This is a guide of the trading strategy. For a guide on how to read the graphs on the analysis page, click here.
This strategy uses the Bollinger Bands. Bollinger Bands is a plot of the Simple Moving Average (SMA) along with two lines of two standard deviations above and below the SMA. These two lines above and below the SMA is normally referred to as the bands. When the price crosses the bands, there are two school of thoughts.
One school of thought in which the Bollinger Range strategy follows is that the price generally stays within the two bands. When the price crosses the bands, it is either overbought or oversold situation. This means that the trend is about to change direction. The Bollinger Range strategy uses this observation to trade.
In the Data Trader Bollinger Range strategy, a BUY entry signal is when the price goes below the lower Bollinger Band. Exit when the price goes above the mid price. Similarly, a SELL entry signal is when the price goes above the upper Bollinger Band. Exit when the price goes below the mid price.
We use a Bollinger Band window of 20 periods.
The strategy used by the other school of thought can be found here. Note that in the other strategy, a standard deviation of one is used (instead of two).