Bollinger Band Mastery

[Jamie Richards]

If I wanted to master Bollinger bands how would I go about it?
 Good question and the first thing is to understand what
Bollinger bands is and what it measures. The bands are a
representation of standard deviations from the mean, usually 1 to 2
standard deviations.
This alone is rather revealing because when you understand the concept
of reversion you understand that price stays within the 2nd standard
deviation around 85% of the time. You might not connect the dots
at this point, but what you should be concluding is that if price
closes outside the 2.0 standard deviation and IF it stays inside 85+%
of the time then there's at least an 85+% likelihood that price will
reverse here. (Potential entry maybe?)   That said the next step
for the observant connoisseur is to develop a rule set for entry that
allows you to enter a trade and exit a trade and capture a profit most
of the time.   Sometimes it might be prudent to adopt an
overbought/oversold criteria for entry thereby increasing the
likelihood of a decent sized move, and at least an initial push in the
favored direction moving price away from your stop and minimizing your
risk.   Keep in mind that the more rules you establish for entry
the more likely you are to miss a potentially profitable
trade. As you develop your rule set keep in mind that the most
profitable rule sets have a win/loss ratio, some you will win and some
you will lose.   If you try to get a 100% win ratio your profits
will diminish because of the amount of missed trades. This right
here is one of the keys to your long term success; don't try to find
the flippin HOLY GRAIL because it passes up to many trades -
period.   Find a balance between wins/losses and remain exposed
to profits as well as risk, because if you remove risk you remove the
opportunity for exposure to profits.
That said set up your charts and lay down a 1.0, 2.0 and 3.0 standard
deviation over price and you'll get a nice set of bands that will
allow you to watch price and create a rule set. Start out with a
2.0 standard deviation method and go from there. 
You might consider any close beyond 2.0 standard deviations where a
slow stochastics is in the favorable overbought/oversold condition
giving off a buy or sell signal. If you're going long draw a line
at the high of that trigger candlestick and enter as soon as price
crosses or closes beyond that high.   There are a number of
variations but this should get your thinker going. Bollinger bands
are an awesome tool for any type of trader. If you aren't using
them now then you are missing out on a view of price you
won't see with any other indicator.  

The Right Candlestick-Reading Techniques: http://fxcdmev.blogspot.com/#