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ES doing a great job of honoring BBs and TLs
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ES doing a great job of honoring BBs and TLs

  #1 (permalink)
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ES doing a great job of honoring BBs and TLs

I find it very useful to watch price relative to trendlines, SR levels and Bollinger Bands.

Even though this is a small TF chart.. you can see how the BBs and TLs provide a map of moves... it appears to "react" to the lines, but of course the lines are determined by previous price action... and price "remembers" what has happened in the past. Even that is a metaphor... more accurately the mass of traders making buy/sell decisions remember what has happened in the past and act accordingly.

Regarding the BB's... these are MTF (multiple time frame) settings at a factor of 3x:
20/2 BB -green; 60/2 BB -blue; 180/2 BB -red; 540/2 BB -black
which gives a sense of the short term action relative to longer term trends

The upper/lower BBs are 2 std deviations from the midline which is a simple moving average. The moving average acts like a magnet... in a trend, you will often see price pull back to the midline and then reverse.

Some guidelines for "reading" the BBs
- price consistently staying on one side of the midline shows strength in that direction
- when a smaller set of BBs stays generally on one side of a midline of a higher TF BB set shows strength in that direction
- when a smaller outer BB moves outside that of a higher TF outer BB... indicates power in that direction
- a cluster of outer BBs acts as a SR level (support / resistance level) - the more BBs, the stronger; the higher the TF's the stronger. Obviously black (540BB) is the strongest.. good time to exit position entirely and wait for the pull back to finish; very often there is a reversal or at least substantial pull back off a 540BB. Typically your stochastics and MACD will indicate an extreme at BB clusters and the CCI will show a divergence for a possible reversal or at least consolidation before continuation.

For those BB skeptics, I wrote an autotrading strategy in ensign which is very profitable, consistently so... one of the exit criterion was to exit the trade on a lower/higher close AFTER price had closed beyond the 20/2BB (above the UBB or below the LBB). I had other exit criteria as well of course. I tested it over time with and without this BB exit criterion and the results were far superior WITH this exit. Conclusion: there is an emprical justification for the assumption that if price gets too far afield from a "mean" (used loosely) there is a counter move back towards that mean. The "mean" in this case is a moving average... of course any statistician could tell you that.

Credit for this setup is due to ingos (more recently 'gee') in the ensign community of traders.

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very nice saroj, please could you post the dragon you were talking about in the chat?

also could you post your stoch settings as i have tried to replicate them and mine look totally different to yours!

thanks in advance.


Last edited by rassi; June 25th, 2009 at 12:06 PM.
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I'll gather my dragon pattern stuff together and start a thread on them.. they are just a type of DB/LF but the pattern helps to see these and the dragon itself usually results in a very impressive power move... I'll also get my settings posted in another thread.. hopefully both later today... thanks for your interest.

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Quoting 
For those BB skeptics, I wrote an autotrading strategy in ensign which is very profitable, consistently so... one of the exit criterion was to exit the trade on a lower/higher close AFTER price had closed beyond the 20/2BB (above the UBB or below the LBB). I had other exit criteria as well of course.

Hi Saroj

I think Ensign charting is far better than NT's, but haven't found a way of auto trading with Ensign, so I'm intrigued about how you've achieved that.

Do you interface Ensign to NT or interface Ensign directly into your brokers API or do you just generate trading signals in Ensign and then trade them manually?

Thanks

David

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David, so sorry for the late response... life got crazy for me at end of June... I'll get that dragon stuff together..

A friend and I found a programmer who said he could take signals off ensign and send/receive orders to/from broker via NT; but I decided to try out NT myself for a while to see how it would do for me. so far I like NT except for some horrendous performance issues that I'm encountering.. hopefully they will be addressed to my satisfaction and I can proceed, but don't know how to programmatically take trades off a BB chart..

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More BB work... I must admit it is not facile to read the BB's accurately and it varies according to the market (choppy, whippy, trendig, wallowing)
2009-07-29_1301

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Hi Saroj

Thanks for that info about Ensign.

It made me remember a strategy that Ensign publish which gives Ensign access to the NT datafeed.

I guess this means that you can use Ensign charting, but NT for trade executions.

This is a link to the NT page on the Ensign web site:

Ensign Software - Setup: Ninja Trader and free Zen-Fire

David

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