Writer:Cat Trader
debuted in FX in 2012. Since then, results have shown a gentle downtrend... and in 2015, managed to post a positive lifetime net profit! A short-term technical trader focused on chasing profits with dreams of becoming a full-time trader
Blog:Come to The FX Trader's Grove

Hello everyone, this is Cat Trader. (´・ω・｀) Hello

Last time, I wrote about how the price movements are not normally distributed, and the impact on Bollinger Bands, and the meaning of band contraction and expansion.

This time, I would like to write aboutFever Time that appears during band expansion.

A Powerful Signal for Trend Formation!

There is a phenomenon that appears on the Bollinger Bands during band expansion/expansion periodsthat you can observe.

People call it Fever Time, but if you get carried away, you might get yelled at by John...

FormallyBand Walkis the phenomenon.

Let's confirm it on the chart in question.

USD/JPY 1-hour chart

The area circled in white ellipses is where Band Walk is called.

After a squeeze, the band widens, and you can clearly see the rate moving along right above the widened band as if strolling on it.

In the initial phase of expansion, the bands widen instantaneously but then may return to a range; however,if you can confirm both Expansion + Band Walk signals, it is obvious that a strong trend is occurring!That’s the idea.

Friends of the Trader

In the world of investing『The trend is your friend』There is a saying that riding the trend presents great opportunities.

At the very least,you should avoid counter-trend trades while this Band Walk is confirmed.

Usually, Band Walk trades within +σ to +3σ (-σ to -3σ) of the widened band, so

• If your entry is latewait for a pullback to +σ (and the same for the opposite)
• If the momentum seems strongconsider a cautious trend-following entry

that could work as well.

“Yes, John! I can tell a trend forms with Band Walk, but how long will it last!?”

You might ask.

It is said that deciding on taking profits is even harder than deciding on stop losses, and you might think it would be easy if you knew the answer.But,

The Bollinger Bands also contain signals suggesting the end of the trend. Σ(゜Д゜； Really!?

Using Bollinger as a Signal 

That is a band in the opposite direction of the trend, in other words, in an uptrend, crossing the -2σ band.

What you saw earlier on the chart with the red arrow is that point... though it’s a bit late.

(´・ω・) Shobon

But this is“For those who want big profits!(´∀｀*) Tee hee”John also says this, so it’s not a very effective method if only a small trend occurs, and

it might be more harmful to leave it alone and turn profits into losses (´・ω・｀) Shobon

Therefore, I would like to introduce my own exit signal.

In a word,When the trend-direction band begins to contract!This is the signal.

Let's verify on the chart.

USD/JPY 1-hour chart

A contraction of the bands implies reduced volatility, i.e., a sign of a trend ending.This is the interpretation.

Red arrowsmark that timing, and I personally think it is quite a good timing..

(・∀・) Nice!!

The right edge of the trend is cut off from the chart, but it still hit a decent level for taking profits, so please check it.

This method aims for not letting profits go too late or too early; it may end with only a bite of profit when a big fish comes, but please adapt to your own trading style and use as reference.

Well, after four installments of technical analysis using Bollinger Bands, how was it?

Based on what has been discussed so far, next timewe will perform a recent market analysis.

So everyone, may you have explosive profits today as well! (σ・∀・)σ Getts!!