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 one 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.
A school of thought belief that when the price crosses the bands, it signifies that a breakout is about to happen. The breakout is in the direction of the price movement, ie. if the price crosses the upper band, it signifies a uptrend breakout and if the price crosses the lower band, it signifies a downtrend breakout.
In the Data Trader Bollinger Trend strategy, a BUY entry signal is when the price moves above the upper band. Exit when the price drops below the SMA. This indicates that the uptrend has lost its momentum. A SELL entry signal is when the price moves below the lower band. Exit when the price goes above the SMA. This indicates that the downtrend has lost its momentum.
We use a Bollinger Band window of 20 periods.
A different school of thought with Bollinger Bands can be found here. Note that in the other strategy, a standard deviation of two is used.
