Bollinger Bands® are a great means to trade instruments. These profitable tips for day trading with Bollinger bands are unbeatable.
Day traders can use Bollinger bands to make profitable entries at the right price and at the right time. These entries can help you to generate consistent profits in the long run.
Generally, there are two types of approaches to trade on the basis of technical charts: Fade Trading and Reactive Trading. Traders who prefer to anticipate specific chart pattern are known as “Fade traders” or “Proactive traders”.
They used to trade against the current trend i.e. buying the weakness & selling in the strength. They possess high risk tolerance for trading.
On the other hand, traders who prefer to wait for the confirmation of chart pattern are known as “Reactive traders”. They used to trade as per the current trend i.e. buying the strength & selling in the weakness.
They possess low risk tolerance for trading. But, they have to pay worse prices & suffer huge losses if the expected pattern fails to form. Here are 10 simple guidelines for day trading with Bollinger Bands:
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(1) Modify Standard Deviations To Analyze Authenticity Of Breakouts
It is one of the most basic tips for day trading with Bollinger bands. In default setting, Bollinger Bands® are usually set to 2 standard deviations. With the 2 standard deviations, 85% to 90% of all price actions will fall between the two bands.
The outer bands in this setting are likely to show some fake breakouts from time-to-time. In order to differentiate fake breakouts from legitimate breakouts, you need to modify standard deviations to 2.5.
This modification will make the bands wider to capture more price action. With the 2.5 standard deviations, 99% of all price actions will fall between the two bands.
Therefore, any violation of the outer bands will become more meaningful & reliable signal for true breakout. Thus, intraday traders should modify standard deviations to spot true breakouts.
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