Bollinger Bands

look, ANY widely disseminated indicator or method is almost always USELESS as a trade signal

because the market adapts to itself. it's called a feedback loop

however... are BB's a useful measure of volatility? of course. can they be incorporated into a successful methodology? yes. but in most markets, simply buying or selling based on a BB indication would be insane

that's not a robust strategy.

 

I wonder how these big time pros keep track of all this sh*t.

 

BB's: superb exit indicator. crap for all other uses.

 

What are your bands set at?

 

Let me try to explain myself better....

I never ever said that bollinger bands were the holy grail. There is no indicator that is. I only wanted to show how they could be used as a GUIDE to reading the price action. That is why I wouldn't trust any backtest on it or any indicator for that matter. It's not for mechanical use. At least not how I would use it.

With that said, I like to use a 8 period band with a std dev of 2. I take out the middle line and replace it with a 4 period sma offset +1. I also use pivot points, both daily and weekly along with the widely used 34 sma.

 

Another fun chart....

 

well, really you should feel compelled to withdraw your comment completely

In all seriousness, your statement may lead people seriously astray. Not sure if you are just expressing yourself poorly but the statement as written is just wrong.

Even if stock price movements were normally distributed (which they're not), once the price reaches a point 2 SDs from the mean the probability of a further move in that direction is neither 5% nor 2.5%.

The 95% statistic refers to the probability that a price sitting at its average will not vary outside of its 2 SD range. The stats only work BEFORE the move. Once the market is at one of the BBs, Gaussian (i.e. normal dist) theory (which the 95% stat is based on) would still suggest an equal probability (50%) of a move up or down.

 

Distribution of 30 min es chart with 20 period moving average attached.

 

Thanks for brining this thread to the attention of the ET readers Spxdes.

Bollinger Bands can be used to measure among other things, range, volatility, determine whether a marketing is trending or cycling, and if integrated with other indicators will most certainly make for a very robust system.

I personally wouldn't trade without them.

Do I win on every trade?, of course not.

But the wins far outweigh the losses in terms of size and quantity, and by recording my trades they give me a very good barometer on the state of the markets.

Good trading,

Jimmy Jam

 

Thanks Jimmy!

Hey, are you the same JimmyJam as the guy on dacharts.com ???