Bollinger Bands are useful, but beginners can easily fall into various misunderstandings during practical use, leading to trading losses. For example, taking 'hitting the band' as a buy or sell signal, ignoring the channel status and blindly operating, or relying solely on single indicators without pairing with others. This article summarizes the 5 most common pitfalls beginners encounter to help clarify understanding and avoid going astray.
Misunderstanding One: Price touching the upper band = overbought, touching the lower band = oversold. This is the most common erroneous understanding. The core of Bollinger Bands is 'volatility.' In a trend phase of channel expansion, price touching the upper band is often a signal of trend continuation, not overbought; similarly, touching the lower band may also indicate trend continuation, not oversold. Only in a converging or sideways channel phase can price touching the band possibly indicate overbought or oversold.
Misconception Two: A narrow Bollinger Band = no market movement. Quite the opposite, a narrow band indicates reduced market volatility and a stalemate between bulls and bears, often leading to significant market movement. A narrow band does not mean 'there's no market to trade,' but rather that you need to patiently wait for a breakout signal and prepare in advance.
Misconception Three: Relying solely on Bollinger Bands for judgment. Every technical indicator has limitations, and Bollinger Bands are no exception. If you trade based only on Bollinger Band signals, the win rate is relatively low. It is recommended to combine it with indicators like RSI, KD, MACD, or to use candlestick patterns and trading volume for comprehensive judgment. Multiple signals resonating can improve the win rate.
Misconception Four: Ignoring the adaptability of parameter settings. The default parameters for Bollinger Bands are 20-day SMA + 2 standard deviations, but this does not apply to all varieties and cycles. For example, short-term trading (15-minute, 1-hour cycles) can appropriately reduce parameters, while long-term trading (daily, weekly cycles) can appropriately increase parameters. Adjust according to your own trading style and the characteristics of the varieties.
Misconception Five: Blindly increasing positions against the trend after a false breakout. When a false breakout occurs, it indicates that the market trend has not changed. At this time, increasing positions against the trend will amplify the risk. The correct approach is: immediately stop-loss and exit after a false breakout, waiting for the next valid breakout signal.@男神说币 #加密市场观察 $BTC
