Personally not a big fan of BBs, but many traders seem to like it. I think they must be used in with some sort of confirmation from other technical studies. Any ideas...?
IMHO, most indicators are one chapter short, the developers write on how they are to be used as they see them, give lengthy examples and often give classes on how to use them. But indicators should be used with Price Action, those that are naysayers perhaps don't see the value are they not spent years finding value. Indicators are not any different than using a trend line, volume, fundamentals or price pattern, they become a rule for a trading plan. Many use Bollingers as trend identifier, others use them to show chop, tightening of price and others to show various forms of retracements. I use them in both day and long term trading for deep retracements, and use them for options to find various standard deviations. Oscillators generally work better in longer term trading for me. If one studies indicators long enough, you can expect them to react in a certain way and when they don't, often times there is a very profitable trade at this point like hidden divergences. I find RSI and MACD work better on weekly especially MACD cause it is slow, way too often traders don't see value is slowness but gives less bad signals and over trading. Also, many traders use indicators wrong, like RSI, when seeking divergences, unless indicator is weighted on highs then another on the lows of price, comparisons should be from close to close. So even the developers get it wrong. Take almost any indicator and go one more chapter. And Price patterns give an indication of price to go a certain direction be it breakout of trend line or a bounce. And some indicators like Fibs are self fulfilling getting a mountain of people buying at 61.8% or selling at 87%, or Gann which takes months to explain it all, just comes down to rules for a trading plan.
Why go to a derivative of price when you can simply read price? If you need a smaller or bigger view you can change the bar type/size/time/etc.
Let's say you are trading Tesla options, and you have found that when Tesla makes a thrust bar to show trend, you want to do Put credit spreads at minus 2 deviations when price retraces, how are you going to do that looking at a chart? Say you have done back testing, and have found that past history shows that when there is hidden divergence, higher low in price and lower indicator value, this trade goes up 2.00points 83% of the time. Folks that do Fibs at 61.8%, and there is a cluster at several difference timeframes. Are you not going to draw a trend line for support/resistance? Trend lines do "indicate continuation or rejection'. Most day traders I know have set timeframes to show different support/resistances and trend lines, do you see it all not useful? Suppose you made an indicator that shows what is not seen on the DOME cause orders are there nano seconds, show me how you going to see this on a chart? Do you think HFT looks at charts? Those who trade fair market value and program trading, where do you see this on a chart? True scalpers don't even look at most charts, they look for divergences between volume, price and time on the DOME. I think Bollingers are very good as one can set the deviation under standard of two or greater, smaller time frame the tighter the BB.
Well, Bollinger Bands give you a clearer picture of price evolution during high volatility periods. For example, BB can help to understand what is a squeeze, and why investors overreact. BB size the increase of volatility and help to project where price could fall or increase. Quite better than just read the price because you have no time to read it during a boom or a crash !
You are basically into phase 1 of technical analysis, where you combine indicators for a chance of success because you noticed, any indicator by itself does not make you profitable. First suggestion, try price. Second suggestion, fast forward to the conclusion of indicator permutation and correlation, and delete them off the charts. Good luck.
%%%%%%%%%%%%%%%%%%%%%%%% John Bollinger, money manager ,[B band inventor] said ''stocks are like sheep they travel in sectors-flock'' ========================================================= MACD could work but i look at them as a distraction from price; @ least a 200 period moving average/dma overlines or underlines price======================================================================== Wisdom is profitable to direct.Good question, yas-sir