Band Break System Introduction

BBS - Intro - Results - Template - Basic - More_money - Selecting_stocks

Using technical analysis I believe there are two different approaches to look for buy and sell signals.

The first method is the method I use and explaine in my book “Capturing Profit with Technical Analysis”. The method explained in the book, called “LOCKIT” uses all possible technical analysis techniques to come up with reliable buy and sell signals.

This is not the easiest method, because you need a very broad knowledge of all the basic techniques and the know how to apply them successfully.

A second method is to trail the price movement of a stock, buying and selling based on the fact that a short or medium term up or downtrend is broken, signaling a trend reversal. Here you have to find the most profitable balance between fast entering a trade avoiding as much as possible false entries and staying in as long as possible to let profits run. BBS uses this kind of method.

It should be clear that this kind of trading can only be profitable if the stock makes big enough price moves. A stock making only small moves over longer periods of time will not make you money. Therefore it is very important to make a selection of stocks that make regular larger moves over longer time periods. Later on I will give you some simple method to look for the right kind of stocks to be used with BBS.

For a successful application of BBS it must be applied as outlined here concerning:

• Money management: the basic money management method applied with BBS is to use a limited selection of stocks (5 to 25) and to distribute the available capital between these stocks. Each stock will be traded individually with no profit or loss sharing with the other stocks in portfolio. This means that you must make a limited selection of stocks beforehand.
• Stock selection: use stocks that have a history of bigger price moves over a longer period of time and avoid to use stocks that have a history of:
  • Little price change over a longer period of time
  • Very high intraday volatility
  • Very high daily volatility
  • Regular big surprise moves
• Charting: Use a template with the special indicators that are part of the BBS system.
• BBS is not perfect: Keeping in mind that there is no perfect always winning system in the world, you have the possibility to decide for each BBS buying or selling signal to open or close that particular trade or not.

With the help of some special indicators, I will show you simple technical rules that will help you making this decision. That way you can make even more profit compared to the full automatic trading based on BBS that proves to be successful.

Please note I will not include a description of standard techniques used. For all the basic techniques, please consult my book “Capturing Profit with Technical Analysis”.

BBS is available for MetaStock® and NinjaTrader mainly tested with the default values for trading stocks on a daily chart. It is also available for MetaTrader4 and tested on the forex EUR.USD pair.

Next: BBS Results

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