: I have used this with great results. I do add a third BB with a deviation of 3. It acts as a very strong support and resistance levels.
Hi Kamel thanks for a great article as always. I do have one question though: In an uptrend, if your 3 candle closes above the BB1 and the 1 and 2 candles closed below the BMB, will it affect the trade setup?
Hi Kamel very good to see you back. Hi Kamel, Many thanks to you for sharing your simple trading system, God bless you all, just a question …. All pairs listed here: Kamel — would you please look at the candle EURUSD for — if this were traded, and it seems to comply with the system — except that candle 1 closed below the BMB , then it would be stopped out — would you please advise what you would do? I think the candlestick date should be different that what you mentioned.
Please check and let me know. Hi Kamel Thanks for your attention — you are right — I had both the date and pair wrong — it was the candle on the USDJPY daily chart — thank you for looking at this. OR would this revert to a possible BMB continuation entry condition? It is a very interesting group of candles — in view of the rules. If you mean Compare this with To Kamel and Chris, please stay alive guys, we need you here. God bless you with this an eye opening and the regards you have for Chris!
For giving such a huge strategy free without taking a dime God will replenish you with wisdom and knowledge like he did to Solomon And to Chris, More grease to your elbow and wishing you the best life can offer We all your fans appreciate you and wish you good health and prosperity Amennnnnnnn I am Timothy from Abeokuta Ogun State Nigeria.
Thanks for the kind sharing. What if there will only be two candlestick before the setup, will that setup still be a valid one? I can work, but experience shows that this system returns the best result the way I explained above. I noticed candlestick on Hence, is this a valid Bearish sell setup?
Exactly the same rules have to be applied to the ranging market. We take the setup, and move the SL to breakeven on time. Then we sit back and watch. Time will tell if we will have a trend, or the price will turn around and stay in the range zone. Thank you for sharing this with us. You guys are awesome people.
I am new to these, did a lot of wrong things, hence have not been profitable yet. However, you guys gave me hope and the believe that all is going to be ok.
If 1 candel is closing below the MB, 2 candel is closing just below the BB1 in an uptrend. Hi Kamel, Thank you for sharing his. Hi, Kamel, For learning to identify the setup validity.
It should all at UpperBB1. Another pair for learning again. Candlestick closed on Thank you kamel for a very brilliant post. Please never stop writing to us. I read these posts with the greatest of pleasures!
I just would like to hear how you gentlemen explain this phenomenon. Once again, Kamel… Thank you! From the very bottom of my heart. I wish you both long and continued success in everything you do. I know I am. We have to be aware that our stop loss can be triggered sometimes with any trading system we follow. In case of BB head fake, in most cases it can not affect our positions, because we move our stop loss to breakeven as soon as the price moves for 1SL toward the target. In this case I happened to be watching at 10mins to close and the price was equally performing on both MT4 and my other platform.
I am very surprised and a bit confused at this revelation. You did not waste my time at all. I will be happy to help. The daily candlestick close time is very important.
Any platform you use, make sure that daily candlesticks close at 5pm est. Trading is nothing but taking risks. The only thing we can do is limiting our risks and losses. There is no doubt that our stop loss will be triggered sometimes. This is what we can not do anything about.
Something that makes us profitable at the end of the month is that we enter properly, make our losses small, and our gains big. There is no short trade setup on Actually a long trade setup is formed by Hi Kamel, I would like to say Thank you for your new method. Its very kind of you sharing with us. Anyway I have a question regarding your new system. In spite of opening the new trade either long or short , does the 3rd candlestick have to be a long candle stick?
Can it be a short one? Also, in case of the 3rd candle stick breaking the BB2 with very long bullish or bearish candle stick, is it still the right time to go long or short? Will it be effective? Does it have to be applied while BB is expanding? Can the 3rd candlestick be closed in other forms than full bullish or bearish form? Is it still valid if the 3rd is closed as a doji? The candlestick close price is important. Yes, you are right. In DBB system, we ride the trend when it has already formed and moved sometimes for several candlesticks.
But the good thing is that we ride the trend when it is almost proven that a trend is started. Hi Kamel, With this trategy, if the stop loss get triggered, do we re-enter or we just wait for the next one? Nice and simple trade system! You mentioned both options but it appears that you prefer to wait for the cross back rather than trailing the stop. It would better if candles 1 and 2 close right below BB1 upper band in case of long, and above BB1 lower band in case of short trade setups.
This is the typical trade setup. Thanks a lot for the great strategy, it looks good.. But, are there any special tips or tricks for this strategy?
I tried to do this strategy with 4H timeframe on multiple pairs but I got more losses than gains.. There is no tips and tricks. It is as simple as it is explained above. Trade the daily, weekly and monthly time frames using this strategy and look for the trade setups exactly as it is explained above.
You will have a lot more gains than losses. I have read all your articles. I am glad that you are writing and generously share more awesome knowledge again. I have one question about the DBB. I would to know the logic behind this trade set up. It would be very useful to understand the mechanism of how the price react to it. I feel this is another effective trade set up and yet very simple which accounts for both statistics and the market psychology, thus I would like to know it better in details.
This strategy is not invented by me. I initially learned it from Chris and other senior traders, but I used more seriously than the others.
I know that there are so many traders who use this strategy. Thank to kamel and Chris for Sharing such a great Trade setups…. Keen to give it a go. Just a question, I noticed on 2 of your long trade setup examples that either candle 1 or candle 2 were closed above BB1, but you mentioned that we have a setup if these are both closed below BB1. How critical is this? Thanks in advance for your reply, and also thanks a million times for the unselfish efforts of Chris and yourself in helping us become profitable traders.
Are you sure that candles 1 and 2 are closed above BB1 upper band? Please check one more time. Also here is more explanations: Thank you for sharing another strategy. Is it really profitable? Could you please share its characteristics especially profit factor, possibly loss rate stop loss hit at its initial place based on your experience?
I will do it as my time allows, and will share my results here. I have not calculated the profit factor, but it has worked for me for years. I would be really interested in even a rough indication of how profitable this system has been for you. It would boost my confidence a lot if i knew that someone has used this for years with decent profit.
I bet when you and Chris discussed whether or not to share this strategy then Chris probably warned you about all the feedback you would get about this….. It took me 15 minutes just to read this post. You guys are the best…….. Happy to said it worked.. It hit 2 x SL target long position.. Next I will try in bigger time frame.. Many thanks to you for your simple technic.. We just reported that trade setup as an example.
It is too late to enter now: I will try find more setups in bigger time frame.. Really easy and interesting system. Keeping it simple stupid. I really am interested in following the system.
However, I have questions: Following the system, how can we afford consolidations and little trend pull backs? Must candlesticks 1 and 2 form and close under the BB1 or only close under it Long Setup? Can you please give us an approximate win rate of this strategy? Thanks a million times.
Most of the people these type of secrets are sodding very high price. But you are generously helping to willing people. Kamel I need to test this in demo really enjoy all your articles thanks again mate. Sorry I slow to respond taking a holiday best John. Firstly I am new to and and have recently came across your page in the last few days. I wish to thank both of you for sharing with all of us I will be putting this system to work today and will continue to read your articles which I find extremely interesting and simple thank you again guys I hope some day I can be a successful trader.
We have been using this system for 15 years. Almost all professional trader know about this system. It is neither invented by us, nor any other known person. I got a doubt on candlestick chart. I found that different brokers provide different trading hours thus it would affect the form of candlestick.
Hi Kemal , I really love this BB system, its great, but there are just not enough setups in week over 19 pairs for me to trade it full time.. But what you guys are sharing here is really great, thanks you very much. There are clear rules on forming the trade setups. They are explained above. What you mentioned cannot be known as a trade setup. Then you should check the previous two candlesticks to see whether their close prices are below the BB1 upper band or not. My question is in a long situation, whether the two prior candlestics the ones below BB1 need to be bullish candles or can they have their close prices lower than the open prices?
This DBB strategy is really a wonderful trading system! Thank you for sharing with us your wealth of knowledge and systems. The trade went against me and hit SL after going up rather than down. It was not a typical short setup, but still a short setup. Please see the above examples and you will see the difference.
While I sincerely appreciate your mentoring, even as I strive to comprehend the DBB strategy, presently, I am very confused: Hi Jeng , Michael this cool site and saw your here not Kamel , I was just sitting here catching up on some reading and saw your post.
If I may answer you? The candle on 12th did not close below mean the 20 and was a indecision candle spinning top. The candle on the 15th did. So based on all things, mainly the rules of BB. The candle did not close below the 20 , this is not a sell. Not sure how to give a picture of this anyways.. First of all, this is an important article: There is never a guarantee where the price will go, even with a perfect trade setup.
No trader in the world can predict prices. There are probabilities only. Secondly, there are ways to increase your success rate with the DBB strategy:
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