What Really Works for Technical Traders

[johnw 10]

Well that is all settled then ..push on Phantom, push on.

[phantom 16]

 

Okay, back to business.

 

Today I would like to discuss how I use Bollinger Bands to tip me off as to when I can expect a consolidation, and therefore a subsequent breakout and trading opportunity.

 

Today's chart is a 120 minute euro chart with 3 numbers atop the price action. Notice how the market traded up to these three zones and then consolidated. These zones are located roughly at the top of the Bollinger Bands! When price approaches the top band in a downward moving market, I go on "alert status" to wait out the pending consolidation breakout with a downward bias.

 

The same thing applies at the bottom of the band. I wait for the bottoming consolidation pattern with a definite upward breakout bias (isn't this what standard deviation bands are all about?) and trade the breakout > price rejection methodology already explained earlier in this thread.

 

Does it work 100% of the time? Of course not, but its been pretty good to me so far.

 

 

Luv,

Phantom

[ricastein 10]

Why don't you people just shut up. If I was Phantom I'd already be sick of this whole thing. Here's a guy that opens a simple thread to try to teach some strategy, and before he even gets started you're questioning his methodology, his ability, his honesty, and his integrity. We're all adults here, and I don't need any of you to try to point out some kind of fraudulent activity. I'm perfectly capable of doing that myself.

 

If you people are so smart, why don't you open your own thread. I don't want to read any constructive criticism, or any criticism at all. Just let Phantom present his material, and I'll judge for myself.

 

If you people are such great traders, why are you even taking the time to visit this thread? Are you profitable? Don't bother to answer because I wouldn't believe you anyway. There, I'm questioning your honesty without knowing anything about you. How do you like it?

[BlowFish 10]

It is a forum, presumably if he did not want discussion he would have chosen a different venue like a blog. It's been pretty civil on the whole anyway.

 

Back on topic, a straightforward way of using BB's. Indeed the bands are at SD's from the average. Edit (I see you use 2,20) Do you use default settings (not that it is that big of a deal)? Do you only go in one direction (in the direction of trend or momentum or something else)?

 

Cheers.

[phantom 16]

Back on topic, a straightforward way of using BB's. Indeed the bands are at SD's from the average. Do you use default settings (not that it is that big of a deal)? Do you only go in one direction (in the direction of trend or momentum or something else)?

 

I ALWAYS use a 20 period sma (I prefer it to ema) and a 2 SD channel.

 

I will take a buy signal coming from the bottom of the band in a descending market. Heck, most of the time natural gas (one of my favorite markets to trade) is too hard to distinguish whether the weekly trend is up or down so I depend on the info that the bands and price rejection bars are telling me.

 

Hope this helps.

 

 

Luv,

Phantom

Edited May 18, 2011 by phantom

[calsprdr 10]

I don't exactly see the "consolidation" at point 2 in your last chart, but that might be my poor eyesight:haha:

Anyway you seem to be using the term "volatility" qualitatively rather than in the sense of a specific bar length, am I right?? Does your volatility bar cross a specific part of the BBs?

[Flex1975 10]

 

I've got an even "juicier" way to use the bands, and if you guys can behave yourselves from here on out, I may decide to share it with you (it's the basis for a ridiculously profitable trade entry). No promises, we'll see...

 

 

Let me guess....that "juicier" way is the Keltner/BB squeeze...?

[phantom 16]

Let me guess....that "juicier" way is the Keltner/BB squeeze...?

 

Nice guess Flex. But more important, its the price action inside the squeeze...

[Flex1975 10]

Nice guess Flex. But more important, its the price action inside the squeeze...

 

Yeah yeah...I know..."price rejection/acceptance" inside the squeeze...

 

The KeltBB signal shown in the chart bring back a lot of early trading memories... I coded this thing when I was still a rookie trading idiot (I am still an idiot...but a seasoned one nowadays). Fun to see again...

[phantom 16]

 

The KeltBB signal shown in the chart bring back a lot of early trading memories... I coded this thing when I was still a rookie trading idiot (I am still an idiot...but a seasoned one nowadays). Fun to see again...

 

Don't get me started on trading memories...like the time the electricity went out in my home while I had just entered the bond market after the employment #'s were released and I didn't have a (protective) stop in the market yet...maybe I'll blog on that one...who knows?!

[Flex1975 10]

Don't get me started on trading memories...like the time the electricity went out in my home while I had just entered the bond market after the employment #'s were released and I didn't have a (protective) stop in the market yet...maybe I'll blog on that one...who knows?!

 

It's not fun when that sort of things happen but there is no better learning path (in my opinion) then the school of hard knocks... :crap:

 

Sharing those stories will always make a few people a bit smarter and better prepared...

[phantom 16]

I don't exactly see the "consolidation" at point 2 in your last chart, but that might be my poor eyesight:haha:

Anyway you seem to be using the term "volatility" qualitatively rather than in the sense of a specific bar length, am I right?? Does your volatility bar cross a specific part of the BBs?

 

 

Look for a mini sideways channel on the 120 chart right near the upper band at point #2 (in this case its the 2 bars at the peak of point 2) then go to a 15 or 20 minute chart to see the "expanded version" of the consolidation pattern and subsequent breakout, again, with the downward bias.

 

The volatility bar is a qualitative judgment call and no, it doesn't cross the envelope per se. I just look for the bar to be relatively larger than the consolidation bars, closing outside or very near the range extreme.

 

Hope this helps.

 

 

Luv,

Phantom

[Flex1975 10]

 

Look for a mini sideways channel on the 120 chart right near the upper band at point #2 (in this case its the 2 bars at the peak of point 2) then go to a 15 or 20 minute chart to see the "expanded version" of the consolidation pattern and subsequent breakout, again, with the downward bias.

 

The volatility bar is a qualitative judgment call and no, it doesn't cross the envelope per se. I just look for the bar to be relatively larger than the consolidation bars, closing outside or very near the range extreme.

 

 

I will take a buy signal coming from the bottom of the band in a descending market. Heck, most of the time natural gas (one of my favorite markets to trade) is too hard to distinguish whether the weekly trend is up or down so I depend on the info that the bands and price rejection bars are telling me.

 

Ok, now you even lost me... Calsprdr is right...there is no consolidation pattern on the 120 min...the 2 bars at the peak have a higher low and higher high so I am curious what your definition of an uptrend is.

 

Attached charts of the 15 min and 20 min with two consolidation boxes which are based on specific consolidation rules. These rules are not your rules so if people on this forum wants to use your setup in live trading when are they entering the trade? The first breakout down on the 15 min/20 min? The second? The third? The second down bar on the 120 min?

 

You say you look for an "volatility" bar...it's clear what you mean by that but when you take your example 2 the "volatility" bar (third bar down) closes far below the upper Bollinger band while you said that you "take" the trade coming from the band values. My point is...I assume you're already in the trade when the "volatility" bar closes. Not?

 

I only ask these questions to code a quick strategy to show people the results of your setup based on an extended period of time (2/3 years) instead of a few handpicked "big move" examples. Consistency is all what counts...

 

Maybe you don't want to share your entry/exit rules...that's no crime of course and I respect that...but then I will make my own.

[BlowFish 10]

Well I am obviously not phantom but I'll have a crack at some of that to 'test' my understanding. Hope thats Ok

 

WE are looking for a 'mini sideways channel'. We can anticipate it because we are at/outside the top 120m band. You can pretty much guess what is 'inside' the narrow hammer bar at 2. A narrow bar on 120 will pretty much always be a mini consolidation on 15.

 

Attached charts of the 15 min and 20 min with two consolidation boxes which are based on specific consolidation rules. These rules are not your rules so if people on this forum wants to use your setup in live trading when are they entering the trade? The first breakout down on the 15 min/20 min? The second? The third? The second down bar on the 120 min?

 

You look for he consolidation on the 15 where the 120 bars have poked the BB's not anywhere on the 15 min chart. I enclose a chart, you get a 'mini range' at the top a shift in momentum, price drifts off. There are a couple of rejections that you could trigger entries on. Phantom I wonder which chart you would use for an initial stop?

 

so I am curious what your definition of an uptrend is.

 

Not sure trend is too important to him....see post 55.

 

Please correct me if I am wrong (not unusual)

Edited May 19, 2011 by BlowFish

[Flex1975 10]

Well I am obviously not phantom but I'll have a crack at some of that to 'test' my understanding. Hope thats Ok

 

WE are looking for a 'mini sideways channel'. We can anticipate it because we are at/outside the top 120m band. You can pretty much guess what is 'inside' the narrow hammer bar at 2. A narrow bar on 120 will pretty much always be a mini consolidation on 15.

 

You look for he consolidation on the 15 where the 120 bars have poked the BB's not anywhere on the 15 min chart. I enclose a chart, you get a 'mini range' at the top a shift in momentum, price drifts off. There are a couple of rejections that you could trigger entries on. Phantom I wonder which chart you would use for an initial stop?

 

Not sure trend is too important to him....see post 55.

 

Please correct me if I am wrong (not unusual)

 

You're always free to crack my thinking... The way I see the markets is far from perfect so I never have a problem when someone tells me my brain needs an upgrade...

 

But what you wrote is very good because you made a rule... A narrow (inverted) hammer bar at/above the upper BB band is a 'mini sideways channel'.

Ok, next step... define the rejection rules to trigger permission to enter the market and attach an entry value.

 

As said before...I am not pissing off the setup...but it only has a shot when the frame of the setup has been clearly defined.

[BlowFish 10]

Not so much a rule as an observation. My reply was to test my understanding of phantoms approach. I don't really want to go too far down my road as that would be impolite!

[johnw 10]

OK Phantom,

 

You are employing the pullback in a trend routine.

 

Excellent, excellent thinking it is a most reliable entry technique with

a small easily managed stop loss in my opinion.

 

In fact it is the only technique I use, although I DO NOT use any indicators

and I am looking for different qualities and timing.

 

Never the less ...it is what it is.

"A pullback in a trend"

 

Push on Phantom ..push on

[MightyMouse 12]

 

Okay, back to business.

 

Today I would like to discuss how I use Bollinger Bands to tip me off as to when I can expect a consolidation, and therefore a subsequent breakout and trading opportunity.

 

Today's chart is a 120 minute euro chart with 3 numbers atop the price action. Notice how the market traded up to these three zones and then consolidated. These zones are located roughly at the top of the Bollinger Bands! When price approaches the top band in a downward moving market, I go on "alert status" to wait out the pending consolidation breakout with a downward bias.

 

The same thing applies at the bottom of the band. I wait for the bottoming consolidation pattern with a definite upward breakout bias (isn't this what standard deviation bands are all about?) and trade the breakout > price rejection methodology already explained earlier in this thread.

 

Does it work 100% of the time? Of course not, but its been pretty good to me so far.

 

 

Luv,

Phantom

 

You will be better served by getting clues from price to determine when the bollinger bands will be turning rather than looking for consolidation patterns in price with a breakout bias, but who cares which way the BB's go.

 

If you test the data you will see that a consolidation pattern that touches a BB is just as likely break out and continue out of the band and change the direction of the band as it is to brush against the band and return to the lower band. Price is leading. Why not just trade price in this instance?

 

It makes for a great picture in color or black and white but the particular method provides the same information that flipping a fair coin would.

[BlowFish 10]

 

If you test the data you will see that a consolidation pattern that touches a BB is just as likely break out and continue out of the band and change the direction of the band as it is to brush against the band and return to the lower band.

 

Sure. In that case you will be very unlikely to get consolidation -> momentum in the new direction -> test/price rejection on the lower time frame. (or the higher time frame for that matter). It's not about forecasting turns it's more about 'good' trade location. EDIT: + price confirming that the bulls/bears are no longer in control.

Edited May 19, 2011 by BlowFish

[phantom 16]

 

WE are looking for a 'mini sideways channel'. We can anticipate it because we are at/outside the top 120m band. You can pretty much guess what is 'inside' the narrow hammer bar at 2. A narrow bar on 120 will pretty much always be a mini consolidation on 15.

 

You look for the consolidation on the 15 where the 120 bars have poked the BB's not anywhere on the 15 min chart. I enclose a chart, you get a 'mini range' at the top a shift in momentum, price drifts off. There are a couple of rejections that you could trigger entries on. Phantom I wonder which chart you would use for an initial stop?

 

Please correct me if I am wrong (not unusual)

 

BlowFish, you seem to have nailed it with just a few added notes:

 

I'm not too concerned whether the 120 BB has in fact been penetrated; I'm looking for ballpark here.

 

The BB on the 15 minute chart acts as my trend identifier, ie the 20 period sma.

 

The 1 or 2 inside bars on the 120 chart tell me to look at the 15 minute chart. At this point, I no longer care about the 120 chart per se

 

Once the market breaks down from the trading range on the 15 minute chart, I wait for any identifiable price rejection. On your 15 minute chart, a breakdown below the low of the 13:45 bar is a "false breakout-reversal" because the market broke above the previous 9 bars, closing near the high (false breakout phase), then proceeded to break down below the 13:45 bar 3 bars later (reversal phase).

 

Since the breakdown occurs under the 15 minute chart's 20 period ma, we have trend filter okay on this setup.

 

Once the market breaks out, I would place my stop above the false breakout bar (13:45 bar)

 

My definition of an uptrend is 15 minute bars closing above the 20 period ma. (Downtrend is vice versa).

 

There you have it. Hope this clarifies things a little bit.

 

 

Luv,

Phantom

[phantom 16]

It's not about forecasting turns it's more about 'good' trade location.

 

Yes, you are exactly right.

[phantom 16]

Ok, next step... define the rejection rules to trigger permission to enter the market and attach an entry value.

 

Flex, I've never had any success with trying to codify this method because the variables are never fixed. This is really one of those setups that is better seen than automated...

 

But if you come up with something tangible, I'd love to be the first to know!

 

 

Luv,

Phantom

[phantom 16]

You will be better served by getting clues from price to determine when the bollinger bands will be turning rather than looking for consolidation patterns in price with a breakout bias

 

MM, I've been served just fine the way things are described.

[Flex1975 10]

You will be better served by getting clues from price to determine when the bollinger bands will be turning rather than looking for consolidation patterns in price with a breakout bias, but who cares which way the BB's go.

 

If you test the data you will see that a consolidation pattern that touches a BB is just as likely break out and continue out of the band and change the direction of the band as it is to brush against the band and return to the lower band. Price is leading. Why not just trade price in this instance?

 

It makes for a great picture in color or black and white but the particular method provides the same information that flipping a fair coin would.

 

True!!! Phantom, have you ever backtested your setups based on a continuous dataset of say 24 to 36 months? You use NinjaTrader so you have the right software....

[Flex1975 10]

Flex, I've never had any success with trying to codify this method because the variables are never fixed. This is really one of those setups that is better seen than automated...

 

But if you come up with something tangible, I'd love to be the first to know!

 

 

 

You already answered my previous post...my apologies. You don't have to automate your setups but coding your setups as an alert or indicator to highlight the appearances in your historical data is crucial. That way you can develop better ways to filter the best trades... Just a tip...