Quote:
Originally Posted by jerryd_99
Hi Tymen, and welcome back. I have been awaiting this next series with keen anticipation. I am wondering about the "trumpeting" appearance of the Bollinger Bands. As I seem to see trumpets everywhere I look, are there degrees of trumpeting that are acceptable? Or to put it another way, what constitutes a trumpet versus a divergence? Obviously I am really new to this Forex world so I hope my questions are not too basic.
Jerry
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You question is fine Jerryd_99.
Welcome to this thread and thank you for the kind compliment.
The "trumpet" is an expression I have coined to describe the rapid opening of the Bollinger bands after a period of compression.
The ususal term here is "breakout"
The price action will walk either the lower or upper Bollinger band, depending on the direction of the price.
It is dangerous at this time to trade in the opposite direction. If you do, then your stop loss has a very high probability of being hit.
Now if we see a candlestick pattern along this "trumpet", and this pattern tells us to trade in the opposing direction to the price, then we must treat such a potential trade with great caution.
There are no degrees of trumpets here - trading in the opposite direction is always fraught with danger.
The best we can expect is for price action to go level for a period, that is neither up nor down.
A price resumption in the original direction after a period of time is very likely.
A second pattern is really required to change the direction of the price action completely in the above case.
Being familiar with this senario gives you a powerful advantage over other traders.
That is why it is good to be aware of it.