WEBVTT 00:03.120 --> 00:10.290 In this video, taking a look at Bollinger bands, no Bollinger bands, if you remember your old math 00:10.290 --> 00:18.870 classes, there were the bell curve, the standard deviation, and 95 percent of action was within two 00:18.870 --> 00:21.130 standard deviations of the norm. 00:21.150 --> 00:29.090 So the idea is that price can get a little ahead of itself, a little lower, overbought, oversold. 00:29.140 --> 00:30.630 That's essentially what you're using. 00:31.640 --> 00:41.320 The Bollinger Band Indicator is a moving average in the middle of the 20 Esmay simple moving average 00:41.320 --> 00:43.960 is the default for most platforms. 00:43.960 --> 00:50.140 So you'll have the moving average like you learned about in the last video, and then you'll have bands 00:50.140 --> 00:57.660 that form around it that show plus two standard deviations, miners to standard deviations. 00:58.000 --> 01:00.040 And keep in mind that this is the. 01:01.520 --> 01:05.090 Normal price, the trending average price. 01:06.170 --> 01:10.130 So let's click on Indicator's Click on Bollinger Bands. 01:11.200 --> 01:15.050 And you can see that we have a middle line here. 01:15.070 --> 01:20.940 This is your 20 s.m 20 based upon the clothes and then to two standard deviation. 01:20.960 --> 01:26.200 So these lines, this is two standard deviation, Tuya, two standard deviations lower. 01:27.840 --> 01:33.960 So when you look at a Bollinger band, you should think of it as a couple of indicators in one, so 01:33.960 --> 01:37.770 you have the moving average, you have the standard deviation. 01:37.800 --> 01:41.430 You also have the width of the standard deviations. 01:42.000 --> 01:48.000 So what I mean by that is in a more volatile market, they'll spread out because your average price 01:48.000 --> 01:52.700 swing and your average price for the day in this case is much higher. 01:54.140 --> 01:59.840 In a very kind of quiet range bound market that isn't doing much, you can see how. 02:01.920 --> 02:05.910 Then it gets and that shows you that the market just isn't very volatile at all. 02:05.940 --> 02:07.800 So you want to pay attention to that? 02:08.890 --> 02:13.800 Now, with all things technical analysis related, the first thing you want to notice is the trend. 02:14.170 --> 02:23.710 So when you have a slight lower or upper moving moving average, it's not a lot to do with the Bollinger 02:23.710 --> 02:24.010 band. 02:25.940 --> 02:31.510 When you get a compression, then that tells you that you could get an explosive move rather soon. 02:32.870 --> 02:37.880 So let's go ahead and take a look at a couple runs here, we have broken higher. 02:37.910 --> 02:44.240 We've hit two standard deviations above the norm that is grinding higher with it. 02:44.240 --> 02:47.090 And you can see that we come back and we find support there. 02:48.490 --> 02:57.040 So the idea is that you can use the moving average air support and you can see that if you just simply 02:57.460 --> 03:01.980 followed right along, you could have made quite a bit of money. 03:01.990 --> 03:04.710 But there does come this point here. 03:04.720 --> 03:05.710 So, for example. 03:07.680 --> 03:14.700 This candlestick in this candlestick and this candlestick, I'll catch my attention, and the reason 03:14.700 --> 03:18.120 is that they break out of the. 03:20.060 --> 03:25.820 Standard deviation ban and the one on the. 03:27.200 --> 03:33.050 Far left over here and this one are particularly interesting, and that tells me that perhaps. 03:34.480 --> 03:41.390 It's time to exit a long position, but this one tells me that we are starting to pull back. 03:41.410 --> 03:46.240 It's a shooting star, but when you close outside of two standard deviations, you are getting a bit 03:46.240 --> 03:46.640 stretched. 03:46.660 --> 03:49.750 So if you're long, this could be a reason to exit. 03:50.020 --> 03:52.960 Now, some people will short and try to aim for the other side. 03:54.400 --> 03:58.390 That's a bit riskier because you're not going with the overall trend. 04:00.480 --> 04:06.390 Another thing that you will sometimes see is some traders will actually look for a compression like 04:06.390 --> 04:11.010 this, and then once we explode to the upside, you know, if you think about it, it makes sense that 04:11.010 --> 04:16.410 the first couple of candles do close outside of the standard deviation because we haven't been doing 04:16.410 --> 04:17.170 much lately. 04:17.850 --> 04:22.230 So what they'll do then is they'll just dynamically move their stop loss right along with the moving 04:22.230 --> 04:27.930 average to try to catch as much as the move as possible, because clearly you had a breakout here just 04:27.930 --> 04:30.660 based upon support, resistance and then a close on side of it. 04:30.670 --> 04:36.570 So you could have gotten along here and gotten out here for a nice multi week gain, because this is 04:36.570 --> 04:38.180 a daily chart that I'm looking at. 04:40.010 --> 04:43.280 The moving average starts to roll over with closed below. 04:43.700 --> 04:50.090 You could look to shore next time we touch it and you can see that it just kind of rinses and repeats 04:50.090 --> 04:56.180 just time and time again, an explosive move to the upside forward, a shooting star, but we broke 04:56.180 --> 04:59.420 above the shooting star, which is a very bullish sign. 04:59.960 --> 05:08.630 And you could see that that was probably a break, even trade, if you did the stop loss at the moving 05:08.630 --> 05:09.230 average thing. 05:09.230 --> 05:15.320 But you also had a shooting star closed just outside of it, which, as I mentioned earlier, is a sign 05:15.320 --> 05:16.930 that perhaps we're getting ready to pull back. 05:17.660 --> 05:22.640 So you could have gotten in here, got out here or here, just kind of depending on how you played that. 05:23.890 --> 05:31.930 Bollinger bands for myself, I found them to be extraordinarily useful for determining when a stock 05:31.930 --> 05:35.000 may move violently because of the compression. 05:35.020 --> 05:36.580 That's my favorite use for him. 05:36.850 --> 05:39.310 But there are a multitude of ways to play this. 05:39.310 --> 05:42.970 So just by all means, do stick with the trend, though. 05:43.000 --> 05:44.530 This is slightly bearish trend. 05:44.530 --> 05:47.770 So you could make a little bit of money selling. 05:48.590 --> 05:53.140 But then again, when you look at the longer term attitude of the market, you would have expected support 05:53.140 --> 05:53.380 there. 05:53.380 --> 05:54.330 So it's a tool. 05:54.340 --> 05:55.150 It's not. 05:55.600 --> 05:58.990 You know, unfortunately, some people use Bollinger bands as a complete trading system. 05:58.990 --> 06:00.990 And I think that's somewhat dangerous. 06:01.000 --> 06:03.040 You never really want to use just one thing. 06:03.040 --> 06:06.040 Price action, support, resistance are the bedrock. 06:06.160 --> 06:08.280 And then you can add this on top of it. 06:08.740 --> 06:10.150 So for an example. 06:11.490 --> 06:20.940 Let's go ahead and draw a horizontal line here at this previous resistance, so you would have known 06:21.120 --> 06:27.870 that somewhere around 32 ish dollars there was resistance and you would have also known that there was 06:27.870 --> 06:28.710 support here. 06:28.860 --> 06:32.310 So it makes sense that there's going to be a lot of buying pressure in this area. 06:32.310 --> 06:33.700 And that's exactly what we saw. 06:34.290 --> 06:35.490 So where's your signal? 06:36.120 --> 06:41.160 Well, your signal could be every time you break above this moving average, but quite frankly. 06:44.220 --> 06:48.900 I think the most interesting candlestick is the shooting star that formed here at a place where you 06:48.900 --> 06:52.040 would expect to see selling and then it gets busted through the next day. 06:52.470 --> 06:56.850 If you don't like that, a return to the moving average, you would have had to wait a couple of weeks. 06:56.850 --> 06:59.160 But you got a nice opportunity there. 07:00.900 --> 07:05.730 At that point in time, you had multiple trades that would have worked out. 07:06.270 --> 07:11.010 Bollinger bands are good, but you have to use them as a tool, not an entire system.