Table of Contents
Introduction
Day Trading Bollinger Bands
Bollinger Bands with RSI
Support & Resistance with Bollinger Bands
Trend Breakouts with Bollinger Bands
Trading Bollinger Bands in a Portfolio
Following Trading Plan
Risk & Money Management
Hypothetical Example of a Portfolio
Introduction
John Bollinger developed the concept of Bollinger bands in the 1980s. Bollinger bands are volatility bands placed above and below a moving average with a multiple of a standard of deviation. The length of this moving average can vary depending on the time frame of the trader and the sensitivity. The standard for position sizing (daily bars) is generally 20 periods. However for day trading it is suggested to be much less. It can be as little as 10 periods. This is something the individual trader can test depending on their own personal preferences. Volatility is based on the standard deviation, which changes as volatility increases and decreases. The bands automatically widen when volatility increases and narrow when volatility decreases. The robustness of the Bollinger bands makes this indicator applicable to all time frames and all markets. The tightening of the bands is often used by traders as an early indication that the volatility is about to increase sharply. The closer the prices move to the upper band, the more overbought the market becomes, and the closer the prices move to the lower band, the more oversold the market becomes. However markets can stay overbought and oversold for long periods of time. In this short ebook we will discuss various ways in order to use Bollinger bands as far as
1. Day Trading using Bollinger Bands
2. Oversold & Overbought with RSI Reversals
3. Support and Resistance
4. Breakout Potentials
5. How to build a Trend Following Portfolio
