Thời gian này tôi tìm hiểu hơn về chỉ báo Bollinger Band, nên tôi đã hỏi chatGPT 4o về những câu hỏi mà tôi tự nghĩ ra, song song với việc đọc sách của chính tác giả. Tôi note lại ở đây để xem lại sau này.
The 95% concept of price staying within the Bollinger Bands is based on the idea that the market, over time, generally exhibits a normal range of volatility. This provides several valuable insights for traders.
Best Ideas for Trading with the 95% Concept in Bollinger Bands:
1. Mean Reversion Strategy (Reversal Trading)
Core Idea: Prices naturally tend to revert to the mean (the middle of the bands, i.e., the moving average) after hitting extremes.
When to Use:
When prices reach the upper band, it indicates the market may be overbought, and a reversal toward the middle or lower band could be expected. When prices reach the lower band, it suggests the market is oversold, and a bounce back toward the middle or upper band could follow.
Action: You can trade against the extreme—buying when prices touch the lower band (oversold) and selling when they touch the upper band (overbought).
Best Used in: Range-bound markets where prices fluctuate between support and resistance, and the market does not have a strong trend.
2. Breakout Strategy (Trend Following)
Core Idea: Occasionally, the price breaks out of the Bollinger Bands (in the remaining 5% of cases). These breakouts often signify the beginning of a new trend or a strong move.
When to Use: When prices close outside the upper band, it can signal a bullish breakout, suggesting a new upward trend may be starting. When prices close outside the lower band, it can signal a bearish breakout, indicating a potential downward trend.
Action: Follow the breakout direction, entering long if prices break above the upper band or entering short if prices break below the lower band.
Best Used in: Trending markets where price action shows strong momentum, and you’re looking to capture large directional moves.
3. Volatility Contraction and Expansion
Core Idea: The Bollinger Bands expand during high volatility and contract during low volatility. A period of low volatility (narrow bands) often precedes a big move.
When to Use: During periods when the bands are tight, signaling low volatility (often called a “Bollinger Band squeeze”), watch for a breakout. The price is likely to make a significant move in either direction once volatility increases.
Action: Anticipate the breakout by positioning yourself to take advantage of the upcoming volatility expansion. Trade in the direction of the breakout when it occurs.
Best Used in: Markets transitioning from low to high volatility, where you’re looking to trade the explosive move.
4. Dynamic Support and Resistance
Core Idea: Bollinger Bands can act as dynamic support and resistance levels because 95% of the price action occurs within them.
When to Use: In sideways or trending markets, use the lower band as support for buying opportunities and the upper band as resistance for selling or shorting opportunities.
Action: Buy near the lower band when the price is expected to rise and sell near the upper band when the price is expected to fall.
Best Used in: Markets with clear price channels, where the price bounces between the bands.
5. Confirmation with Other Indicators
Core Idea: Bollinger Bands are more powerful when combined with other technical indicators like Relative Strength Index (RSI), MACD, or volume.
When to Use: Use Bollinger Bands to identify overbought/oversold conditions, and confirm potential reversals or breakouts with indicators like RSI (for overbought/oversold) or MACD (for trend direction).
Action: When prices reach the upper or lower band, confirm the trade direction with other indicators. For example, if prices are at the upper band and RSI is overbought, it’s a stronger signal to sell.
Best Used in: Any market condition to increase trade reliability by using Bollinger Bands alongside other signals.
Key Takeaways:
95% of prices stay within the bands because the bands are set at 2 standard deviations from the moving average. This creates a framework where you can anticipate:
- Reversions to the mean (middle band) most of the time.
- Occasional breakouts when volatility rises.
- Use of the bands as dynamic support/resistance levels.
Best Idea: Combining mean reversion trading with breakout strategies helps you capture both low-risk entries (by entering near the bands) and high-reward exits (by taking advantage of volatility when it increases).