What would untrained person see in this EURUSD-Bollinger Bands chart?
Take away ‘rules’ we picked up previously for a different look
What kind of observations would he make that would be scientific or at least logical? Unbiased? Uncluttered by all the right or wrong things that a trader might learn previously?
Is this what an untrained eye would see in this chart (daily line-bar-chart chart of EURUSD from November 2017 to July 2018, with 20 period Bollinger Band)? Nothing beats line chart for spotting turning points; bars overlaid so we don’t miss the extreme high-low information.
Is this what an untrained eye/mind would spot/conclude?
A. When price keeps stick to ceiling of bands it will keep rising. Do not go short.
B. This appears to be a steep discount to go long. We know this is correction retracement price action ‘oversold’ according to the Bollinger Bands.
C. After a steep discount, this is the selling point once price hits previous level B1. Ceiling of band is now flat instead of rising and it look like not just taking profit but going short is now possible.
D. Price is now back to steep discount again. Seems to be based on B but exceeds. Limit order might not work because price exceed below could hit stop loss. Use candlesticks instead?
E. Comes out of nowhere. Should feel fine to miss a trade here. Don’t feel compelled to do anything.
F. Comes out of nowhere again.
G. Now this level clearly comes from hitting E. This is a retest.
H. Clearly comes from F.
I. Came out of nowhere.
J. Clearly hit J. Now I see a pattern – when a level comes out of nowhere it will be hit one more time. That second hit offers a trade. This was the same as E-G and then F-H.
K. This is so clearly a repeat of A. Sticking to the bottom band is a strong down. Don’t go long. When price sticks to Bollinger Band, instead of thinking overbought oversold, think of strong trend.
L. This is a repeat of B. Steep discount for a short. Retracement-overbought.
M. This is a repeat of C I see a pattern here – after price swings to discount in a strong trend then swings back to previous high/low a contrarian trade appears. M clearly comes from L1.
The crucial forward test
To tell whether all these observations earn some credit or they should be junked entirely.
We have two points N which came out of nowhere and 0 which also came out of nowhere since it missed N. If the previous pattern repeats (see above points E F I and J) then the next point will be a hit at N or O before NFP tomorrow.
Note: If this is what an untrained person might arrive at for this chart, what does the trained person see? Agree or disagree? If disagree will the observations here change the way a trained person might think about price action and Bollinger Bands?