Watch the Youtube BBS video and here is a crude oil trading example. Want to know more about " Capturing Profit with Technical Analysis "? AXIOM business books awards, bronze medal for my book! The Bollinger Bands in the following figure consist of a set of three curves drawn in relation to price data.

The middle band is usually a simple bars moving average, which serves as the base for the upper and lower bands.

The use of the standard deviation moving average is a method to measure price volatility.

Metastock Formulas - B

With trending prices, the bands will be wider as a result of the higher volatility in price, moving farther away from the mean, whereas during consolidation periods, bands will be narrower as a result of smaller price moves closer to the mean. This changing bandwidth is used for volatility-based trading opportunities. As you can see in the above indicator it is leading most of the time, showing high levels, low levels, and eventually divergences prior to turning points in price.

Unfortunately it is a very choppy oscillator. Using a heikin ashi re-calculated closing price, a TEMA average and the zero-lagging technique, we can create this indicator with more clear turning points.

We will split this chart in two parts. The first part ends March 9, In November there was a big price drop and some recuperation. Next price is moving further downwards. In the above figure you can see at the start a big price drop and a first reaction until the beginning of December in a convergent move with lower tops in price and the indicator.

Price now continues the down move in a phase 1 and is making a lower top in price, but a higher top in the indicator beginning of January This is an inverse or hidden divergence pointing in the direction of a continuation of the previous downtrend.

Metastock formulas Smoothed Bollinger %b indicator SVE_BB%b

And once more, price continues the down move until half of February when you can see again the same situation with phase 2 , with lower tops in price and higher tops in the indicator. Another hidden divergence telling you that price will continue the down move. Price is making lower bottoms, but now you can see higher bottoms with phase 3 in the indicator. This is a normal divergence telling you that you should expect a price up move now. Phase 3 actually brought a trend reversal and started a new price up move.

There is a nice convergent up move until the beginning of may with phase 4 , showing a negative divergence with a higher top in price but a lower top in the indicator.

This points in the direction of a price reversal. What follows is a correction back to the lower Bollinger band. The end of this correction is showing with phase 5 a positive divergence with lower bottoms in price and higher bottoms in the indicator. This is pushing price up again. You could go for a new long position here.

The tops in price and indicator beginning of June, end phase 6 with a negative divergence, pushing price down for a bigger correction. It now looks like the end of this correction is reached with a new positive divergence in phase 7. Find a Stock ticker symbol, enter the ticker and find a chart, news, fundamentals and historical quotes.

Futures and forex trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment.

Download Better Bollinger Band For Metastock

Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results.

Hypothetical performance results have many inherent limitations, some of which are described below. One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight.

In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk of actual trading.

There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all which can adversely affect trading results.

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