[ SEASON 2 | Week 8 ] Steemit Crypto Academy Homework Post for @kouba01 | Cryptocurrency Trading with Bollinger Bands |

in hive-108451 •  4 years ago  (edited)

Hello friends .... !!!
Back again with me Ichsan Angga P at Steemit Crypto Academy Homework.
Today I will finish the homework from professor @kouba01.

The topic that I will choose to discuss from the work given by the professor @kouba01 This week's assignment is about Cryptocurrency Trading with Bollinger Bands

What Is Bollinger Bands indicator

bollinger-bands-explained.png
SOURCE

Bollinger Bands (BB) is an indicator created in 1980 which was created thanks to the idea of ​​a financial analyst and trader named John Bollinger. Bollinger Bands an indicator used to perform technical analysis. More simply, that the Bollinger Band is a signal that shows the market position being reviewed, whether it has volatility at a high position or even a low position, Bollinger Bands can also be used to see where the market is trading, being in overbought or even in oversold positions. .

John Bollinger had the idea of ​​creating the Bollinger Bands (BB) indicator with the aim of being able to see the spread of prices that occurred and spread, Bollinger Bands (BB) itself consists of 3 bands, namely the upper band, lower band and also the middle band. The Upper and Lower Bands indicator will react to the market price, which will expand when the volatility is high, then the band will move away from the midline, and conversely, there will be contraction when the volatility is low, then the band will slowly move towards the midline .

Method of Calculation Bollinger Bands (BB)

So if you are a trader who is just learning about using the Bollinger Bands (BB) indicator, the standard Bollinger Bands formula is to make the Middle Line as a reference for the Simple Moving Average (SMA) with 20 days, on the upper and lower bands. we can perform calculations on market volatility.

so before we go into the calculation of the Bollinger Bands indicator, there are things you should know, namely, in general the use of the estimated value used is the value of 20 days and for the standard deviation period it uses a value of 2, Here are the general settings for the Bollinger Bands (BB) indicator ), as follows :

  • Middle line : At the middle line we use a simple moving average (SMA) at the 20-day position

  • Upper Line : On the Upper Band the kit uses the SMA at 20 days and then + with the standard deviation of the results (20 days later x 2 standard deviations of the upper band)

  • Lower Line : In the Lower Band we use the SMA 20 days later - with a standard deviation of the results (20 days later x 2 standard deviations of the lower band)

You need to know that the purpose of using a period estimate of 20 days and also making settings for the upper and lower bands has a standard deviation value of x2 from the Middle band, which means that here we can analyze and make sure that 90% of the price movement will moves in the middle between the Upper Band and Lower Band, making it easier for us to analyze and read the situation of market movements, But you need to remember, this is the basic setting for beginner traders, if you are advanced then you can change the settings between Upper Band, Middle Band and also the Lower Band according to your wishes to get better results

How Bollinger Bands (BB) Indicator Work

Screenshot (370).png

So here I will show when the Bollinger Bands Indicator works on trading, the Bollinger Bands indicator can be used for both day trading and swing traders, this indicator can be used at any time according to the strategy carried out by the trader himself. Here are some examples of what happened to the Bollinger Bands Indicator:

  • Volatility
    Volatility is a position where when the market is trading it is soaring high or even when the market trading conditions are weak. We can see that when the band is experiencing a tight squeeze, then it is a position where there is low volatility, because of the lack of good trading. happening in the market. Meanwhile, when high volatility occurs, we can see that the position of the two bands begins to widen away, it is a signal that high volatility is occurring. Like the picture below

Screenshot (371).png

  • Oversold And Overbought
    The Bollinger Bands indicator is also very helpful in determining where when the market is oversold, which we can see that when the market price starts to touch the lower line, it can be ascertained that the market is Oversold and there will be a price reversal to the top. On the other hand, if the Bollinger Bands indicator shows where the market is overbought, we can see that when the market price starts to touch the Upper Line, this shows an indication of the Overbought market and a reversal of the position will occur to the downside. Here's an example

Screenshot (373).png

What is a breakout and how do you determine it? (Screenshot required)

Breakout is a sign that when the price breaks through the consolidation area, this breakout occurs when the price penetrated crosses the threshold of the position either at resistance, support, middle line and also other breakouts that occur.

Here I will give an example of a chart found in the LTC/USDT pair, here is an example:

Screenshot (374).png

It can be seen in the picture above where at the time the trading position experienced a pause at the middle line point, as we can see, where the red line is a price suppression that occurs on the chart, then after the pause that occurs from the emphasis there is a breakout for the lower price. new, as in the green mark indicated as Breakout

As for the Breakdown itself, when the trading position declines downward and stops for a moment on the middle line, as shown below where the green line breaks at the new price, then there is a new decline like the red line and that is what is called a Breakdown.

Screenshot (378).png

How to use Bollinger bands with a trending market? (screenshot required)

So the combination of using the Bollinger Bands Indicator will be better and have good results when coupled with other tools to read trends, It is true that the Bollinger Bands Indicator is an indicator that gives us information about market volatility, but it would be better if the Bollinger Bands Indicator was combined with other trend analysis tools which will provide more definite analysis results for us and we dare to decide when we will take a step in and when we should decide to get out of the trade. Here is an example I took

Screenshot (384).png

So we can see in the picture above where I use a combination of 3 indicators, namely, the Bollinger Band indicator, the MACD indicator and also the RSI indicator, my goal is to use these 3 combinations to ensure clearly the current trend. So as in the example picture above, which in the Bollinger Band Indicator we can determine the trend by looking at the candlestick that is oversold when it touches the lower line of the Bollinger Band indicator, then after being oversold he will try to break through at the new price, Likewise for overbought, where when the price reaches the Upper Line point on the Bollinger Band indicator, there will automatically be a price reversal going down.

Likewise for MACD which on the MACD indicator we can read by looking at the MACD that crosses the signal line and passes through the Histogram, there will be a price reversal according to the direction that occurs, Likewise with the RSI we can see when the Hline or Line moves between the Upper Limit and Lower Limit, where the Middle Line touches the Upper Limit, it indicates it is an Overbought and will be followed by a price reversal, as well as if the Middle Line touches the Lower Limit then the trend that will occur next is a price reversal to go up.

So that's why I use 3 indicators to ensure the trend movement with certainty, because the three indicators can complement each other.

What is the best indicator to use with Bollinger Bands to make your trade more meaningful? (Screenshot required)

Screenshot (384)1.png

What are the best trend indicators that work in conjunction with Bollinger Bands Indicator??? So, as in the explanation above, here I use the Bollinger Band Indicator with other indicators, namely:

1. MACD Indicator
The Moving Average Convergence / Divergence (MACD) indicator is an indicator that was created with the aim of seeing the Oversold and Overbought values ​​found in trading crypto assets, we can analyze this indicator by looking at the difference between the MACD line, from which we can determine a the asset is Overbought or Oversold.

2. Relative Strength Index (RSI)
The Relative Strength Index (RSI) is an indicator that was also created as a tool to see the price momentum that occurs in the trading market, which if the price momentum increases on the chart, then this indicates the market is being bought sustainably, whereas if the price momentum is decreasing, this indicates that the market is being bought sustainably. indicates that the trend is weakening.

The two indicators are our tools to re-check with the adjustments that occur in the Bollinger Band Indicator, so a result is created that can be said to be very good for determining when to enter and when to exit.

What timeframe does the Bollinger Bands work best on?And why? (Screenshots required)

So when discussing what timeframe is best used, back to the trader himself, because a trader has his own way and strategy in analyzing, if he is a Swing Trader, it is better to use a timeframe to analyze in Daily, Weekly and Monthly, because a swing trader needs careful analysis to see the next trend movement. As for Day Traders, you can use a timeframe to analyze in 1 hour, 4 hours, 12 hours and can also be 1 day.

Screenshot (384)9.png

Here I personally do the analysis by choosing the use of time, namely 1 Day which currently has a more comfortable timeframe to analyze and understand the analysis that occurs in the trading market and also we can more carefully observe the trend that is happening, for traders it is getting smaller The time used eats the better to see, observe and analyze the market movements being reviewed, but if you are a swing trader you have to do analysis on timeframes with a wide timeframe, such as weekly or even monthly, this has the aim of seeing the chart movements that occur and in order to be able to read trends for the future, with the aim of achieving market movements that are currently happening and being able to determine good entry and exit times.

Review the chart of any pair and present the various signals giving by the indicator Bollinger Bands. (Screenshot required)

So I will try to see or try to decipher my analysis using Bollinger Bands to see what has just happened to the DOT/USDT pair, as below

Screenshot (384).png

So the results of my observations on the DOT/USDT pair there are several analyzes, which as I said that when an asset touches the Upper Line Bollinger Band then it will become Overbought and here you have to make a sale because one day the asset will have a price reversal towards down, as in the red mark. Meanwhile, if an asset touches the Lower Line on the Bollinger Band then this will happen which is called Oversold, and this is your opportunity to enter and buy the asset, because there will be a price reversal to go up.

Conclusion

The Bollinger Band indicator is an indicator that is easy to use for novice traders, and it is also a very good indicator if a Pro Trader uses it, by looking at the Middle position whether he touches the Upper line or maybe the Lower Line we can analyze what trend will happen next . And also if this Bollinger Band Indicator is combined with other indicators, then a good result for reading the trend will appear, and we can easily determine when to enter and when to exit

Last word

Thus the task that I have completed this time regarding Cryptocurrency Trading with Bollinger Bands If in my submission there are still many mistakes, I apologize and I will be happy if other friends want to correct them through the comments column.

Thank you all, I hope this post can help you all to understand more about Cryptocurrency Trading with Bollinger Bands.

Regards
@ichsananggap

Note: Images that do not have a source are my own edits

Authors get paid when people like you upvote their post.
If you enjoyed what you read here, create your account today and start earning FREE STEEM!
Sort Order:  

Hi @ichsananggap

Thanks for participating in the Steemit Crypto Academy
Feedback

Q1 & Q2Q3 & Q4Q5 & Q6
2/32/33/4

This is good content. Thanks for demonstrating your understanding of the Bollinger bands trading tool.

Homework task
7