Longing ZRX short-mid term. Using Volume and BB.

Why Vol & BB ???

If I’m trading a chart pattern, I check the volume profile to gauge how confident I should be that it will play out as expected. Ascertain whether the violation of a major support/resistance area is likely to stick. If price is trying to break through a major resistance level , ideally I would expect to see a sharp increase in buy volume to support such a push. At the same time, if price is trying to violate a major support, I want to see a corresponding increase in the sell volume at the same time. Thus, I use volume to ascertain whether there’re enough buyers/sellers in the market to break a major resistance.

Bollinger Band is a forward looking Volatility Indicator. It has 3 components to it. The central average line, upper band and lower band. The central line is the average line. If you have selected 30days, then the central line is the last 30 days moving average line. The upper band is 1 standard deviation higher than the average and the lower band is 1 standard deviation below the average. BB works on the premise that stocks prices over a long term reverts to mean. So if the stock price is at the higher band (1 standard deviation away) then there could a 66% probability that it can revert to the average line. Likewise, if the stock price is at the lower band, there is a 66% probability that it comes back to the average line. In simpler terms, you short the market/stock when the stock price hits the upper band with a target the price as reflected on the central line. If the price is at the lower band, you buy with a target as reflected by the central line. BB is one of the better quality indicator as it has some tangible math behind. You can improve the efficiency from 66% to 95% buy tweaking few parameters in your BB settings.