Bollinger Bands + Supertrend Trading Strategy

A trading strategy for intraday & positional (with example) →

Hey there 👋🏼

Today in less than 5 minutes:

1) Why you should trade like a batsman
2) A strategy for intraday & positional trades (with example)
3) Stocks ripe for a trend reversal

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Trade like a professional batsman

An amateur batsman would swing at everything, trying to hit a boundary on every ball. Though there are more opportunities, the success rate is not that high. It’s like taking more risks and getting out more often ☹️

But a professional, on the other hand, picks their shots carefully. It’s all about having the patience to wait for the perfect ball. Staying in the game and optimizing the right opportunities is the trick 🏏

The same applies to trading as well. Typically, the fewer signals a strategy generates, the higher its success rate. And today, we’ll unveil one such strategy.

A quick recap

Before we get to the strategy, let’s do a quick recap of the indicators and chart types that we will be using:

> Bollinger Bands: The Bollinger Band is composed of a simple moving average, and two standard deviation bands, one above and one below the simple average line, signaling that a stock is overbought or oversold respectively.
> Supertrend: A simple line that acts as a dynamic support and resistance for the stock’s price.
> Heikin-Ashi charts: A chart pattern slightly different than candlesticks, Heikin-Ashi charts help cut the noise and identify patterns easily.

You can learn a number of indicators, chart patterns, & methods for stock selection in Ms. Jyoti Budhia’s comprehensive Technical Analysis Course.

Let’s get to the strategy now ↓

Bollinger Bands + Supertrend Trading Strategy

The idea of this strategy is to:
- Use Heikin-Ashi charts to see trends clearly
- Filter out stocks that are on the verge of a trend reversal using the Bollinger Band indicator
- Take help from the Supertrend indicator to determine entry/exit points

First, we will set our indicators to the following:

Chart Type - Heikin-Ashi

Supertrend

Bollinger Bands

Using a standard deviation of 3 covers 99% of the data.

Here’s how we will enter and exit a trade using this strategy:

Long Trade

1) Look for stocks where the candles are getting formed on the lower Bollinger Band, indicating a highly oversold range.

2) Wait for the Supertrend to turn bullish.

3) A ‘buy’ signal is generated on the second candle after the Supertrend turns bullish. The Supertrend line can act as your trailing stop loss.

4) An exit can be taken when the Supertrend turns bearish or on a bearish candlestick pattern.

Short Trade

1) Look for stocks where the candles are getting formed on the upper Bollinger Band, indicating a highly overbought range.

2) Wait for the Supertrend to turn bearish.

3) A ‘sell’ signal is generated on the second candle after the Supertrend turns bearish. The Supertrend line can act as your trailing stop loss.

4) An exit can be taken when the Supertrend turns bullish or on a bullish candlestick pattern.

This strategy can be used on a 15-min timeframe for intraday or on a daily timeframe for positional trades.

Example - Long Trade in TCS (15-min timeframe)

The following chart of TCS is set to a 15-minute timeframe. You can see how the candles are lingering on the lower Bollinger Band, signaling that a reversal is likely (highlighted by a purple channel). Taking a trade as per the strategy generated a good ~1.7% over the last weekend of July 2023!

TCS (15-min)

We tried looking for such stocks ourselves - where the candles are forming near the lower Bollinger Band and the Supertrend has turned bullish…

Keep reading to find out what we got!

Learn to use the Supertrend indicator on Hekin-Ashi charts for profitable swing trading strategies in Mr. Harneet Singh Kharbanda’s Swing Trading Course. There’s currently a 50% OFF on the price, so HURRY UP!

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Did you find any suitable stocks?

Did you find any stocks that fulfill the above criteria? Send us the names of those stocks and get rewarded!

A stock that fits the bill!

We looked for stocks within the NIFTY500 universe where a reversal on the bullish side is likely (whose prices are lingering on the lower Bollinger Band), and found the following (as of 14th Feb 2024):

RELAXO (Daily Timeframe)

RELAXO (1D)

Notice how:
- Several candles have formed on the lower Bollinger Band
- The Supertrend has turned bullish

Let’s wait for the trend to play out!

Note that we are not SEBI-registered advisors and none of the above stocks are intended as recommendations. Do your own due diligence before trading/investing.

Learn a profitable swing trading strategy using the Supertrend indicator and Heikin-Ashi charts in our Swing Trading Course by Mr. Harneet Singh Kharbanda. There’s currently a 50% OFF on the price, so HURRY UP!

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