Swing Trading the Stock Market Using Bollinger Bands, Parts 1 and 2

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Swing Trading the Stock Market Using Bollinger Bands
Swing Trading the Stock Market Using Bollinger Bands

Swing trading the stock market using Bollinger Bands can be very effective. But most people do it wrong. 

One of the most common misconceptions is to buy when a stock hits the lower Bollinger Band and sell when it hits the upper Bollinger Band.

In many ways, that’s the exact opposite of what works!

This video and article provide Swing trading the stock market using Bollinger Bands that help you trade the right way.

Enjoy the video and please leave your comments below.

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VIDEO TEXT

Welcome to this video on Swing trading the stock market using Bollinger Bands. And today I am going to show you very very simple technique. And I like this. It works. It’s about the simplest thing you are ever going to learn. So let’s just jump right into it without any further ado.

So here is the point. First of all look over here at the top, and you’ll see that I am using Bollinger bands with the settings of 2 and 14. 2 and 14. Different people use different settings but that’s what I use for this technique.

Swing trading the stock market using Bollinger Bands

And it’s very simple. It’s basically a technique that finds markets that have gone into an extreme extension of an impulse move. So we are looking for exhaustion. It’s basically an exhaustion pattern. And it doesn’t show up super frequently but when it does show up, it’s usually pretty good. And here is what it is. It’s very simple.

The real body of the candle gets outside of the Bollinger band. So in this case it gets below the lower Bollinger band. Now I like to have the real body. That means that the entire green or in this case the entire red, here we have 2 bars, outside of the Bollinger band.

I don’t care about the wicks or the shadows. that could be touching but I do want the real bodies outside. Now this is not a trend trade. This is a quick little scalp trade. It’s basically 2 types of categories of trades. I guess you could say there’s more category but 2 of the most popular are trend trading and reversion trading.

WHAT TYPE OF TRADE IS THIS?

This is more of reversion and this, I don’t really use the middle Bollinger band, this is the 15 EMA up here, and it’s just what I am looking for to revert back to a mean. Reversion to the mean type of thing. Okay, and eventually it does. It gets over to the 15 EMA over there. SO that’s it. But that’s so simple.

Let’s look at a few other examples. So here again we get another one. Alright, and there you go. It’s outside the Bollinger band. Oops I think the red one was too. Let’s see, yeah. And then it comes back down. By the way, the thicker line that’s red and green. That’s the 50 MA. So sometimes it will revert back to that as well. Alright,

By the way, one way to use this, you see the moves are not real big normally. Sometimes they will be but normally I wouldn’t expect it. So again, it’s an exhaustion pattern and a reversion to a mean. Now you can test different moving averages if you’d like to.

MOVING AVERAGES TO USE

These are the one that I use, 15 EMA and the 50 SMA. And one way I like to trade this is for swing trading as the title indicates. So this is a great thing if you want to scan for markets. Set up your scanner to look for markets where basically what you could do is the open and close is greater than, you know the Bollinger band at that setting. Okay.

Sometimes like this. It is just barely touching, but I’ll still take it by the way. I am sure there’s somebody who noticed that. Okay here is another one. So you can see about how often it’s, see this is a daily chart. But if you are scanning the market, all the stocks in the stock market then you know, you’ll find a bunch of these. So there we go, the entire real body of the candle is below the Bollinger band. And what to do, retrace this back to the mean. And then after that, it just kind of go sideways, it goes choppy. So that’s it. That’s your trade.

YOU’RE NOT JUST LIMITED TO THE STOCK MARKET

I like to do this with options by the way. That’s what I prefer to do, doesn’t mean you should do it. But it’s a good little quick option trade, like I say it’s just a swing trade you know. Swing trading originally meant just 2 or 3 days and that’s kind of how you look at this as well. Very short term, little kind of scalp trades if you will.

Let’s find some more here. Just scrolling through so we are not trade (3:48) picking. There we go, there’s another one. This red bar is entirely below the Bollinger band. And that kind of hesitates a little bit, but it gets up back to 15 EMA, sure enough it does. So that one works.

Let’s see, let’s try to find some more here for you. Oh, now good. Here is one I see good, but actually I do like this. So here is one that did not work, right. This one here, we see the entire real body is below the lower Bollinger band. And that one did not work for our purposes. Does not revert back to the mean. In fact it’s an impulse move that just keeps going down.

Right, so that’s good to see. In my courses, I always show examples of trades that I teach, that didn’t work out because I want you to get that in your brain cells that nothing works all the time. I don’t want you to false expectations or unrealistic expectations. You need to see the times the things don’t work. Okay, that’s it for that chart.

OTHER MARKETS AND NOT JUST SWING TRADING

Let’s bring up another market. Okay, so yeah, there we go. Alright, here we go again. Let’s see here, so here’s one. And that one worked out real nice. Actually, that’s part of a trend. And so that worked out real good.

Let’s find another one. Might be missing some here because I am just going through real quickly. You might see something that I don’t. Oh, actually see one over there. I missed, so there’s one right there. And that’s also at a wave 5. Now that actually prompts me to, these last 2 examples prompts me to remind you of something else.

You want to use this in conjunction with other things that you’ve learned. So support resistance cycles, trend, candlestick patterns. So if you get a nice reversal candlestick pattern down here, obviously that’s going to add to the probability of success. Here is another big one. Alright. So that one again, completely is outside of Bollinger bands, reverts exactly back to the 15 EMA. So this is a little golden nugget for you really. I find this to be very effective.

FURTHER TIPS

And you are not going to see it too much when the market’s going to contract, or consolidation of course. Actually yeah, funny I just said that. It starts to break out of consolidation. We get a little when there, and sure enough, boom right back to the 15 EMA. Remember this is just a scalp trade. Don’t take these for long term. They are normally not that. And that is all.

Well there might be a little one right there too. Okay so, you know that’s it. It’s pretty simple. Like I say, I would apply any other knowledge that you know. But way I like to use this is to scan for these. I use www.stockfetcher.com and stock fetcher, I don’t have a material connection with stock fetcher. So that’s a good one but there’s many good scanners out there and you can program this in. I don’t have it for you. So you can just, you know which ever program you use, you have to use that programming language, I don’t have the programming language for all different scanners obviously. Stock fetcher, you just write in English, that’s why I like it. Because I am not a programmer.

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SWING TRADING THE STOCK MARKET USING BOLLINGER BANDS, PART 2

Welcome to this video on Swing trading stock market. Another great setup with Bollinger bands. This is part 2 of a little mini-series. If you want to see part 1, just scroll up on this page to find it. But you can watch this one first. They are not in any particular order. They are just 2 different setups using Bollinger bands for swing trading.

Actually you can use it for day trading as well, end of the markets as well. But this particularly works well with the stock market for swing trading. That’s mostly how I use it.

Enjoy the video and please leave your comments below.

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VIDEO TEXT

Okay, so let’s jump right into it. As you’ll see here. First of all let’s talk about what the settings are. So using Bollinger bands with setting of 2 and 14. So 14 period and 2 standard deviation. That’s what I personally use.

You can try with other settings as well. And this is a really good setup. Now the last one that we looked at, just as a little reminder, the previous one was where you get a real body that occurs outside of the Bollinger band. Either with the upper Bollinger band or the lower Bollinger band.

Depending on the type of setup you have, it’s reversion to the mean setup back to the 15 EMA. Generally in this kind of situation, it will just be a little scalp trade. And I like to do with options on daily charts that’s how I personally like to do it, but you can use other things as well as I said before.

Okay now this setup that we’re teaching today is quite different. So here it is.

SPECIFICS OF THE BOLLINGER BAND SETUP

So the market goes up and the price touches the upper Bollinger band. Now here is the key. After it does that, then you get a higher high that does not touch the upper Bollinger band, and then comes back down. So both of these are different signals. This one comes down, this by the way is the 15 Exponential Moving Average, this black line. And then this moving average here, this green and red one that is the 50 period simple moving average.

It’s showing a shift of momentum if you will, little weakness there. And Bollinger bands can be used couple of different ways. Number 1 is to measure volatility. But they can also be used to measure strength, and even trend. So they have multiple uses if you know how to read them.

Now the key in this one is that we are also using other things along with it. Here’s my cycle indicator. And by the way half of the cycle indicator, actually we use this as the primary kind of signals but then there’s another aspect of it, another line we put in there to actually give us kind of a leading indication beyond the actual cycle indicator.

GET MY FREE CYCLE INDICATOR FOR SWING TRADING THE STOCK MARKET

And if you like that, feel free to email me at Barry@TopDogTrading.com. Actually for my YouTube subscribers, I offer this for free along with the free tutorial and how to trade it. So feel free to send me an email. Make sure you subscribe because it is for YouTube subscribers. And I do sell this but a few guys get it for free.

Anyway, so I like to use it in conjunction with cycle indicator but even if you don’t use it with it, the primary thing here is price action in relation to the Bollinger bands. And then the 3rd thing we want to look at is where are we in the trend? So here you see right away (3:38) wave 7. By the way obviously these are not Elliot waves. Elliot waves can only go up to 5. So wave 7.

Now the significance of that is that it means we are already in an extended trend. The average trend, the way I read waves is 5 waves. So you can get a 3 wave, that’d be obviously shorter than the average. 5 would be average. Once you get into 7, that’s when I start to look to fade the trend. Essentially fade the trend. And so this one we would expect a deeper retrace if not a trend reversal.

We don’t get a trend reversal here. But it is expanded, extended trend so after that as you can see what happens is the market basically just goes sideways for a few months. Right. February, March, April and into early May. So that essentially ends that trend.

EXAMPLE #2

So here is another example of the stock marketing swing trading this. And with the Bollinger bands. So again I like to put this in the context of the trend. Very important that you understand that really the bottom line of what this signal is telling you is that there is a high probability final cycle high. That’s the key. That’s the real point here.

Then you need to look at where you are in the trend, as far as price structure goes, as to how far you expect the market to retrace from that. So here we have an impulse move up. Okay we got a, wave 1, 2, okay there’s 3. Now before I go to 3, we get an impulse move up from this cycle low to that cycle high, now it touches the upper Bollinger band here. Then the market makes a higher high.

Price action makes a higher high that does not touch the upper Bollinger band. In fact it’s quite a waves away from it. So then we would expect, okay that is going to be the final cycle high before we put in a cycle low. That is the real signal that this is giving you.

MORE CONFIRMATION SIGNALS

Then for any other signals you need to look at other components. Such as your moving average, your momentum indicator, the next target’s time frame. Things like that to find out what you are expecting to see profit will be. But at the very least I like to see a comeback to the 15 EMA. it comes back down here. Now if you want trade options in this, you could buy a put. You’d want to buy something that moves, you know is very correlated with the movement of the markets, so it’s moving fast. And because it’s just a low scalp trade, its scalp trade now, and that’s true until we go up here and then we get 4.

Now again the average wave is 5 in a trend. Market comes back up, hits the upper Bollinger band. Rides it up, rides it up. Now look, it hits the Bollinger band here. Then we make another, we make higher high, much higher high after touching the Bollinger band. But where is the Bollinger band? Way the heck up here, it’s even off the chart. then we would say, oh okay now that is a high probability final cycle high before we put in another cycle low.

The difference with this one is we are at wave 5, which is an average trend. So yeah I’d expect it to come down to the 15 EMA, and maybe even go lower because okay if it’s come down, let’s say about a couple of contracts, or if you’re doing shares or if you’re doing it with, you can do this with forex as well. But last contract, whatever markets you are trading. the heart rate of chart at as of today.

So there you go, those are the pointers and works very well for swing trading the stock market using Bollinger Bands, but also forex, futures, yes you can use it with day trading as well if you’d like to. But I find that it works great, and I like to do it especially with options for swing trading personally. That’s just my preference.

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PLEASE PAY IT FORWARD BY SHARING THIS VIDEO & ARTICLE ON FACEBOOK OR TWITTER by clicking one of the social media share buttons below.

Leave a comment below telling me what other information you’d like about what’s the best time frame for trading that you’d like me to teach in the future.

Also I am giving away one of my favorite trend trading strategies that work today. Just fill out the yellow form at the top of the sidebar on the right. Once you do that, I’ll personally send you an email with first video.

For another excellent trading video, simply click here:
http://www.topdogtrading.com/candlestick-chart-trading-what-works-today/

Go here to Subscribe to my YouTube Channel for notifications when my newest free videos are released:
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