I am newbie, Can some one explain me on how to trade Bollinger Bands ? All I know is if the price touches above band then it is sell and price touches lower band then it buy. I am sure I am quoting wrong. I am interested in learning more about this bands like Bollinger Bandwidth Bulge Bollinger Bandwidth Squeeze Price at upper Bollinger Band + BB getting wider What happens when the price close is above or below band. Trading with other indicators.
I don't think you're misquoting what you've heard, because that's one fairly standard technique with BB's. How "good" it is is another matter. I think it's fair to say that the validity of the approach you describe is proportional to the bandwidth: there might be something in it, when the bands are far apart. Not so much when they're close together. Another approach is to do what you describe above but taking only trades that are in directional accordance with a "higher time-frame/longer trend". For example, to use BB's with some setting like 10,2 but take trades only in accordance with the direction of (say) a 45-period simple moving average. So, when the price is above the SMA-45 and the SMA is rising, then you'd enter long after the price has gone below the lower band of a 10,2 BB and crossed back above it again (maybe entering on the first close above the lower band). The objective here is to be entering long in an uptrend, after a downward retracement has been "shown" to be "just a retracement". I think this will significantly increase the win-rate. But I still doubt whether it will have a genuine, long-term edge just in itself. As with all indicator-driven approaches, the entry in itself isn't going to make a profitable system: all the details of the trade management after the entry are going to be influential in determining that, too.
We publish on our blog educational articles and we have covered this topic beofre. I hope this helps you. http://www.optimusfutures.com/tradeblog/archives/use-bollinger-bands-day-trading/ We made the illustration over MultiCharts.Net which we supply for free.
Some traders are closed minded and only think Price Action the only way to trade, some traders never learned how to use Bollinger Bands, but regardless, what works first is being able to know charting better than back of your hand first, then after you know charting well, then you can add moving averages and Bollinger Bands to make trading just a tad easier. I use both in my trading, but I did hand charting for 20 plus years even after I bought home computers. And when you use indicators, study what moves the indicators, so when price moves you can expect the indicator to do XYZ, and when they don't do as they should, you have divergence of Price and indicator and this can be very important. Trading is understand Price first and everything else second. Questions that you ask come from a book by John Carter, I don't think he even now trades futures as he is hawking options book? See if you can get it through a library as it is expensive book or university, or rent it through amazon. Some of it I couldn't get to work for me called the Squeeze, gave me too many losing occurrences, it a coin toss of when price gets tight range, it is going to expand one direction or the other. Unless you can read Price and what it has the Probabilities of what it might do, don't look at Bollingers at a Bulge, from a budge price can lead onto long channel one direction or other. In upper right, use the "Search" and start reading, or go down to Educational Resources of this forum. But like anything, if you don't become an expert in chart reading, indicators will have no real good way of making your life better in trading. What newer traders don't realize that charting will do for you are non signal trades, charting can scream when not to take trades in direction of trend, so just taking Bollinger band trades cause it is a signal can become a loss they could have avoided. Taking a solid 2-3 years of heavy study of price would put you ahead of the many of the 95% who might not be here three years from now, but they will be replaced who think trading is exciting and fun. People tend to do what is easy first and seldom correct thing to do, as being correct take long time to do well and right.
I am ever reading certain trader they use triple bolinger band with different setup, and as signal confirmation if all triple BB line already match and touch each other, but might need high patience because not often signal will confirmed