Bollinger Band Magic

Bollinger bands are a powerful indicator. After using Bollinger bands for over 10 years in I have some
powerful insight that will allow you to enter trades more precisely with less risk, stay in trades longer
that are going to continue to move, AND ext trades with such precision that you will literally more times
than not get out on a high EXACTLY where price begins to go against you.
Will it always go this way for you? NO, but I can certainly say with 110% confidence that these simple
tricks will allow you to experience a level of accuracy that will shock you from time to time. I can
remember 100's of trade, both entries and exits where Bollinger bands got me in to the degree that I
was 100% confident of a move in my favor and exits where I was absolutely certain that price was DONE
moving. So many times when I got out I watched price just rocket against me, but because of the
accuracy Bollinger bands allowed I was already out of the trade with MAXIMUM profit.
There isn't too many indicators that will allow you this kind of accuracy. In fact I can't think of 1 single
indicator that will allow you this type of precision.
This manual is intended to be short and to the point. I will cover the basics AGAIN short and to the
point, and then we will get into the advanced stuff that you won't find anywhere else.
The techniques that I will share with you here I have been using for several years. Although I have been
using Bollinger bands for over 10 years I really didn't harness the power until recently. You have to get
beyond the Bollinger band squeeze, and Bollinger band contraction to truly realize the power of this
incredible indicator.
So we should first thank John Bollinger for coming up with what just might be the best indicator ever
developed, because I truly believe it is the best indicator I have ever used.
I would like to add before we start that there are times and situation where Bollinger bands can be used
alone, always with addition of a MEAN or moving average that defines the MIDPOINT between the
bands. Usually a 21 period moving average. This moving average is often a default addition to the
bands but sometimes you have to add it.
That said, YES you can use the bands with a 21 period moving average by themselves for many great set‐
ups but the addition of an indicator or two can greatly benefit you and your accuracy.
I will cover with you some details on how I create my cash‐flow through my trading with Bollinger bands
and a few other tools.
So let's get started...
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Copyright 2011 MTD Inc.
All My Secrets are here ‐ http://www.3stepislandtrader.com

Bollinger bands ‐ The Basics

Let's start by defining Bollinger bands and their defined purpose for existing.
Here is Wikipedia's definition of Bollinger bands ‐ Bollinger Bands is a technical analysis tool invented by
John Bollinger in the 1980s. Having evolved from the concept of trading bands, Bollinger Bands can be
used to measure the highness or lowness of the price relative to previous trades.
Now it's a good thing we aren't relying on Wikipedia for any insight into Bollinger bands because that's
about the lamest explanation of Bollinger bands I've ever heard.
According to Wikipedia again here is the "Interpretation" of how to use Bollinger bands and this
explanation in itself presents a new problem...
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The use of Bollinger Bands varies widely among traders. Some traders buy when price touches
the lower Bollinger Band and exit when price touches the moving average in the center of the
bands. Other traders buy when price breaks above the upper Bollinger Band or sell when price
falls below the lower Bollinger Band.[3] Moreover, the use of Bollinger Bands is not confined to
stock traders; options traders, most notably implied volatility traders, often sell options when
Bollinger Bands are historically far apart or buy options when the Bollinger Bands are
historically close together, in both instances, expecting volatility to revert back towards the
average historical volatility level for the stock.
When the bands lie close together a period of low volatility in stock price is indicated. When
they are far apart a period of high volatility in price is indicated. When the bands have only a
slight slope and lie approximately parallel for an extended time the price of a stock will be found
to oscillate up and down between the bands as though in a channel.
Traders are often inclined to use Bollinger Bands with other indicators to see if there is
confirmation. In particular, the use of an oscillator like Bollinger Bands will often be coupled
with a non-oscillator indicator like chart patterns or a trend line; if these indicators confirm the
recommendation of the Bollinger Bands, the trader will have greater evidence that what the
bands forecast is correct.
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Additionally this is a clip from John Bollinger's website http://www.Bollingerbands.com
Bollinger Bands are a technical trading tool created by John Bollinger in the early 1980s. They
arose from the need for adaptive trading bands and the observation that volatility was dynamic,
not static as was widely believed at the time.
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The purpose of Bollinger Bands is to provide a relative definition of high and low. By definition
prices are high at the upper band and low at the lower band. This definition can aid in rigorous
pattern recognition and is useful in comparing price action to the action of indicators to arrive at
systematic trading decisions.
Bollinger Bands consist of a set of three curves drawn in relation to securities prices. The middle
band is a measure of the intermediate-term trend, usually a simple moving average, that serves as
the base for the upper band and lower band. The interval between the upper and lower bands and
the middle band is determined by volatility, typically the standard deviation of the same data that
were used for the average. The default parameters, 20 periods and two standard deviations, may
be adjusted to suit your purposes.
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The Real Low Down on Bollinger Bands
I wanted you to have some insight in what "others" say about Bollinger bands and I also
recommend anyone wanting to really study Bollinger bands to buy John book on Bollinger
bands because he is the inventor of the bands and there is some good insight into the book.
If you just want the "GOLDEN NUGGETS" the stuff that's going to make you money consistently
then just continue with this report and the emails that follow as well as the videos, and you my
friend will know more about generating profits with Bollinger bands than 99% of all
experienced traders.
To begin with we need to talk about the 2 Bollinger band STAPLES. The ROOT of Bollinger
bands. The Bollinger band SQUEEZE, and EXPANSION.
We are only truly interested in EXPANSION, but a SQUEEZE tells us of a coming EXPANISON,
because in order to EXPAND we need to CONTRACT or SQUEEZE.
It's the EBB and FLOW of Bollinger bands.
A SQUEEZE is really the result of a slow in price volatility. In other words when price begins to
SLOW DOWN it's day to day MOVEMENT or VOLATILITY Bollinger bands begins to SQUEEZE to
reflect this. The bands will narrow and this indicates, let's just say, dead price action. Price can
become stagnant. When price does this it's hard to make money, HOWEVER it also points to
the fact that and EXPANSION of volatility or MORE AGGRESSIVE price movement is inevitable.
In fact and always remember this, AFTER A SQUEEZ COMES EXPANSION. Further DECREASED
VOLATILITY BEGETS INCREASED VOLATILITY.
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This is an important observation because it is a fact that a low volatility environment is always
followed by a higher one. You just need to know how to take advantage of what follows low
volatility.
Let's look first at a Bollinger band SQUEEZE and Expansion
Figure 1
In figure 1 we have a Bollinger band squeeze as well as expansion. Notice that prior to the squeeze
price, for almost 1 full month really slowed down and remained within a very narrow price range, then
the bands came to a head closing in on each other and price EXPLODED to the upside and continued to
rocket upward. This is a typical picture of Bollinger bands squeezing and expanding. The opportunity of
course lies in the expansion.
Now one thing to make note of is that a Bollinger band expansion NEVER dictates DIRECTION just
MOVEMENT. In other words this could have just as easily exploded to the downside as it did the upside.
More on this later.
When I really began to use Bollinger bands to an extremely accurate level was when I realized that it's
not just about expansion or contraction, it's about...
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How the Bands React To Approaching Price Action!
and not just the band that's being approached. it's about what BOTH BANDS do as price
approaches either band. I'm going to use the same image above to demonstrate the KEEN
INSIGHT Bollinger bands offers in this simple example.
Figure 2
Notice as price moved down to the red circle the lower band moved with it. Both headed downward
ever so slightly. Then at the red circle, BEFORE the explosion in price. The lower band hooked UPWARD.
I call this the BRICK WALL of Bollinger bands. This clearly told us that for now at least, price WAS NOT
going down any further.
Pay attention to this, it's very important and very reliable in either direction. Notice that it was actually
3 bars back that the lower band started to flatten out and STOPPED going down. Then when price hit the
band it MARKED THE END of the move down.
Now keep in mind that sometimes price isn't so close to the band when this happens so I have a rule of
thumb to keep in mind.
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The Closer Price Is To the Band (Whichever band) The More
Accurate Your Reading.
In this case price was right on top of the lower band at the red circle.
I would now like to introduce you to a short cut chart I made to help you interpret the varying Bollinger
band signals.
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Figure 3
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Let's take a look at each of these indications from Bollinger bands on a 1 by 1 basis because if you get to
know them all intimately you will become a top trader any asset class any time frame from any place on
the planet. From New York to Bangladesh!

Figure 4
Take a close look. Bollinger bands could be doing a number of things on the left, traversing sideway
slightly bearish, it could even be slightly bullish, the bottom line is the bands got real close (contraction)
and then they both expanded to the point of a NORTH and SOUTH bound almost vertical band on the
TOP and BOTTOM. This is extremely bullish.

Figure 5
This is the opposite of figure 4, extremely Bearish. Literally just the exact opposite as the first one. Price
could be doing many things up to this point, but right here the bands began to close in on each other
first, and then BAM right here we get a NORTH and SOUTH bound UPPER and LOWER band. This again is
a transition from low volatility to high volatility.
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Figure 6
In figure 6 price is moving down to a Bollinger band that won't. This is a sure sign that FOR NOW the
downward momentum is over.

Figure 7
Same here in Figure 7, the move up is HALTED by a stubborn Bollinger band.
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Figure 8
Figure 8 is even more certain that Figures 6 & 7. In Figure 8 the Bollinger band heads up to CUTOFF price
action on its way down. You can trade this set‐up in more ways than 1! Price is DONE at least for now.

Figure 9
Same here with Figure 9, the upper band comes down and heads price off at the pass! Price is not going
anywhere but down for the time being.
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Figure 10
Here we have a slightly bearish stance as the lower band heads down and the upper, rather than expand
to the upside and give us the expansion we like to see remains flat. Price is likely to continue down, just
not aggressively.

Figure 11
Figure 11 is the same as 10, but its bullish. Price will likely continue up in a moderate fashion.
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Figure 12
Both bands headed down is classic downward momentum. These are the kind of moves you see with
bank stocks or trending blue chip high volume movers. Ideally with this type of Bollinger band
momentum you look to swing structure to identify key low risk entry levels.

Figure 13
The same with figure 13, look to swing structure to pinpoint low risk entry into these moderate to slow
movers.
You will notice that I say "AT LEAST FOR NOW" a lot about most of these set‐ups. I say that because no
matter how great the set‐up price can always and often does change direction. Yet no matter how
much this happens I can still be so darn accurate with these set‐ups that its almost magical.
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Always keep in mind as you enter your trades that although you will be right most of the time price can
always turn on you, that's why it's so important to keep an eye on swing structure. The swing highs and
swing lows tell you so much about overall strength and weakness regarding the trend.
Watch those swing highs and lows for clues about your trade. Combine swing structure with Bollinger
bands and you will have tremendous power at fingertips. No Joke !
If you want to learn all my secrets on Bollinger bands and swing structure, as well as have access to over
10 webinars on the subject I have arranged a very special offer for you here ‐
http://www.3stepislandtrader.com
Sincerely, PS ‐ I will be adding examples of each
set‐up to this report sometime in the
future. I will send you an email to
download the updated version at that
time.
Mark Deaton
mark@renegadetrader.com
780 Falls Ave. #320
Twin Falls Idaho 83301
U.S. Government Required Disclaimer - Commodity Futures Trading Commission Futures

and Options trading has large potential rewards, but also large potential risk. You must be aware
of the risks and be willing to accept them in order to invest in the stock/options markets or forex.
Don't trade with money you can't afford to lose. This is neither a solicitation nor an offer to
Buy/Sell futures or options. No representation is being made that any account will or is likely to
achieve profits or losses similar to those discussed in this manual. The past performance of any
trading system or methodology is not necessarily indicative of future results.
CFTC RULE 4.41 - HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS

HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD,
SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE
TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER
COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH
AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE
ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF
HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR
IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN.
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Bollinger Band Magic

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Bollinger Band Magic

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Additionally this is a clip from John Bollinger's website http://www.Bollingerbands.com

U.S. Government Required Disclaimer - Commodity Futures Trading Commission Futures

CFTC RULE 4.41 - HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS

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