Natural Gas Bollinger Band

Touching the band means the intraday price reached the band level. Closing beyond means the candle closed outside the band. Closing beyond is a stronger signal - it shows price spent significant time at the extreme. A touch with wick rejection is a reversal signal; a close beyond may indicate breakout.

The bands contain ~95% of prices but that means ~5% of the time price goes beyond. Also, in strong trends, price can 'walk' along the bands for extended periods. That's why confirmation (reversal candle, RSI) is essential - not every band touch is a reversal opportunity.

2 standard deviations is the default and works well. 1.5 SD gives tighter bands with more frequent signals but more false signals. 2.5 SD gives wider bands with fewer but stronger signals. Start with 2; adjust only after experience shows a need.

4-hour (4H) is recommended as the best starting timeframe. It provides enough signals (8-15 band touches per month) while filtering out noise. Daily is good for longer-term trades. 1H is more active but noisier. Start with 4H.

Yes. In a ranging market, you can buy at the lower band (targeting middle) and sell at the upper band (targeting middle). However, in trending markets, only trade in the trend direction - buy lower band in uptrends; sell upper band in downtrends.

Use ADX (Average Directional Index). ADX < 20-25 suggests ranging - good for mean reversion at both bands. ADX > 25 suggests trending - be cautious with counter-trend band trades. Also observe band behavior: ranging markets show price oscillating between bands; trending markets show price walking one band.

During a squeeze (narrow bands), volatility is low and a breakout is likely coming. Don't predict direction - wait for the breakout. Once price closes beyond a band with momentum, enter in that direction. Stop on the opposite side of the squeeze range. Target a measured move equal to the squeeze range.

Look for confluence: Price at lower band + RSI < 30 = Strong buy signal. Price at upper band + RSI > 70 = Strong sell signal. RSI divergence at bands is even stronger. If price is at a band extreme but RSI is neutral (40-60), the signal is weaker - consider skipping or reducing size.

Your stop should handle this - it's placed beyond the band extreme for a reason. If stopped out, the market may be trending (check ADX). Don't add to losing positions hoping for reversion. Accept the loss and reassess market conditions before the next trade.

Middle band is the safer, more probable target (mean reversion). Opposite band is less likely but larger reward. A good approach: Take 50% profit at middle band, trail the remainder toward opposite band. This balances probability with upside potential.

%B quantifies band position (0 = lower, 0.5 = middle, 1 = upper). Systematic rules: %B < 0.05-0.1 + RSI < 30 = Buy zone. %B > 0.9-0.95 + RSI > 70 = Sell zone. Exit when %B crosses 0.5. This removes subjectivity and enables backtesting and automation.

Above 90th percentile: Reduce to 50% size. 75th-90th: Reduce to 75% size. 25th-75th: Normal size. Below 25th: Normal size but tighter stops possible (squeeze conditions). The goal is constant risk across all volatility conditions.

Use 3+ years of data. Track: %B at entry, RSI, ADX, bandwidth percentile, outcome (win/loss), R-multiple, time to target. Segment by: trending vs ranging periods, volatility regime, season. Look for conditions where strategy excels vs struggles. Use out-of-sample validation.

Mean reversion: 55-65% win rate, 1.5:1 to 2:1 R/R, profit factor 1.3-1.8. Breakout: 40-50% win rate, 2:1 to 3:1 R/R, profit factor 1.2-1.6. Results vary with market conditions. Mean reversion better in ranging; breakout better in trending transitions.

Standard patterns just look at price. With bands, the key is how deeply each swing penetrates the band. W-bottom: First low pierces lower band; second low doesn't pierce as deeply = buying pressure increasing. M-top: First high pierces upper band; second high weaker = selling pressure. Band behavior adds confirmation.