"Bollinger Bands for Early Alerts"

The Bollinger Bands indicator plays an important part in my trading.

Whenever a band is spiked or tagged it should put you on high alert if for example let’s assume the top Band is spiked.

This could be considered an overbought condition – but we don’t know for sure and you should not enter a “short trade” - confirmation of reversal is required as price can, and does walk up the upper Band and down the lower one

Following a Bollinger spike or tag, there must follow a trend confirmation in other words the Moving Averages must be stacked up in the specified and required order.

All the above must be followed with a Parabolic SAR indicator showing its red dots to go short

Next a quick check to confirm that the RSI indicator is in the bearish territory.

Finally go “short” once a bearish candle has closed below the MA8.

This indicator provides a relative definition of high and low.

That relative definition can be used to compare price action and indicator to arrive at rigorous buy and sell decisions.

Volatility and trend have already been deployed in the construction of this indicator, so their use for confirmation of price action is not recommended.

The indicators used for confirmation should not be directly related to one another.

Two indicators from the same category do not increase confirmation.

Closes outside the Bands can be continuation signals, not reversal signals.

They are based upon a simple moving average.

This is because a simple moving average is used in the standard deviation calculation.

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