Bollinger Band Stops: Three Risk Levels for Trend Changes
Summary
This document describes a Bollinger Band stop indicator intended to help identify trend direction and possible trend changes. It says that the usual approach derives a stop line from deviation-based risk, but a single line may not suit every use. The described version calculates three stop lines at once and treats the highest-risk line as the ultimate stop. The other two lines provide alternatives with lower risk or can serve as earlier warnings of changing market conditions.
The author suggests using color changes to read the current trend direction and selecting any of the three lines as a stop loss for an order. The text offers no formulas, parameter settings, sample chart, asset scope, or performance evidence. It therefore explains the indicator’s intended interpretation and possible uses, but does not establish whether its signals improve trading outcomes or how the different stop levels should be chosen in practice.
Key ideas
- The indicator uses Bollinger Bands to assess trend direction and potential trend changes.
- It calculates three stop lines rather than relying on a single deviation-based stop.
- The highest-risk line is designated as the ultimate stop, while the others offer lower-risk levels or early warnings.
- Color changes can be used as a visual cue for trend direction.
- Any of the three lines may be used as an order stop loss, though no selection rule is provided.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.