Traders are always looking for the most ideal strategy – one that can help them earn more with lesser effort exerted and one that help get them the best entry points and directions. Well, it is hard to find such strategy since everything requires some amount of effort to get the greatest rewards. Some traders may find what they want and do the same thing all over again to gain more but the truth is there are actually better and easier strategies. This strategy is known as Tops and Bottoms on Bollinger Bands.
HOW TO USE IT?
Tops and bottoms is the actual strategy and it uses Bollinger Bands just as the name says it. However, the true strength of this strategy comes from using multiple time frames. The first things you need to do are the application of Bollinger Bands to your daily charts and then do it all over again on an hourly chart or H4.
In Bollinger Bands, you drawing skills are not that important. What matters is that your drawing can show a single period when prices are just below the center line of the tool. This strategy makes use of 20 as its default setting for Bollinger. According to the strategy, once prices are below the center line, the market is in a downward trend and once prices are above, you are trading in an upward trend. This is how the strategy recognized trend using Bollinger Bands and this is actually dependable.
When you already have the trend on a time frame that is higher, you can now move down to a time frame that is smaller. This can be hourly as per the strategy. You also need to look for the weakness in an upward trend and the strength in a downward trend. There may be many users of this strategy who do not fully understand it but it can be quite easy to grasp. A downward trend comes with weakness of assets but prices do not progress in a straight line. Even when the total direction is going down, prices will still have strong moment before it drops lower. The exact opposite happens in an upward trend. There is total strength however, there are also times when trend is weak and prices move lower. This is popularly known as a retracement.
The next step is to know strength in a downward trend. Put in mind that in a daily chart you may have identified the down trend. This market strength is symbolized by the upper Bollinger Band’s touch. Thus, when you see the price heading to the topmost band, you can then place the Put.
WHY IS THIS STRATEGY BAD?
If you can fully understand the idea of the Bollinger Band strategy, you will realize that it does not actually suck. However, for those who are having a headache understanding its aspects, just put in mind that weakness is an upward trend and strength is the exact opposite. If you do not understand this strategy then it will surely suck.
WHY IS THIS STRATEGY GOOD?
Any trade that comes from the direction of the total trend has a bigger possibility of success. This can make you trade on at the main trend’s direction and if you manage to be disciplined enough at following the simple steps then you can really earn lots of money from it.
If you are a fan of Multiple time frame analysis then you can surely use this strategy. You can stick to it if you understand it. With this strategy, you can pick tops and bottoms but you have to test it first. You can even use extra filters but be careful not to exaggerate your decisions.