1 line Bollinger Bands Trading Strategy %B

This is the Bollinger Bands indicator, nothing special, you have most likely seen it many times. Beginners can find it difficult to read, it doesn’t look messy as the Ichimoku Cloud Indicator. This is the Bollinger Bands Percent B. And this indicator looks way easier to read than the normal Bollinger Bands indicator. The Bollinger Bands percent B, or Percent Bandwidth, is an indicator derived from the Bollinger Bands Indicator. When the price gets volatile, the Bollinger Bands move far away from each other. And when the price stays in a range and is less volatile, the upper and lower Bollinger Bands move closer to each other. If you don’t like the constant contraction and expansion of the Bollinger Bands, then the Bollinger Bands Percent B is for you. Even your dog can read Bollinger Bands with this. Here’s how it works.

Percent B will show the closing price of the candle as a percentage of the upper and lower Bollinger Bands.

In simple words, when the closing price is equal to the lower band of the Bollinger Bands, the Percent B value will be zero.

When the closing price of the candle is below the lower Bollinger Band, the Percent B value will be lower than zero.

When the closing price is equal to the upper band of the Bollinger Bands indicator, the Percent B value will be at 100 percent.

And when the closing price of the candle is above the upper Bollinger Bands, the Percent B value will be above 100 percent.

Also, if the closing price is equal to the middle line of the Bollinger Bands, Percent B will show a value of 50 percent.

With a normal Bollinger Bands indicator, we consider the price to be oversold when the price crosses below the lower Bollinger Band. And we consider the price to be overbought when the price crosses above the upper Bollinger Band.

But when the price is in an uptrend, the price crossing above the upper Bollinger Band doesn’t have to mean over-bought. In an uptrend, the price has a higher probability of moving in the upward direction, so many traders see the upper Bollinger Band crossover as a sign of increasing buying pressure in the trend, and not a sign to take a short position. A similar thing applies in the downtrend, just the opposite.

In the range market, since the Percent B is derived from the Bollinger Bands indicator, the Percent B value crossing above 100 and below 0 can indicate an overbought and oversold market respectively. But in an uptrend, the Percent B indicator will cross 100 percent multiple times indicating an increase in buying pressure. Percent B will indicate an increase in selling pressure by crossing below 0 percent in a downtrend.

So many traders will use a trend identifying indicator like the 200 period moving average, and will buy when the Percent B indicator crosses above 100 percent only if the price is above the 200 period moving average. When the Percent B indicator crosses below Zero Percent, many traders like to take a short position only if the trend indicator like the 200 period moving average is indicating a downtrend. In an uptrend, use the pullback and set the stoploss below it. And in the downtrend, set the stoploss above the pullback.

To see if this strategy makes money or not, we will test the Bollinger Bands Percent B Trading Strategy 100 Times in the next video, just like many other strategies we have tested on the Trading Rush Channel.