Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : DAYTRADING Fundamentals -- Ignore unavailable to you. Want to Upgrade?

To: - who wrote (544)	6/12/1999 7:55:00 AM
From: TraderAlan	Respond to of 18137

Here is an old article I wrote on BBs: Bollinger Bands add horsepower to any trading system. Just set the bands to the popular (20-bar 2-std deviation) inputs and you'll locate many hidden support and resistance points. They're also highly effective when examined in multiple time frames. Moving from weekly through intraday bands reveals a multi-trend view with excellent predictive value. Often, reversals can be predicted to within a single bar. Someday another Edwards/Magee will come along and categorize the different band/price scenarios and assign predictability to each. Until then, these should help: A. LOCATION AND DIRECTION DETERMINE TRADING PHASE: 1. UPPER VS LOWER ACTION Location of price bars determines the strength of the current phase. Price within the upper band signifies power while price within the lower band signals weakness. 2. PRICE DIRECTION Direction of price within the band identifies convergence and divergence with the current trend. Rising price within the lower band and falling price within the upper band signal divergence while rising within the upper and falling within the lower signal convergence. 3. TREND TESTING The lower band, middle band (center average) and upper band represent support/resistance for the trend. Reversal off any band increases odds that price will expand in the reversed direction and return to the last band crossed or touched. B. PENETRATION THROUGH THE CENTER BAND INCREASES DIRECTIONAL MOMENTUM: 1. CROSSING FROM BELOW CENTER TO ABOVE Uptrend increase in strength. Observe directional movement of the upper band as price approaches. 2. CROSSING FROM ABOVE CENTER TO BELOW Downtrend increase in weakness. Observe directional movement of the lower band as price approaches. C. BANDS OPEN IN RESPONSE TO AWAKENING TREND: 1. CLIMBING THE LADDER If the angle of the upper band rises in response to approaching price, expect a series of upward price bars, each riding higher along the top band. This is an uptrend in progress. Conversely, price striking into a horizontal upper band predicts reversal and resistance. 2. THE SLIPPERY SLOPE If the angle of the lower band falls in response to approaching price, expect a series of downward price bars, each pushing lower along the bottom band. This is a downtrend in progress. Conversely, price striking into a horizontal lower band predicts reversal and support.