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Wednesday, April 21 2021
Developed by veteran trader John Bollinger in the 1980's, the Bollinger Bands are an indicator using a moving average with trend bands of equal distance above and below the moving average. The middle of the Bollinger band is a 20 period SMA (Simple Moving Average)
The bands on each side of the middle used most often are at the 1, 2 and 4 standard deviations from the middle. These are called 1 sigma, 2 sigma and 4 sigma (shorthand for standard deviation in statistics). For clarity we call the upper bands the +1, +2 and +4 sigma and the lower bands the and -1, -2 and -4 sigma.
See https://www.investopedia.com/articles/ technical/102201.asp for a more technical description.
Most price action will occur between the +2 and -2 bands.
What do Bollinger Bands indicate?
The middle shows just what any moving average does, direction of trend and whether the current PA (price action) is above or below the average.
The bands visualize the change of volatility in the PA. When the bands are contracting, the volatility is decreasing and when they are diverging the volatility is increasing, when they are parallel the volatility has stabilized.
How to use them:
Market Direction - the middle of the Bollinger band will point in the direction of the current trend, commonly for the last 20 candles. If the bands point in the same direction the trend is strong.
Market Momentum - When the bands are diverging, price momentum is increasing in the direction of the current trend. When the bands start converging, the trend is pausing, look for a retrace.
Warning - When the bands continue to converge and roll to change direction look for a potential turn around. Another sign of a potential turn around is when the price is at the extreme of the +4 or -4 sigma.
My favorite Bollinger signals
3 Trips beyond the 2 sigma
At least one candle, or several in a row, closes beyond the 2 sigma (either side) in a strong trend. After a small pullback this happens again 2 more times, for a total of 3 trips beyond the 2 sigma, with pullbacks or pauses in between. After the 3rd trip beyond the 2 sigma there is a strong chance of a trend change or deep retrace. After the first trip beyond the 2 sigma, trade the pullback in the direction of the trend for trip 2 and 3. Stop should be outside the trend support. After trip 3 watch for indecision, a channel break or additional confirmation like RSI divergence for even stronger confirmation and trade against the trend as this will likely be a deep retrace or even a trend change. Stop should be outside the high for a short trade or low point for a long trade on the turn around.
2 sigma to 2 sigma cross
In flat or neutral price action like a box the price will often cross from one 2 sigma of the Bollinger Band to the other in a +2 to -2 movement down or -2 to +2 movement up. Watch for the typical turn around confirmation to enter the trade. Stop should be below the 2 sigma the price is moving away from. This works best in a large box.
Potential Trend Change
Price touching the +4 or -4 sigma band is a strong indication of a trend change
When price is using bands, like the +1 sigma and +2 sigma as support and resistance acting like a dynamic channel
When the price crosses the middle of the Bollinger strongly and the bands flare the +2 sigma becomes a prime target for a fill in an uptrend. The -2 sigma is a prime target fill in a downtrend.
Confidence in a trade is a key component for consistent trading. I used to always worry in a strong trendy movement that the market would unexpectedly turn on me. While the unexpected is always possible, when I see a pattern that recurs in the market like the three trips beyond the 2 sigma, stack that with a strong trend, a well drawn channel, a standard turn around or other patterns, I trade with more confidence and less worry. I can also have clear boundaries to manage my risk with greater accuracy because the moment the pattern fails it is obvious and I can manage the trade. So, whether the pattern holds or fails, it tells me something important about the current PA that I can use to inform my next trade.
Bollinger bands are a great indicator when combined with more basic indicators to add confluence and increase confidence in your trade decisions.
Randy S, TX
Friday, April 09 2021
Do I Treat Trading Like a Hobby or a Profession?
First, let me start out by saying that learning to trade has been one of the best and most difficult careers moves of my life! What’s weird about that statement, is that I haven’t even really made huge profits as a trader, yet. There’s been some crossroads that I’ve had to come to, and when I got there, the decisions that must be made are so incredibly stress full that sometimes it’s just easier to say, “forget it I wanna quit” or “I can’t do this I’m an idiot”, or whatever. And at some point, you look in the mirror and you ask yourself am I a trader or am I a puss and giving up?
For me, the journey has been incredibly powerful. I’ve learned so much about what it takes to be a trader that often I fell short when deciding to be a professional trader. The thought of it just being a hobby made sense to me at the time. The reason it made sense is because it was an easy way out to say, “I don’t have to be a great trader” “I don’t have to do well because this is a hobby.” There’s going to be quite a few obstacles that you must trip over and fall on your face to get to the next level of even determining if this is going to be a hobby or a career path for an individual.
And that path can be so treacherous and incredibly emotional, not to mention very costly, at least it was for me, to determine whether you can even make it as a pro trader. For me it took a lot of sitting on my hands watching the market and during that time I learned how to be patient and see trades, avoid FOMO, make good decisions in taking trades that were more inviting or higher probability trades, also to take less higher risk, essentially trading less while finding my zone. Well in the midst of learning to trade less and be more productive, I almost traded so little that it felt like a hobby. I felt like I was damned if I do and damned if I don’t!
The psychology aspect of that can be damning when indeed, you set out to be that pro trader, and halfway through the journey your head starts playing tricks on you. Making you think that all you can be is somebody that claims Trading as a hobby. I think that when you’re determining whether Trading is going to be a hobby or profession for you, the first thing that you need to do is look in the mirror and ask yourself with tears in your eyes, after your third or fourth stop out in a row and losing a few hundred bucks (or more) are you willing to endure these losses and continue down the path that you originally set out to be a pro trader? Or are you going to find that comfort zone in your closet, sitting in the dark in a laundry basket full of blankets and dwell over the losses, or mistakes you made (YES this was me!)
What I learned was that making the mistakes was part of the process. Stop outs and losing money is also part of that process. What I continue to learn is that taking the grandkids to a baseball game and dropping a couple hundred dollars at the concession stand alone, was nothing compared to losing 150 bucks on one single trade. What’s the difference? Well, the difference is one is for entertainment the other is your potential livelihood, and that is a huge difference. What I realized was that when it doesn’t bother me to lose $150 Trading then that’s the day that I realize I’m making a hobby out of this instead of a business. I don’t know any business folks that don’t get upset when they lose money in their business, but nobody gets upset when they take their grandkids to a baseball game and spend a couple hundred dollars.
That’s when I realized that if I was going to treat trading as a hobby, I would not be successful. As a successful businesswoman, I know that struggling and limping along, continuing to grow to the proverbial finish line. So, I started setting goals which is huge in this realm. It’s important to have a business plan, five-year plan, ten-year plan. Those plans have changed for me dramatically over the last two years of learning to trade. And that’s OK. If you’re not changing along with the increase knowledge that you gain, that’s complacency and that’s what can make this a hobby for some! I don’t want to be complacent. I don’t want to be fine with losses. I want those losses to be a reminder that losing trades is part of doing business. If this is my business and that I AM a pro trader. Having that mindset reminds me to put my game face on when I sit down at my charts and know that every trade I take is going to be a trade that I take for my future, and if I continue to make good decisions and keep my mind open to learning and growing in this industry, then success can be on the horizon for me.
The five-year plan that’s in place for me and my family will be totally achievable with hard work and determination. So, the question remains for some, is this a Hobby or a Profession? It’s up to each individual and where they’re at in their journey. I’m just grateful I’m on this journey with great mentors and people that keep me grounded and remind me that I can be the best version of myself that I can be.
In summation, I do believe you can have trading as a hobby, but what do Hobbies typically do? They cost you money. So, take your trading seriously, spend the time effort and energy to continually improve your decision making. Surround yourself with other traders like we have at FNL! Don’t expect immediate results. Patience and Discipline comes in many forms 😊
Lydean S. CA
Tuesday, 13 July 2021
Wednesday, 09 June 2021
Tuesday, 08 June 2021
Momentum Trades and what to look for.
Tuesday, 18 May 2021
Tuesday, 11 May 2021
Wednesday, 21 April 2021
Friday, 09 April 2021
Tuesday, 05 January 2021
Tuesday, 08 December 2020
Quite often its the quitting of something that saves us time effort and energy that can all be refocused into something productive there are some area
Tuesday, 01 December 2020
Comparison of poker and trading by Rob B member trader at FNL compares the two after his long relationship in both industries.
"At some point, you will find your life is changing and you have to roll with the punches or get knocked around pretty badly as the waves of time get rough and rougher.
Getting younger is not an option. Getting old is the best option, but it comes with conditions. (read the fine print:)
When that time comes, look at what we do here in the FNL trading group and understand it is a chance to start over and start bigger than ever. If you want to earn extra money or re-start your career with great pay increase, then you can learn how with an awesome group of people that are committed to each other and learn together. On patrol or on deployment; a battle buddy or your patrol partner is a must. We recommend one for trading also." -David Jeffries, TX