One of my favorite TA tools are Bollinger Bands. I keep them at the standard, 20 day, 2 standard deviation setting. It's amazing to me, that no matter what stock chart I pull up, from no matter what country, a stocks price action is contained within the bands 90% or more of the time. To me, that's a major clue as to when things get extreme. I have yet to see another indicator with that kind of accuracy. And it's universal in it's application. Not the "flavor the month", such as buying breakouts or shorting head and shoulder patterns. Those can work in certain markets, but there seems to be something much more mathematically "real" about a security reverting to its mean and having an indicator which can capture that process. And it working in any kind of market environment. Any other thoughts on this? I'm still tweaking some of my original scans to come up with more optimal entry and exit points. The exit is the easy part. Simply selling after it re-enters the band at a pre determined percentage. The hard part is the stop loss and whether to play end of day or intraday, or even weekly.
In my opinion any strategy based on Bollinger Bands is useless. In a strong market prices will stay near the upper band and in a weak one.. they will stay near the lower band. In a sideways market they will stay somewhere in the middle and maybe bounce from the upper to lower band. Gee.. do you really need bands to tell you this? Whats so great about this indicator. Its really pure common sense. The only thing I use bollingers for .. simply visual aid. Strategy wise.. they never really work. You wanna short when price penetrates the upper band .. you will be right in a choppy market and get killed in a trending market. Maybe the only use would be to see how the bands tighten or loosen for breakout traders.. but this can be easily viewed with out them. In reality they are just a nice visual guide.. and experienced traders can trade just as good w/o them. John Bollinger is just another spin doctor re-packaging common sense to the public in the form of an idicator.. and making millions at it. I just bet he made more $ selling his products than he has trading with them. --MIKE
There are some good discussions here in the past on Bollinger Bands... you may want to use ET's handy SEARCH menu up there in the upper right corner to review such past discussions. I personally know lots of traders successfully trading via Bollinger Band...making a living at it. However...with that said...all such traders use Bollinger Bands in CONCERT with other indicators or technical analysis. Lets put it this way...any trader that only uses one indicator and no other indicator, chart pattern or anything to do with another form of technical analyis...won't last to long in this business. Simply...always use something to confirm that particular indicator. P.S. I use Bollinger Bands successfully in trading the Emini Futures along with Stochastic, MACD, Price Exponential Moving Averages, Volume and Japanese Candlesticks. NihabaAshi
Yes; and look on about 99 or 100 other things to make money. Unfortunately they are probably not that ''90%'' in a real strong trends[or sharp rally] like tech stocks in October;however still helpful any way. A tag of the bands some times doesn't mean much. --------------------------------------------- Star wars trend ''The stars fought in thier courses [spheres]''
jbtrader, i have consistently found BBands to be worthless. Could you tell us a simple mechanical way of trading them that will bring consistent profits. just post the strict rules for entry and exit. i can do the testing as can many other people on the board. Yes, it's a challenge.
traderkay, I'm not sure if jbtrader uses BBands via discretionary methods or mechanical methods... but most successful traders I know that uses BBands along with confirmation from other technical analysis uses it via Discretionary trading methodology. In fact, I've met 2 traders before that attempted to mechanicalize it...they failed miserably. If you find BBands worthless...why do you want to bother with it some more? Obviously your not interested in learning how jbtrader is using something successfully when you aren't able to use it successfully...via attempting to challenge him/her publicly. Are you trying to discredit his/her trading methodology? My point is this...if jbtrader is using BBand via Discretionary methods (as I am)...your attempt to mechanicalize it will produce poor results. Note: I personally have never tried to mechnicalize BBands eventhough I own a copy of TradeStation 2000i and SuperCharts...therefore, I'm not sure if it can be done or not. Although I have met a few that have attempted it. This is not a rude comment...however I feel its not going to go far if you openly tell another trader that his/hers indicator is WORTHLESS eventhough that indicator is making them money. I've said this a dozen times on this board...its not the indicator that makes a trader succeed or fail... it's the trader that uses the indicator that'll be the deciding factor in success or failure. Simply...if one trader is unable to make a buck via a particular indicator and another is able to make a buck (consistent bucks)... is it the indicator or the trader? I truly feel its the trader...especially if the two have different discretionary methods. Here's another example... 5 close trading pals aren't able to use candlestick analysis profitably...me and another friend are using it successfully...does that mean that candlesticks analysis will cause losses or profits or that the traders obviously are applying it differently?...most likely the latter. Now...if jbtrader is using a mechanical system to trade the BBands... as you said...that can easily be tested unless his/hers mechanical system is something that can't be shared with the public. Also...I rarely take backtesting to seriously...it rarely produce results close enough to actual real trading results... sometimes better and sometimes worst...depending upon the backtesting method. Further, since you find the BBands WORTHLESS... I'm extremely interested to find out how you are using them...your strict rules for entry and exit...stop loss protection and profit-targets. PM me with such info...I'll review your strict rules that cause you to think they cannot make you any money so that I can see if there were any flaws to your use of BBands. If there are flaws...I can reveal them to you publicly here at the board or privately via pm or email. That is not a challenge nor an attack...just one trader trying to help another trader that's having problems making a buck from a particular indicator. P.S. My analysis of your BBand trading methodology will be via that of a discretionary trader that has used BBands successfully for many years...I trade the Emini Futures (ES and NQ) and occassionaly the QQQ. NihabaAshi
Believe it or not John Bollinger himself loses money trading the Bollinger Bands, yet makes A LOT of money selling books and seminars Good Trading !
My only real use of bollinger bands as an indicator is to cancel a trade i might otherwise take. THAT IS THIS....... i will not go long if price is in the top 25 % of the bands and i will not go short if price is in the bottom 25% of the bands. Yes, i know it kills a lot of good trades but it seems to save me much more from making BIG BOOBOO TRADES!