I am not a certified analyst. The charts shown and the content in the blog are for educational purpose only and in no way is a buy or sell recommendation. Readers are advised to use discretion.

Monday 9 December 2013

Bollinger Bands (BB) - Rule 3

Third Rule of BB - Close/ Tag or No touch on BB

Ok, here comes another good rule for BB, which i use most of the time. Its a little tougher & needs practice to watch at Live market. So, keep identifying it first at daily charts- then on hourly TF & finally on hi speed 5min/ 3 min charts..

BB are nothing but the standard deviations & in Technical terms, when a process moves outside this band, it will turn to its mean IF ANY EXTERNAL INTERFERENCE forces the process. This External Interference is generally the Smart Money & it is shown by the Close / Tag or No touch on BB..

Close means, no Interference, so market will most probably continue the same direction after Pullback
Tag means, some External Interference & a pressure to not let the Process deviate the other trend
No Touch is nothing but Failure to Continue & even touch the BB, a good Pressure for Reversal.

Lets see with below example to understand all 3...

So keep looking for them and decide on the position, whether to exit or take reversal..

NB: The order should be right at a DP - 1) Close then 2) Tag and 3) FTC. Not in reverse order...

Happy Trading !!!

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5 comments:

  1. Unknown15 October 2015 at 19:56

    Hi Deven, thanks once again for another wonderful piece of article, can you please elaborate more on "Right at a DP", thanks

    ReplyDelete
    Replies
    1. Deven Malhotra16 October 2015 at 08:21

      Hi Prakash,

      DP here stands for "Decision point". I avoid to use the term Support & Resistance as it gives a bad impression to short at resistance & buy at support. These are levels to take decisions so -"Decision Points".

      My trading preference is - DP - BB - OI.

      Thanks,
      T.Deven Malhotra

      Delete
  2. Unknown22 October 2015 at 12:12

    Hi Deven, many thanks for the clarification of the word DP, till now I was only looking at support/resistance concept/theme, would it be possible to publish articles on DP or guide as to where to get information relating to DP, regards Prakash

    ReplyDelete
    Replies
    1. Deven Malhotra22 October 2015 at 16:06

      Hi,

      DP is coined by a trader - Rajesh known as SMART Trader owning a blog - www.niftynirvana.blogspot,com.
      He has written a small book also on his concepts which you can download free from my blog in Downloads section or from his blog. All Good Things in Life are FREE, so believe me its the best one !

      Thanks,
      T.Deven Malhotra

      Delete
    2. Unknown23 October 2015 at 02:09

      Hi Deven,many thanks for guiding me to the proper source, have finished one round of reading and obviously will read multiple number of times to get it ingrained into my system, one clarification though, can we adopt the system designed by Rajesh for larger time frames like daily, weekly as it becomes extremely challenging to do day trading unless into full time, regards Prakash

      Delete

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