Bollinger bands scalping. This technique is very very powerful and what I love about
this is it's based in actual statistics actual math not some ancient Phoenician numerology or
astrology or even just some concept or theory that somebody came up with no this is based
on actual statistics and so this is what I like to trade so let me just show it to you
real quick it's pretty simple what we're using is our Bollinger Bands got price action okay
we've got a daily chart we're used looking at the Euro right now I'll show you an example on
stocks as well but the setup is very simple so the setup is where we get an entire price bar
above the upper Bollinger band or below the lower bollinger band will show an example of that as well
so what does that mean that's the setup okay so the setup why that is so powerful statistically
is because we are Beyond two standard deviations of the mean and that is not sustainable
and what I mean by that in fact first let me just show you here the the settings
on the Bollinger Bands because this is very important people usually ask about this anyway
and well you should because especially with this setup super important so some people use a 14
length on the Bollinger band and that could be good for certain things but for this trade setup
you want to use the 20. so 20 is the length closes the source and two standard deviations
again very very important for this particular setup so those are the settings now let me show
you why this is a statistical high probability trade and it's based on math and not just Theory
so here's our good old-fashioned probability bell curve
and you can see on the probability build curve here's our mean
that's where most price action occurs most of anything right this is a um ubiquitous type of
probability diagram now what we want is we want to look for two standard deviations away
from the mean and that's what the Bollinger band did for us right we had that set to two standard
deviations over 20 periods and look what we've got here so once we get Beyond two standard deviations
well what are the probabilities of it continuing to go in that direction so only 2.15 percent from
two to three and up to three standard deviations I mean it's getting pretty close to zero there
so if we add that up we've got let's just round it up and just say you get a 2.5 okay I'm gonna
fudge on it a little bit and make it a little worse than it is but
we got 2.5 percent chance of the market continuing to go in the same direction
and the same would be for the opposite side of course as well so that's why I call these the
money zones these are the money zones above or below to standard deviations
okay so let's go back to our charts now that we understand the statistics behind this
here's another example I promise we'd look at a stock so we're looking at Apple right now and
this is also can be a little bit counterintuitive so it looks like we might have a Bollinger band
squeeze here let me um change the scaling here so some people would see this as a Bollinger
band squeeze and they would want to take this long but here's the real deal is once we get
up here oh we went up too far too fast and we went beyond the two standard deviations with
the open and the close the real body of those candles and it's not statistically sustainable
and remember this is just scalping trade so here is literally the 20 moving average is
your mean and it comes back to the mean so we sculpt this puppy back down here now having all
said all of that this is great but there's one more aspect of this that is absolutely critical
remember is I'm famous for saying the dollars are in the details so the statistical structure
of the price is not enough so you get price structure such as this would be I call Bollinger
Band exhaustion price structure but you can get head and shoulders double tops wedges
triangles all these things okay those are price structures but you can't trade those in and of
themselves or by themselves you have to add one more thing and that one more thing is actually
more important than price structure and that thing is Supply demand shift because really all that
makes prices go up is more demand than Supply and what makes prices come down is more Supply than
demand so we have to add that to the equation here let me show you something interesting
now look at this example so price came down and we've got a bar that's below two standard
deviations all right so that is definitely abnormal but when do we look for this puppy
to turn around we gotta wait for the shift of supply and demand and that's what's going
to do it that provides us the timing so I call this the setup and then I wait for the trigger
all right now the trigger comes here and then this is the first time yeah we have to go back
to the mean here we got close but we didn't quite get to it and then it comes back off of
it and actually goes to the upper Bollinger band sometimes these will turn into Trend trades and
sometimes the risk reward on them is really really good other times through just little scalp trades
so of course now what do we use for Supply demand shift since that is a requirement to add to this
and any other chart pattern and there's many different things you can use some people like
to use time and sales some use level three those can be very good if you're skilled with it it
takes time to get used to it and really get those patterns into your nervous system that's a bit
of a skill that has to be developed I would say that's more advanced more difficult I personally
there's different indicators you can use volume obviously again volume is not as easy to read as
most people think so I use what I call my market timing indicator and I'm happy to share that with
you by the way I give it to all of my viewers for free meaning you and what's cool about this is
it's very objective and rule-based so there's no skill that has to be developed such as in Reading
time and sales or level three it's just well it's a mathematical formula again so it's math and that
means you'll get the same setups the same pattern around the same triggers that I will because well
I type 2 plus 2 in my calculator you do the same on yours and we're both going to get four pretty
much I'm guessing around 100 of the time anyway I'll be happy to give that to you for free it's
a common indicator just for full disclosure but I modify it and that's what turns it into a market
timing indicator and I show you how to set it up on your charts I'll show you how to trade it and
all for free and I show you why it works again I'll show you the logic behind it so that's all
on a recorded webinar therefore go check that out at indicatorwebinar.com and get my free
gift to you and also before you leave go ahead and subscribe to the channel so you get more
videos like this you'll be notified when I put out new videos like this two to three times every week
[Music] thank you