Bollinger Bands

Thanks, I had seen that on the website but didn't realize it was from the book. I should of looked closer.

 

Hey nihaba, You got any use for donchian channels? I know there's some money in there somewhere, but I can't find it. They intrigue me cause they are so darn simple. I only ask because they remind me a lot of BB.

 

profitseer,

I've taken a few peeks at Donchian Channels...but never tested nor traded via them. The only person I know that uses them...uses them for their trailing stops.

NihabaAshi

 

Has anyone taken John's two day course he offers on trading with BB's?

Thanks in advance.

Bsulli

 

This has been a great thread. My first time I bought when es touched the bottom band. The whole world initiated me into the Bollinger Club by selling. It was like standing under Niagra Falls. So I said, "Well, ok, that doesn't work." and went on my way.
That bb site looks interesting. This is going to be fun. I love learning new things. Thanks Nihaba for sharing.

 

"Buy the Upper Band and Sell the Lower Band" was confusing for me.

“Buy the Upper Band sell higher Upper Band” and “Sell the Lower Band and buy lower Lower Band" sounds better.

Thanks for the clarification.

 

Miki...

Here's another way I prefer to say it...

"There are Long and Short trade setups at the Upper BBand...there are Long and Short trade setups at the Lower BBand...it all depends on the price pattern when these Bands are reached."

Thus...for a trader to say...always buy at the Upper BBand or always sell at the Upper BBand or vice versa...hasn't been properly schooled in Bollinger Band trading...the same is true for the Lower BBand...especially for application in the Eminis.

Those that practice such a fixed "always" regiment at either Upper or Lower BBand...are going to lose a lot of money

I remember a website a few years ago had said to "always" Short the stochastics above 80 and "always" Buy the stochastics below 20. They based their entire trading system on that theory.

That website is no longer around...it got burnt by all those oversold stoch signals (buy, buy and more buys) in late 2000 and 2001.

NihabaAshi

 

"so that's your homework"... I've been doing it and have made a few bucks at the same time. The BB pattern I'm having the best results with is the volitility breakout/breakdown. It' s hard to tell the headfakes at times but once price commits above or below it seems to work. Has anyone bought the BB videos? I'm going to get the book and then think about the videos. Thanks

~EC

 

Great thread. BB's are one of the main tools I use in TA. You can't use them in a vaccum though. You need to employ other indicators to confirm a move you see on the BB's (on balance volume for example).

One of the big mysteries for me when it comes to trading is understanding WHY BB's capture so much of the price action when used at 2 standard deviations. Even when I look at a chart of the DOW for example in 1974 (before Bollinger Bands were invented), those savage declines were captured beautifully just stair stepping their way down. Wow.

I read somewhere that a 2 standard deviation BB captures 95% of a markets price action within the bands. That's incredible. When you combine BB's with an indicator like the TICK at -1,000 or +1,000, you can see where the extremes are. And extremes by definition don't last forever.

My BB rules:

Closing above the upper band indicates strength (always confirm it with another indicator)
Like wise when it closes below the lower band.
Tightness in the bands can produce explosive moves (I talked about a 5 year weekly VIX chart in another thread. Extreme tightness in '98 and '02 lead to dramatic levels above 50).
The slope of the bands can tell you alot about direction.

 

Nihaba got me into these bands. There seems to be no end to the information they contain. What finally got my eyes opened was just watching the bands and disregarding all the price movement. You can watch what happens when the the EMA moves down through the old high on the lower band. Or what happens when the upper band drops down to the old high on the lower band. Just to name a few.
It is more like meditation than math. What intrigued me was the notion that sometimes a tag means one thing, and sometimes it means something else. I can't explain it because I don't understand it, but you'd have a heck of a time trying to program it into a computer.
(The other thing they have going for them is they don't take up any room. I have room for 2 studies under my charts, but with BB, you can just add them to your charts without giving up your other two favorite studies.)