How to use Bollinger Bands to capture big breakouts?

hi guys today we're going to explore a new technique in breakouts check out this chart of ITC as you can see it's such a large move up very quickly by the way and then you have another stock over here Mahindra and Mahindra same thing so why does this happen now there could be many reasons why a stock goes up for an entire year continuously but one reason that's very common is called a catalyst now a catalyst is a big change in an existing business that takes it to new heights think about the Geo Revolution within Reliance it changed Reliance forever now these catalysts happen in a lot of companies and it requires a lot of research one way to follow fii is buying such companies going up like this is the BB blast technique and that's what we're going to talk about today [Music] so here's how the technique works but within the technique we have a basic framework you should understand one we are trying to follow fias trying to buy a good stock over a long period of time so limit yourself to say NSC 100 stocks or the list of fnos talks so you're not really trading with small cap companies it just keeps you safer the second thing is because this is you're tracking fii buying or institutional buying actually fi is the wrong word institutional buying over a long period of time limit yourself to something like a monthly chart okay so now let's understand how we can do this first you need to know what boolelinger bands are I'm not going to explain what Bullinger is see I've been saying Bollinger a long time but it's actually called Bollinger created by John Bullinger very very old guy has been doing this for a long time I even get his newsletters but Bollinger basically measures volatility like the moving average measures the average movement of a company over a long period of time using price Bollinger Bands tells you volatility or the range of a company and it's very simple first it uses a simple moving average a 20 moving average so this is a 20-day moving average since we're using monthly charts it will become a 20 month moving average this basically gives you the average movement of a stock over a long period of time now once you have that the Bollinger band will add will use this information and add one more line on top and one more line below this this is basically two standard deviations on either side if you don't know what standard deviation is don't worry it's basically taking that average and just extending it a bit extreme not extreme or low extreme okay that's what it means minus two standard deviation plus two standard deviation this means that price and I'll change this to say a pink color that price will stay within this range normally it does not exceed this range so as volatility is measured we can say price again if price goes up 20 that doesn't mean it's gone up too much it's within the range so as you can see here price is within the Bollinger Bands and this is normal now when a catalyst happens just like we saw the startup boom a lot of VCS were putting lots of money in startups uh very quickly and sometimes they put too much money well the similar thing happens over here in public markets when they find a catalyst key or a company this company looks like it's gonna do something for XYZ reason they have their fundamental analysis behind it they simply say we're gonna buy a lot and this buying results in the price going above the average so now I'll just extend this over here and you'll see that this this Bollinger band outside the Bollinger band this candle has closed so I've drawn this as a candle this is called and I'll I'll name this this is called the Bollinger band blast I just made up that name because it sounds cool BBB but basically it's this right key outside of volatility there's a breakout in a monthly chart in a good company the likeliness of this trend continuing up becomes slightly higher is this clear so far if it's clear clear so far put it in the comments right now say that if price moves Beyond volatility the chances of going up becomes higher I know this is a little long but I got up if you write it and type it you will understand what we're talking about so pause the video write a summary of what I just said because that's how you'll understand otherwise watching this video is a complete waste now let's look at the rules here are the rules the first thing you need is you need the monthly candle to close above the Bollinger band as soon as this happened first step completion right so monthly candle obviously closes at the end of the month so you'll actually see this on the first of any month um as soon as this happens you know that this breakout is now complete the second thing you'll do and this is the most tough part you'll hold and observe now remember this is not a trading system don't actually go and buy and sell this but I'm telling you the psychology behind what's happening in the candlesticks and we'll see some real examples as well you have to observe and you have to just hold the market is likely to do two things it'll go up I'll go down right or it can go sideways for a long period of time so let's see what will happen then in the case that it's going up I mean you're just observing doing nothing if it goes sideways again you're doing nothing uh but how do you make that I won't say exit but at what point do you say that this BB blast is not complete the trend is reversing very simple you find a monthly candle that closes below the Bollinger band as soon as this happens if this is true if this is true you will say stop loss below candle that closed very simple as soon as we cross that lower the candle you're out now this could happen as the market goes up it closes and then you're out or the market goes sideways closes and you're out if you don't understand let's see some examples so the first chart over here basically shows that there is no breakout in the middle we have the simple moving average on either side we have the edges of the Bollinger band this one and this one right over here and there is no breakout you can see that this green bar is right there it's within the lines nothing has happened let's see an example where something did happen so over here we have BSC and we can see that the market was within sideways doing nothing and then this Catalyst happened and the bar closed above the Bollinger band this is kind of scary because the market has moved up so much it's gone from 200 to 300 and that's when we're saying oh the first step is complete right here monthly candle closed above the Bollinger band right here now you need to basically wait until a candle closes below this Bollinger band so let's look at the second bar has it closed below no third bar no fourth bar no keep going keep going keep going keep going keep going okay right here this you see this weird Red Bar doing this this is actually this spinning top thing has actually closed below the Bollinger bat as soon as that happens what do we do here you keep a stop loss or you keep a alert below this bar saying as soon as we cross the low we will exit next day you can see the next month actually gaps down a bit stop loss but it doesn't hit the market just blasts up and it goes up little did we know we're just following the market not predicting it finally you get an exit somewhere here this red bar closes below you put a stop loss here and you're out somewhere here and that's the exit it's very simple you don't get out at the top you don't enter at the bottom you just catch the meat in between somewhere and that's what it is does this work every time no like every trading or investing system you have winners and losers and your risk management is what makes this profitable okay but it's a pretty nifty trick right instead of holding on to a stock for a long time you're just trying to enter when there is momentum and then you're out anyway let's see what else we have I have another example here of adani power so adani power we can see we have this bar over here which is in 2021 closed above hold hold hold this red bar closed below the Bollinger band and the next bar went below it and we're out notice this is almost a lost trade or a slight profit trade because we held it for one two three four months but did not make any money on it but what's interesting because there was an exit as the market went sideways for an entire year your money was out so I think that's interesting the question is does this technique capture or increase your probability of finding momentum yeah of course right when there's momentum when there's proof of momentum we follow it when there's proof of momentum slowing down we exit that's it we're not predicting we're just falling a second observation comes here close above hold old hold stop loss moved here nothing happened hold hold stop loss move it here out so I hope that was easy to understand we'll see one more example in this case we have balakrishna Industries I'll make this quicker we have the first observation here there's a Bollinger Bollinger blast breakout here hold old hold close below the Bollinger band out in this month you held this for a good one year I think then another observation here continues um and there's an exit that happens somewhere over here um so you actually miss this move up from 800 to 1200 but you caught something like this um yeah another thing is if you're completely new to Trading and you're watching this video please don't trade it doesn't make any sense to just find a strategy like this and trade it I guarantee you will lose money because we think a company I need one balakrishnan I will get out with 30 I'll make a lot of money no that'll not happen your stop loss will get hit and you lose Capital here's how you can fix it for no cost at all in the description we have a new program called learn app Prime where you can enroll it's completely free but not everyone gets in you actually have to pass a mini form exam and if you have the right psychology you'll get into this exclusive cohort where you'll learn how risk management works how probability Works how systems work for free over three days and I promise you you will enjoy it because you'll do it in a cohort of other people trying to understand heads or tails of trading or investing if you find this interesting give me a like give me subscribe and try to apply for it I think it will be really really interesting for you let's move forward to the next example over here I have ITC and we all know ITC has not been moving for such a long time but 2022 was very different here we can see that this bar actually closed above the Bollinger band the market continued to move up this red bar closed below it and the exit just happened I think this is November or December I think yeah December and the exit happened there so this was I guess a lucky trade which actually sort of worked as a perfect entry exit uh but yeah I think does the Bollinger band Capture extreme volatility which we call Momentum I think it does if you found this interesting please say something nice in the comment because uh sharmaji and mayank and all the people who've written this script of what this strategies would really like to hear from you it really really helps and we love hearing good comments but I won't leave you high and dry give you one more example to see what it looks like Mahindra Mahindra which is a blue chip company how does it look like on a company like that so here you can see company moving price moving nothing happening this bar closes above the Bollinger band and then we move upwards and you can see for the first time this red bar I think this is November closes below the billinger band and December is still yet to open so you're probably seeing this in January but we were recording this uh last day of December December January may we go below this bar and the exit will happen uh so yeah I think that was interesting I hope you found this video useful if you did please say something nice in the comments give a like subscribe see you in the next video foreign