Bollinger Bands are a big part of the TBL method of trading. For those not familiar with Bollinger Bands, they are simply three moving average lines plotted over the price bars. The three lines represent an exponential moving average, and two additional plots of the same moving average – one placed two standard deviations above, and the other placed two standard deviations below, that moving average. Different traders use different moving average types and lengths, but I prefer the original 21 period exponential moving average. I plot the Bollinger Bands as white dotted lines, as shown on the chart in Figure 1.
The Bollinger Bands provide us with much information, For example:
The middle Bollinger Band is our primary indicator of trend direction for the time frame of the chart.
The degree separation between the upper and lower Bollinger Bands indicates the current level of volatility in the market.
The vast majority of trades take place within the Bollinger Bands – therefore when price approaches an upper or lower Bollinger Band I immediately become alert to a possible reversal in the direction of price in the near term.
As price oscillates from the area of one band to that of another, it gives me a means of assessing the value of the average oscillations currently taking place. Since short term trading is based on playing those oscillations, knowing what degree of movement might be expected in the next oscillation is crucial information.
I am currently watching the AUSUSD currency pair (Figure 1) for a price reversal in the near future. Notice how the Bollinger Bands are widening at the current price – a frequent occurrence not long before a price reversal. And the wider the Bollinger Bands are at the point of reversal, the larger the reversal move may be. I think that a trade set up for a long position in the AUSUSD currency pair will be coming up very soon – so I need to pay attention to my business now. I will come back later and finish this commentary.
I had to leave my work station for a bit and missed the small move up – but it was a pretty weak signal – and the trade only looked decent on the fastest chart I use for intra-day trading. The chart in Figure 1 is my primary intra-day chart and displays the AUSUSD currency pair at 4000 ticks per bar – and I would trade this market from my secondary intra-day chart which is set to 400 tick per bar. The fastest chart is set to 40 ticks per bar and I use it only for scalping mode – where I am at the computer with my eyes glue to the screen at all times. The action on the 40 ticks per bar chart is too fast to leave unattended for any reason.
So here I sit and the signals as of now are mixed – so I am not predisposed to trade this market. Time is running out for my trading day, so it looks like I will have to pass on the AUSUSD trade for today.
I will be taking a few days off for a motor home trip starting tomorrow, so my posts will be infrequent until next week.
Keep your eye on the AUSUSD currency pair – especially as if it reaches the area of the primary SRV at .91032 – a bounce from there could easily go all the way to .9300 plus. It is possible that price reached a bottom at .91313, but right at this time (about 1400) it could go either way.
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Author & Trader
I trade the US Bond Markets exclusively – amazed at the accuracy of the SRV’s !!George SNew York, NY
Thanks for the method !! Very solid, very logical entry and exit and genius SRV’s !!Denis DRussia
the SRV’s are spot on !!Tom CUSA
Great system – couldn’t trade without it !!Frank YDavid, Panama
“The SRV’s are amazingly accurate”.Tony Texas
….very impressed with the whole philosophy – both personal and trading, expressed in the book. I will read and revert !!Richard DUSA
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