TonyTheBullSeverino
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TonyTheBullSeverino
Chartered Market Technician. Cycles, crowds, psychology. I don’t predict — I observe structure. Less noise. More signal.
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Joined on 15th November 2024
Boston, MA
Education: How to use the Bollinger Bands
According to research, breakout-style trend-following trading systems like the Bollinger Bands are among the most reliable. But few actually understand how to use the Bollinger Bands as a complete trading system.
The most valuable use of the Bollinger Bands is how the help to visualize volatility, or a lack thereof.
Low volatility: When the Bands tighten or narrow, it suggests a low volatility state. An analyst can strategize around this a variety of ways. In the red shadow box, we can see that the Bollinger Bands spend over a year at record tightness. During that time, there was a lack of a trend and primarily sideways movement. It is during this phase where the Bollinger Bands can be used as a mean reversion trading system, selling touches of the upper Bollinger Band and buying touches of the lower Bollinger band.
At one point during the red box, price closed outside the lower Bollinger Band, generating a breakdown sell signal. However, price i
Bitcoin BTCUSD making a higher high on the weekly chart has perfected a TD9 sell setup. This is a market timing signal that suggests a reversal is possible. However, when this signal fails, it often leads to strong continuation in the original trend direction (up). In this picture, the first highlighted green box shows what happened the last time a perfected TD9 sell setup fired, but ultimately failed. The newly drawn green box is expected to fill out, before a corrective phase, then one more final impulse up to the upper channel boundary.
XRPUSD has potentially begun its upthrust from a wave 4 contracting bull market triangle. 2016/2017's massive leg up is an extended wave, with clear five-wave subdivision (top-most diagram).
After reaching a wave 3 peak, began forming a contracting triangle that moved painfully sideways for seven years. We can, on good conviction, state that this was a triangle due to the clear ABCDE structure and decreasing volume and volatility. Due to the extended low volatility state, the upthrust out of the triangle can be especially strong and fast, hence the "thrust" naming convention. Importantly, triangles only appear before the final move in a sequence. Pay close attention to the smaller triangle in wave 3's sub-waves (sub-wave iv). After the triangle resolved, there was a final move up. That's what we can expect from the larger wave 4 triangle – a sharp move up to end the larger sequence. The triangle target typically matches the widest part of the triangle – that suggests a possible 1,000
