Improving Your Bollinger Bands Trading -- with David Moadel
hello and welcome to looking at the markets with David Modell going to talk
about potentially a couple of ways that you might hopefully be able to improve
your trading with Bollinger Bands and before I get started if you'd like more
help with trading or investing you can email me for coaching I do offer that
the email address to contact for coaching is David Modell at gmail.com
alright so let's get into this and a lot of people you know they go to let's say
trading view which is what I'm on right now and I'm using the BlackBerry stock
ticker symbol BB I'm using the daily candlestick chart but what I'm gonna say
could also be applied to one-minute candles or two-minute 5-minute hourly
daily weekly whatever because the Bollinger Bands will adjust to whatever
timeframe you're using and also everything I'm saying today does not
work perfectly does not work 100% of the time so please be cautious respect your
stop losses or whatever strategy you're using to hedge your losses okay so a lot
of people just go with the standard default settings which is usually a
20-period moving average simple moving average for the midline and then 2 which
is 2 standard deviations above the midline for the upper band 2 standard
deviations below the midline for the lower Bollinger Band that's pretty
standard but they might get stopped out a lot and first of all one way to
possibly improve is if that mid line is trending downwards you might not want to
take the trade okay you might want to take it only when that mid line is
either going sideways or upwards alright because you're you're fighting the trend
alright you're buying you know you're buying the dips essentially in a in an
overall downtrend which is not recommended I mean this thing was
starting to go down and then even before it reached that bottom Bollinger Band
the downtrend started to accelerate and you could also just look at the candles
and see I mean it started to really go down hard so this is a trade that you
probably wouldn't have taken if your strategy is to buy at the bottom
Bollinger Band and sell at the top Bollinger Band then this would not be a
trade you'd probably would have wanted to take okay
so a better way to go perhaps would be to well here's an example you know
you've got it at least going sideways I mean up is good sideways is fine because
you can still trade a range if it's range-bound
okay it's also nice of the Bollinger Bands you know aren't super wide and if
they're parallel and you know like over here the Bollinger Bands are you know
not parallel and they're pretty wide and so you wouldn't want to take a trade if
the Bollinger Bands necessarily look like that but let's say they're parallel
it's range bound so that's that's those are good conditions and so if you buy it
the if you bought it the lower Bollinger Band here and then waited until it
touched the upper Bollinger Band over here it almost touched it but didn't but
then it touched it over here you would have made not a bad profit from nine
sixty seven to ten fifty six percentage-wise that's a pretty good
profit for just a matter of days or a few weeks on the daily candlestick chart
here okay here's another example yeah this is a perfectly good trade here you
could have bought when the wick you know the price touched down here at the lower
band and then you know because the price action it was going sideways at the time
the Bollinger Bands were parallel you know there wasn't anything crazy going
on like over here with the you know the Bollinger Bands and so you could have
yeah could have taken the trade and sold up here it would have bought it again
967 sold at ten ninety two something like that that's pretty good not too bad
at all you're kind of rinsing and repeating the range so to speak okay
that's a pretty good strategy does not work perfectly but be aware of that okay
so the other idea to help you to improve your Bollinger Bands trading hopefully
no guarantees is to consider instead of using two for the standard deviations
above and below the midline consider making that a bigger number like three
or two and a half two point five right here's why and I cannot guarantee these
numbers this just what I've heard and I looked it up
and this is from research but it's not guaranteed around 65% of price action is
contained within one standard deviation of the Bollinger Bands all right so the
the candles are only within the bands 65% of the time if you use one standard
deviation let's see what that looks like so you go to settings and change from 2
to 1 and yeah I mean the price is just outside of the bands as you can see a
lot of the time way too much way too much all right so that's not what I'm
looking for so what about to the standard default around 95% of the price
action is contained within two standard deviations of the Bollinger Bands so if
we put this back to 2 the candles should stay within those upper and lower
Bollinger Bands about 95% of the time I've heard and yeah it sounds about
right it's usually within the the two lines most of the time so yeah if you
did one standard deviation you would get a lot of false signals but if you find
yourself getting stopped out a lot maybe consider three standard deviations
because almost 99% of the price action I've heard is contained within three
standard deviations of the Bollinger Bands so let's try changing it to three
and so it's going to be pretty rare that ik that it touches the upper or lower
band but it does you know you could buy it there because you know you're getting
a higher quality signal because it doesn't happen very often and it really
needs to go down to to touch that bottom one all right and then you could and
might get might keep you in the trade longer actually also because you know
you buy here and you're not selling until the thing really really goes
pretty hot you wouldn't have sold here you would have sold up here not too bad
right just be aware that you're going to be in a trade longer if you want to be
in the trade not so long maybe also put the two standard deviation ball
your band's up there on top of the three and you know by when it hits the lower
lower band on the three standard deviation setting and then cell when it
hits the upper band at the two standard deviation setting that is one way to go
about it if you don't want to wait so long to sell alright because there is
risk involved there if you're going to wait until it hits the top which is way
up there it might hit the bottom first and so perfectly perfectly good trade
could end up losing right on the three standard deviation so be aware of the
limitations here and also you're going to get fewer trades so you have to be
very patient with this one so maybe if you want to compromise if you want more
trades you can go to point five if your platform allows that looks like trading
view will allow it so there you go buy here sell here you
wouldn't have had to wait so long to exit the trade you wouldn't have had to
wait until here you would have sold here which is you know pretty close to here
not that huge of a difference and it's much sooner all right
so something to think about maybe change the settings you're allowed to do that
check to see what your settings are you know some people watching this might not
even be aware of what settings they're using the Bollinger Bands on there's a
good chance it's just 20 and two and you you know you never really thought about
it enough or questioned it but you should be questioning everything really
as a trader not maybe not everything but well yeah I mean at least consider all
the angles that you can and see if you can make improvements because the name
of the game is not perfection but improvement alright so I hope this was
helpful and if you want that coaching again you can contact me by email at
David Modell at gmail.com so thank you so much for watching and for listening I
will talk to you again soon