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How to use Bollinger Bands effectively for Intraday Trading- Trading Strategy

Bollinger Bands are a popular technical indicator used by traders. There are a number of uses for Bollinger Bands, including determining the best time to enter and exit from a trade.
Bollinger bands trading strategy for intraday trading

We will not go in details for the calculation of Bollinger Bands as it is theoretical things however; we will cover the entire practical uses through our strategy - Rejection from Bollinger Bands. The indicator is available as an option in most of the charting platform. Thus, you can directly use the indicator from the platform. I am covering more details about Bollinger bands and its utilities in a few upcoming posts. 

You need to use the Bollinger bands with price action to get the best results. The Strategy which I am going to describe below is called "Rejection from Bollinger bands". The time frame you need to use for the below strategy is either 5 min or 15 min (for more confident entry but less RR). 

Before delving the details of our strategy, I would like to tell you that Bollinger bands include 3 curve lines. The Upper lines are known as Upper Band, the midline is known as Middle Band and the lower lines correspond to the lower bands. These are basics for Bollinger band now here goes our strategy:

Steps to Strategy
1. Select the time frame either 5 or 15 minutes, depending on what system you are using for trading. However, I would like to mention 5 min time frame basically has more noise so one can move towards higher time frame to reduce the noise.
2. Select Bollinger Bands from the indicators list.
3. Open Screen and Watch: If a red candle closes the below upper BB - A short can be initiated.
4. If a green Candle closes above the lower BB - A long can be initiated.

Time Frame - 5 Minute or 15 Minute
Indicator to use - Bollinger Band
Criteria 1 for Short - A red candle closes below the upper BB
Criteria 2 for Long - A green candle closes above the lower BB

It is a  powerful strategy and give very good entry signal. As like the other strategies, there are few stocks which follow it wonderfully and there are few stocks which does not follow this indicator a lot. Thus, I will also share some of the stocks that follow it religiously, however; I also encourage you to find out some of those stocks and spend some time before screen as pro-traders says, nothing can beat the importance of screen time.

Here I am posting the chart of Reliance to explain the strategy of how it works.


Reliance with Bollinger Bands

In the chart posted above for Reliance, You can see the price got rejected from the upper BB and then a red candle has closed below the upper band. This gives an excellent signal to enter the trade with SL sightly above the upper BB. 


The trade gives an excellent RR, with the target to the lower level of BB. You can revise SL to cost when we see that the price has moved below the midline. However, if you want to protect your profit, you can shift your SL to the midline - this depends on how aggressive a trader you are. The other can wait for shifting the SL to midlines once price reaches to the lower BB and continue the trade with TSL. 

I have explained the trade for a day trading strategy so we need to square off by the end of the day. If we follow the chart, You can notice that the price kept going down and reached to Rs. 1010. With a correct entry, the trade would have generated a profit of at least Rs. 35-40 per share. We can follow the spot chart to enter and exit from the trade-in future market. 

We are coming with more wonderful strategies so keep tuned with us. And don't forget to comment your suggestions in comments.

Here are some recommended reads for you:

How to trade piercing candlestick pattern



How to use Bollinger Bands effectively for Intraday Trading- Trading Strategy Reviewed by Ankit on March 17, 2020 Rating: 5

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