TA Seminar - Bollinger Bands (29 Apr 2020)
Transcript of TA Seminar - Bollinger Bands (29 Apr 2020)
Bollinger Band
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Disclaimer
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1. What is Technical Analysis?
2. Moving Averages
3. Bollinger Bands
Contents
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What is Technical Analysis?
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� A method of evaluating securities by analysing statisticsgenerated by market activity (eg past prices and volume).
� Technical analysts do not attempt to measure a security'sintrinsic value, but instead use charts and other tools toidentify patterns that can suggest future activity.
� Technical analysts believe that the historical performances ofstocks and markets are indications of future performance.
What is Technical Analysis?
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It is crucial to keep in mind that Technical Analysis is
not an exact science.
Rather, Technical Analysis deals with
probability distributions.
What is Technical Analysis?
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� Market Action Discounts Everything
� Prices move in Trends
� History tends to repeat itself
What is Technical Analysis?
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1. Market Action Discounts Everything
� Cornerstone of Technical Analysis
� The technical analyst believes that anything can possibly
affect the price and is actually reflected in the price of that
market
� Anything can be political factors, psychological reasons or
natural disasters, etc
What is Technical Analysis?
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2. Prices move in Trends
� The concept of Trend is essential to Technical Analysis
� Believe that market prices do exhibit Trends
� Purpose of charting price action is to identify Trends
What is Technical Analysis?
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3 Basic Trends of the Market
Uptrend Downtrend Sideways
� Uptrend has a pattern of rising peaks and troughs
� Downtrend has a pattern of lower peaks and troughs
� Sideways has a pattern of horizontal peaks and troughs
What is Technical Analysis?
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Uptrend has a pattern of rising
peaks and troughs
Uptrend has a pattern of
rising peaks and troughs
What is Technical Analysis?
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What is Technical Analysis?
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Downtrend has a pattern of
lower peaks and troughs
What is Technical Analysis?
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Sideways has a pattern of
horizontal peaks and troughs
What is Technical Analysis?
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3. History tends to repeat itself
� The study of human psychology
� Chart patterns reflect Bullish / Bearish psychology of the
market
� Key to understanding the future lies in the study of the past
or that “The future is just a repetition of the past”
What is Technical Analysis?
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Moving Averages
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• Most popular trend-following indicator
• Assist in smoothing market noise, reveal its “real” direction
• Calculated by averaging a number of past closing prices
• Most common time periods are 10, 20, 50 and 200 days
• Longer time period equals less sensitive and smoother
average
Moving Averages
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Moving Averages
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Common Applications of MA
� Identify the trend direction
� To determine Support and Resistance levels
Moving Averages
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Uptrend
Moving Averages
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Downtrend
Moving Averages
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Sideways
Moving Averages
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Bollinger Bands
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� Technical tool created by John Bollinger in the 1980s
� A band where its upper and lower boundaries are derived
from standard deviation
� Standard deviation is a mathematical formula that
measures volatility, showing how the stock price can vary
from its true value
Bollinger Bands
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Middle Band
Upper Band
Lower Band
What are Bollinger Bands?
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Middle band = 20-day Moving Average (MA)
Upper band = Middle band + 2 standard deviations
Lower band = Middle band - 2 standard deviations
What are Bollinger Bands?
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95% of price within the band
Characteristic
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5% occasion
Characteristic
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Price moves from one end
to the other
Characteristic
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In strong uptrend, price tends to
move between the upper and
middle bands
Characteristic
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Characteristic
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In strong downtrend, price
tends to move between the
middle and lower bands
Characteristic
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2 usages of Bollinger Bands
1. Breakout
2. Range boundary
Usages of Bollinger Bands
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Breakout
Squeeze
Breakout
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Breakout
Breakout
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Breakdown
Breakout
Breakout
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Breakdown
Breakout
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Breakdown
Breakout
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Is this the
squeeze?
Breakout
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Is this the
squeeze?
Breakout
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Range Boundary
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Range Boundary
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Range Boundary
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Exhaustion
Bollinger Bands
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Bollinger Bands
Exhaustion
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Bollinger Bands
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Exhaustion
Bollinger Bands
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Buy Signal:
When price > middle band
RSI > 50
W Bottom
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W Bottom
Buy Signal
RSI > 50
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Sell Signal:
When price < middle band
RSI < 50
M Top
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Sell Signal
RSI < 50
M Top
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Sell Signal
RSI < 50
M Top
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Sell Signal
RSI < 50
M Top
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Thank you
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