Thread: 1) Do you have a question on Bollinger Bands?

Should you have a question about trading with Bollinger Bands, here is the place where you can ask an instructor. The instructors are available 24 hours per day during worldwide business hours (Sunday afternoon thru Friday afternoon New York time). You will see the instructor's response posted after your question. (If you need help posting a chart, watch this short VIDEO.)

Originally Posted by Jeremy Wagner

Should you have a question about trading with Bollinger Bands, here is the place where you can ask an instructor. The instructors are available 24 hours per day during worldwide business hours (Sunday afternoon thru Friday afternoon New York time). You will see the instructor's response posted after your question. (If you need help posting a chart, watch this short VIDEO.)

What will be the best time frame to use Bollinger Band,I trade through $100 micro ac.
Is it necessary to match MACD and Bollinger Band signals before entering into a trade?

Originally Posted by prabhakar13

What will be the best time frame to use Bollinger Band,I trade through $100 micro ac.
Is it necessary to match MACD and Bollinger Band signals before entering into a trade?

I personally tend to use the Bollinger Bands on 4hr or daily time frames. However, there is a strategy in the Active Trader section of the video player which uses Bollinger bands on a 5 min chart. In my opinion, it is a versatile indicator that has many uses or a variety of time frames.

If you are trading on a small $100 micro account, then I would suggest trading only 1k positions at a time. To keep within our money management guidelines, you will want to look for trades less than 50 pips of stop loss, which can be difficult at times. Therefore, you might want to look for trades on a 1 hr time frame chart.

Yes, you could wait for prices to bounce from the Bollinger band and use the MACD to confirm the trade. However, you may find it easier by watching our support & resistance and candlesticks video and use those tools as confirmation. Those tools together may allow you to find a tighter stop within 50 pips.

The bottom line, with only $100, it is difficult to stay within risking less than 5% of your account equity. Try trading off the 1hr candle chart, but with a small capital base, it is difficult to see consistent trading results. Also, I would suggest using other methods of support & resistance as well as candle patterns to help confirm trades off the bollinger bands. Good luck!

Originally Posted by Jeremy Wagner

I personally tend to use the Bollinger Bands on 4hr or daily time frames. However, there is a strategy in the Active Trader section of the video player which uses Bollinger bands on a 5 min chart. In my opinion, it is a versatile indicator that has many uses or a variety of time frames.

If you are trading on a small $100 micro account, then I would suggest trading only 1k positions at a time. To keep within our money management guidelines, you will want to look for trades less than 50 pips of stop loss, which can be difficult at times. Therefore, you might want to look for trades on a 1 hr time frame chart.

Yes, you could wait for prices to bounce from the Bollinger band and use the MACD to confirm the trade. However, you may find it easier by watching our support & resistance and candlesticks video and use those tools as confirmation. Those tools together may allow you to find a tighter stop within 50 pips.

The bottom line, with only $100, it is difficult to stay within risking less than 5% of your account equity. Try trading off the 1hr candle chart, but with a small capital base, it is difficult to see consistent trading results. Also, I would suggest using other methods of support & resistance as well as candle patterns to help confirm trades off the bollinger bands. Good luck!

thanks for your support,I have seen all the trading course videos and I feel that with $100 ac I have to take risk up to 15% and before entering into trade I have conform tech. signals.

Originally Posted by prabhakar13

thanks for your support,I have seen all the trading course videos and I feel that with $100 ac I have to take risk up to 15% and before entering into trade I have conform tech. signals.

It is our pleasure.

Yes, that might be an appropriate strategy. As the account grows with profits or additional deposits, you would move that risk down to 5%.

Originally Posted by Matt Russell

It is our pleasure.

Yes, that might be an appropriate strategy. As the account grows with profits or additional deposits, you would move that risk down to 5%.

shoud EUR/USD hit target of 1.2389????
Can I Enter in to the trade with 1h time frame

Originally Posted by prabhakar13

shoud EUR/USD hit target of 1.2389????
Can I Enter in to the trade with 1h time frame

I am not really sure what you are asking. What are your reasons for entering the trade? Are you basing your entry on Bollinger Bands?

Hello folks. After watching the lessons on BBs, I've begun to experiment with using them as trade indicators. However, I have a couple of questions about changing the number of periods and the standard deviations.

1) I've seen some systems have a default period setting of 14, but I see in the lessons here a recommendation of 20. Why? Would it be beneficial to use something along the lines of a 30 or 50 period count?

2) Standard deviation generally seems to default at 2, with the lessons (generally) recommending using 3 SDs—I've seen one person recommend using 4 SDs. Again, what is the significance of altering the count? (and) Are there certain pairs in which a lower/higher number is more valuable than another? For instance, if someone is trying to use the bands with a pair that is relatively volatile, say metals or pound/yen, is it (hypothetically) best to use more SDs than fewer?

Thanks,

cLeo

Originally Posted by cLeo

Hello folks. After watching the lessons on BBs, I've begun to experiment with using them as trade indicators. However, I have a couple of questions about changing the number of periods and the standard deviations.

1) I've seen some systems have a default period setting of 14, but I see in the lessons here a recommendation of 20. Why? Would it be beneficial to use something along the lines of a 30 or 50 period count?

2) Standard deviation generally seems to default at 2, with the lessons (generally) recommending using 3 SDs—I've seen one person recommend using 4 SDs. Again, what is the significance of altering the count? (and) Are there certain pairs in which a lower/higher number is more valuable than another? For instance, if someone is trying to use the bands with a pair that is relatively volatile, say metals or pound/yen, is it (hypothetically) best to use more SDs than fewer?

Thanks,

cLeo

Hi cLeo...you offer up some very good questions. Keep in mind, there is not a one size fits all. Part of the answer is in what you are trying to accomplish. Let's dig into your questions :

1) The bollinger band has a moving average that is central to it. Most charting packages do list the 20 period SMA. The developer also suggests the 50 SMA. The longer SMA will smooth out the moving average and the bands.

2) 2 SD is the default setting. A more conservative approach if you are using the bands and support and resistance would be 3 SD. A larger SD setting means more of the pricing is going to take place inside the bands.

If you use the bands on a volatile pair, the bands will automatically widen. I personally like the 20 and 50 SMA. I like to look for the positioning of the bands relative to each other. So bands that are horizontal and parallel are situations where I start to get excited in the trading. At that point, you can use a breakout on the 1 SD, or simple support/resistance on a 2 or 3 SD setting.

Mr. Wagner,

Thanks for taking the time to revisit this. As you say, optimal band settings seem to be situational (depending on the pair and also the chart time frame).

I appreciate the explanation and (now) confirmation.

Thanks, again.

cLeo

Originally Posted by cLeo

Mr. Wagner,

Thanks for taking the time to revisit this. As you say, optimal band settings seem to be situational (depending on the pair and also the chart time frame).

I appreciate the explanation and (now) confirmation.

Thanks, again.

cLeo

Yes, Bollinger bands are just one of the tools to consider using. They work well in conjunction with other tools like trend, support/resistance, candlesticks, etc.

Hello instructor, My question is as follows: I just have started the course, I still have not trade in the demo account, so forgive me if I seem a little ignorant
about the subject. I will like to know if it is possible to have both a buy and a sell position on one currency pair at the same time, and at any time establishing two different positions of the same currency pair?. I saw that one of the strategies suggested on the videos, of when a market is range bounded and due to a breakthrough, that it will be nice to have a long position above resistance and at the same time have a short position below the support line. Is there any regulations that prohibits this? If so, can you explain me why it is not allowed? And if it is allowed, can you expand my knowledge in this matter? thanks a lot I will really appreciate your reply.

Originally Posted by maria-o-ch

Hello instructor, My question is as follows: I just have started the course, I still have not trade in the demo account, so forgive me if I seem a little ignorant
about the subject. I will like to know if it is possible to have both a buy and a sell position on one currency pair at the same time, and at any time establishing two different positions of the same currency pair?. I saw that one of the strategies suggested on the videos, of when a market is range bounded and due to a breakthrough, that it will be nice to have a long position above resistance and at the same time have a short position below the support line. Is there any regulations that prohibits this? If so, can you explain me why it is not allowed? And if it is allowed, can you expand my knowledge in this matter? thanks a lot I will really appreciate your reply.

Certainly Maria - What you are asking about is hedging.

Hedging is the ability to have both a Long and a Short position on the same currency pair at the same time.

I believe the strategy you are referencing does not suggest a hedged position - but rather an OCO order.

The OCO order would allow you to place a buy order above resistance, and a sell order below support - so that when price breaks out of that range - One order is triggered and executed - while the other is canceled.

Hedging can be a potentially dangerous tactic to employ. Since you have both a long and short position at the same time - gains made on one side of the trade will be matched with losses on the other side of the trade (long position gains, short position loses).

You can certainly enable Hedging for UK based accounts with FXCM LTD.

Thank you for your reply, I realize and understand now the OCO order. Thanks about the comments on hedging, I was just curious about this, but you are right it seems dangerous if the market goes one way, for example up and it will go really high I can get a margin call before the price comes back to my sell price. I was just curious about buying and selling the same currency pair at the same time and having this two opposite positions and to win in any direction the market traded. I just wanted to know if traders did this. I like better to trade with the trend of the market and have my stop orders and limit orders defined. I am thinking better to trade different currency pairs, and find to hedge in this way, I just do not know now how. If this last thought possible? thanks for your comments.

Originally Posted by maria-o-ch

Thank you for your reply, I realize and understand now the OCO order. Thanks about the comments on hedging, I was just curious about this, but you are right it seems dangerous if the market goes one way, for example up and it will go really high I can get a margin call before the price comes back to my sell price. I was just curious about buying and selling the same currency pair at the same time and having this two opposite positions and to win in any direction the market traded. I just wanted to know if traders did this. I like better to trade with the trend of the market and have my stop orders and limit orders defined. I am thinking better to trade different currency pairs, and find to hedge in this way, I just do not know now how. If this last thought possible? thanks for your comments.

If you are establishing a hedge - you would want to use an instrument that directly mirrors the original. After all, the goal with a hedge is to offset risk. Like a Long and Short position on a single currency pair.

If you use a different currency pair - that would be a different instrument and it would no longer be a "Hedge." If the pairs you were looking at shared a currency (such as the USD in, EUR/USD and GBP/USD) Only part of the risk would be offset while you were still exposed in another direction.

Also keep in mind the risk of a hedged position - particularly if you are over-leveraging your account with really large positions.

Spikes in spread will create a loss in both sides of a hedged position that could potentially trigger a margin call if your Usable margin is not enough to withstand the loss(es).