Quote:
Originally Posted by damo989
Just a quick question tymen.
When you say you should only trade on the Bollinger Bands, does the actual star need to be above the band or just on it. And say for the Dark Cloud or the Engulfing Pattern what would the requirements be for them? Would they need to be above the BB or half on the BB.
Cheers,
Damo
(hope it makes sense, if not i will try re word it. Maths is my strong point not english  ) |
No problem with your English Damo!!
Great that maths is your strong point.
With regard to the BB, we do not need to split hairs here.
Instead, understand the principle :
The upper, lower BB are extreme price regions.
From here price is more likely to return to the average - the mid BB line.
The idea of spotting patterns on the outer BB is to give our patterns a boost in the right direction.
For example, a dark cloud is traded short, that is, downward into the mid BB line.
Now, if this pattern is also on the upper BB, then price action is at an extreme, adding to the pattern probability of returning to the centre.
So we now have 2 probabilities instead of just 1, working for us.
Knowing this, get a feel for what you think is a pattern properly positioned on the BB.
There are no hard and fast rules.
But I have seen many patterns set in the
middle of the BB envelope that have gone the wrong way.
Hence the Bollinger bands are a powerful tool.