Bollinger Bands

Discussion in 'Technical Analysis' started by Spxdes, Jan 27, 2007.

  1. Spxdes


    I would like to discuss the use of bollinger bands as a great way of helping one read price action. There is no need for any other indicator to base trading decisions. The bands tell you everything...trend, range, volatility, support/resistance, chop, etc.

    The chart attached shows a 5 min chart of DE for the last three days.
  2. Spxdes


    Now here is the same chart with descriptions.

    The idea is simple. If price breaks the outer bands, it should be considered strong in that direction. What happens next? Does it continue in that direction? Does it come back in and break the middle line? Does it find support/resistance at the opposite outer band? These answers can give you a good idea of what price is doing and what it might do next.
  3. Spxdes


    By the way, I apologize for my sloppy charts. This is the first time I have done this and I am not an expert in microsoft paint by any means.
  4. Lorenzo


    I don't like BB

    I found them almost useless

    I prefer ADX / DM+ DM- to measure volatility

    Besides, Pivot Points & Fibonacci Golden Ratios are the way to go for successful daytrading

    But it's my opinion of course
  5. Spxdes


    I also like pivot points and think they are a perfect addition to bollinger bands.

    I just wanted to suggest a simple way of trading or gaining a better understanding of what price is doing.

    I have looked at the ADX/DMI a lot and hate it. I find the ADX to be pointless. Simply looking at a chart can tell you if there is a trend or not.

    Just my opinion though....
  6. i also like BBs but the only thing i have really found them to be usefull for is on a volatile stock stuck in a trading range. Then you can play a good probability setup in that price has moved 2 stnd devs away from its moving average. The problem I have found then though is if you get a breakout into a trend the bands become totally worthless as it rides the upper or lower band. In some sense become dangerous as you try to play band touches and miss the big move.
    ADX then can come in rather handy then but I'm still trying to find something to give a signal to stop looking at the BBs and ride the trend.
  7. no indicator is the "way to go " for datrading success.

    developing an edge and managing risk is what makes money

    indicators are tools.

    NO indicator is necessary, but some people find utility by looking at indicators, and at price for that matter

    BB's are a measure of volatility. that is a useful metric.

    one of the reasons why this is useful is that volatility is much more cyclical than price
  8. Spxdes


    I have heard a lot of people say that bb's become useless as it "rides the line" in a trend. Thats a good thing!

    It's telling you the strength. It's a "signal" to hold in that direction. No reason to go against the trend.

    Don't just look at bb's as a way of finding overbought/oversold situations.

    Instead look at the outer lines as a 50% situation. It could either bounce off the line or break out, suggesting a possible start of trend.

    You don't need to predict, just react. You can always reverse.
  9. I used to use BB's too . I also found them usless, but when the bands narrow, they can be good at predicting breakouts. Only for that reason, I still use'em from time to time.
  10. ER2


    I find Bollinger Bands and similar tools (e.g. moving average envelopes) useful as a cross-verification tool. For example, a chartist may decide to go long on double-bottom patterns only when the extremes poke outside the bottom bands.

    No single tool is a holy grail and therefore shouldn't be judged by itself. As a confirming indicator (filter) I'm sure it is very useful to some.

    #10     Jan 27, 2007