Index of links for Methods descibed here.
http://forums.worden.com/Default.aspx?g=posts&t=45157
When it comes to any tool you want to know as best as we can, WHY the creator designed it. From what i have read, John Bollinger created Bollinger bands because he wanted something better than price channels -- price channels PLUS if you will.
Instead of knowing the highest high and highest low over a certain period, Bollinger was more focused on relative price moves and volatility. How is price moving now, compared to how it was moving a few periods back.
He wanted to know this because he knows markets move from volatile periods to quiet periods and when price has maxed out volatility-wise in one direction it will often snap back. One way to tell this maxed out period is when the bands become very wide and we see a close outside the band as Tobyday highlighted.
60-70% of the time, volatility will contract when this happens.
So when we have that close outside the band, that's a FLAG -- and it says: hey, price MIGHT be getting ready to snap back here.
Now tobydad wants to look for other ways to confirm this possible FUTURE price action.
By looking at recent TSV movement he might get an idea of accumulation taking place. That's why he wants TSV (which remember stands for time segmented VOLUME) is on the rise. If price is falling and TSV is rising, this indicates a DIVERGENCE and tells us all is not as it appears.
In simple terms, price is attempting to FOOL those that might be not be as aware of what's going on behind the scenes.
If price is falling and someone is buying, maybe someone and someone BIG thinks this is a bargain.
Now, Tobyday is not content enough to jump in on these facts alone. He wants to see price CONFIRM his idea first. So when we get that nice POP above the YELLOW linear regression line it indicates that his hypothesis may be correct -- there is some buying activity below the scene.
When price trades slowly and evenly back Tobydad has the final piece of info he needs. The waters are calm enough to take a position if price can trade back obove the high of his signal bar.
He has his set up, his entry trigger and he will have his stop (which is probably the March lows) all neatly laid out for him. You couldn't ask for anything more from a good system.
1. It tells him when to put a stock on his radar.
2. It conforms when he's right by proving itself.
3. It tells him when to enter and where to place his stops.
4. And, if what I know about these stocks is true, it gives him the EDGE he needs to make a profit over time (not every time)
Hopefully I have added to this discussion and not subtracted from it.
David John Hall