I know of a stock that has a very tight bollinger band setup?

Question

recently it closed above the upper bollinger band but the next day it closed back under the band which is why I sold my position. The macd has been trailing up and all indicators have bullish setup. Was this a good idea?

Answer 1

If the stock has a tight bollinger band I will pass this stock since the stock can move from top to bottom in a short time. If you are trading US market current the FOMC meeting is coming up next week (24-25) So I guess you should put a stop lost.

Answer 2

Dont think much about the past.

Time will tell you.

This is point of having both the posibility.

It is good you thought for worst.

If bullish, get in again, but wait for some time.

Answer 3

You need to look at the whole picture, and not just what the indicators tell you. At the end of the day, it is still price action that  is still king.

If it was your trading rule to close that trade, and you did, then it is good, even if you did not make any profit from that trade. Better to lose money following your rules than to make money trading without discipline.

I trade with bollinger bands using different time frames. Bbs tend to give signals way before the other indicators/oscillators do. What i do is i wait for confirmation before entering a trade--by way of retracement to see if support or resistance holds.

Typically, when bbs are tightening and are moving sideways, it is telling us that volatillity is about to break. We just don't know which direction it will go. I usually place limit orders on either side to catch the breakout, with tight stops in case I am wrong.

If the bands are tight, and broke one side but closed back again on the inside, price is probably telling you that the trade will break on the other side.

Hope this helps!

Jim http://jsforex.blogspot.com