Bollinger BandWidth

 

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April 10, at 7: February 18, at 1:

BREAKING DOWN 'Bollinger Band®'

The only place to learn to use candlestick charting techniques correctly from the first person to reveal candlestick charts to the Western world, Steve Nison.

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So, tine one is percent, tine to zero percent. Now, I have found that different charting platforms will prescribe different percentages there, but this is for Ninja trader seven. So these are going to be equidistant from the handle from the middle line. And then from there, I use 50 percent differences. So those are the settings that I use here.

And as long as price action stays between these two times or these two lines, we are continuing that same type of energy. In other words, the market is not going down with as much enthusiasm as it started. Sometimes it does, but this is a little more typical of what happens. So it comes back down, hits that tine, comes back up, comes back down, hits that time, it comes back up, kind of rides this one down.

Now, when it breaks out of the final one, the final line or tine, then I consider, this downtrend completely done this pitch fork over. Not going to look at that pitchfork anymore. I could just take it off of the chart if I wanted to. That would be one place to exit. Another place to exit is a little more aggressive. You get a little more reward on it is when you wait for it to break out outside of this major tine here.

And then look for it to come back and see how low it can go. It may not come all the way down here. You could look for things like a double bottom, etc. But just look for it to come back down here and then take a profit down here. So those are two options for you. The signal that the energy has changed no longer is dramatic to the downside. So we drew it. The two major ones. Just create more clarity for you.

So it comes in here, holds that one, gets a little below it, comes back up to the middle and holds this one. By the way, notice that it also kind of provides diagonal support resistance. Now, here is the point of the second type of exit. Once it gets above the upper major tine, I call these my two primary tines. So this is then a very aggressive move to the upside for it to break above; see, last time we were looking forward to break below the tine to get out. So I consider that to be often an exhaustion move.

It actually did make a higher high after that. But look what it also did in the meantime, which is very cool. So this is where, I would get out on an exhaustion move.

Comes down here, right? So that went up. Did it make a little higher high after where I got out? And then, well, what happens then when it finally does break down below this final tine, look at that, sure enough, that trend reverses and it goes down. So that is one of my favorite trading indicators, strategies, drawing tools, etc. Test it out for yourself, see how you like it.

Yeah, it is free. But from a spiritual point of view, if you got value from it, then you have an obligation to pay it forward. Share it with other people. And one of the best things you can do also is leave a comment. I love your comments, even if you disagree with me or maybe have something to add to the conversation to help other traders who are watching this.

I have a very special offer to you. It is a super high win-loss ratio. So get my rubber band trade strategy absolutely free by simply clicking on the image in the top right corner of this video or in the description above or below this video. Closing price strategy vs settlement price: Which do you want to be? Welcome to this video on the closing price strategy vs settlement price. So let me show you an example of that right now.

This was Nasdaq futures. This was Friday, the 17th of November. And if we come here, first of all, if we go to the New York close, these times down below our California Times. If I go to the next bar, market closes and opens back up again 15 minutes later.

These are just one-minute bars, we did that to get a very precise timing on each one of these. In fact, if you go to the cmegroup. Is the last price traded at the close? The answer is no. So the settlement for this day was Now, the last price is listed on the cme group website at And if you look at it, the close of that bar is at So three and a half points is going to make a big difference when you plug that in as to how your floor trader pivots plot.

So make sure you use the right number. They will just go to their chart and they would use either that number or they would use the number By the way, there is a whole a procedure for how they determine this settlement. So not no reason to go through all of that. The outer bands are usually set 2 standard deviations above and below the middle band. Settings can be adjusted to suit the characteristics of particular securities or trading styles. When calculating BandWidth, the first step is to subtract the value of the lower band from the value of the upper band.

This shows the absolute difference. This difference is then divided by the middle band, which normalizes the value. This normalized Bandwidth can then be compared across different timeframes or with the BandWidth values for other securities. Notice how BandWidth tracks the Standard Deviation volatility. Both rise and fall together. The image below shows a spreadsheet with a calculation example. Narrow BandWidth is relative. BandWidth values should be gauged relative to prior BandWidth values over a period of time.

It is important to get a good look-back period to define BandWidth range for a particular ETF, index or stock. For example, an eight to twelve-month chart will show BandWidth highs and lows over a significant timeframe. BandWidth is considered narrow as it approaches the lows of this range and wide as it approaches the high end. Securities with low volatility will have lower BandWidth values than securities with high volatility.

Bollinger BandWidth is best known for identifying The Squeeze. This occurs when volatility falls to a very low level, as evidenced by the narrowing bands.

The upper and lower bands are based on the standard deviation, which is a measure of volatility. The bands narrow as price flattens or moves within a relatively narrow range. The theory is that periods of low volatility are followed by periods of high volatility. Relatively narrow BandWidth a. After a Squeeze, a price surge and subsequent band break signal the start of a new move. A new advance starts with a Squeeze and subsequent break above the upper band. A new decline starts with a Squeeze and subsequent break below the lower band.