how to avoid false signals from Bollinger Bands

Discussion in 'Technical Analysis' started by investing, Nov 16, 2020.

  1. Hello, I have noticed that when the closing price of Heikin Ashi is beyond a bollinger band, the price usually will go in that direction quickly and for a good distance, in particular when breaking a trading range. That doesn’t happen always. Is there a way to know in advance (when it occurs) if this pattern will work or if it won’t have the expected effects on the price?
     
  2. maxinger

    maxinger

    Even if we don't use indicators ( I don't use any ), there are also false signals.

    when the market movement is undecisive / choppy / messy / chaotic / untrendy,
    avoid trading it totally or trade with reduced quantity.
    Because there will be lots of fake signals.
    Use naked eyes to detect such a market.


    Also do not miss a signal. If you miss a signal, and you catch the next signal,
    chances of failure are high.
     
    Last edited: Nov 16, 2020
    yc47ib, toon, Pekelo and 1 other person like this.
  3. You're looking for certainty. Investing / trading is about probabilities, not certainty. You might be able to test some other indicators that give you a better edge but you're not going to get certainty. Part of the process for you may also be learning to manage the risk of the patterns that don't work.

     
    investing and jl1575 like this.
  4. MarkBrown

    MarkBrown

    post a chart and i will help you if i can. what time frame are you using and setting for the bands?
     
    investing likes this.
  5. speedo

    speedo

    There is no such thing as a "false signal", some trades result in a profit and some result in a loss. No one can foretell the future regardless of tool set. The best any trader can do is identify an edge, build a viable trade plan around that edge and trade it with the disciplines required to succeed.
     
  6. Thanks so much for the help. In this moment you can see it for Enel 30 minutes.
    In my experience it works for time frames from 15 minutes to 4 hours because I usually check these time frames but it seems it works well in any time frame. That could be supported by the theory because when the price is in 2nd and 3rd standard deviation go faster than in the first standard deviation.
     
  7. They are more useful if you change the time series to being percentage change instead of raw prices. That’s because prices behave like non-stationary geometric walks, whereas price change is more tractable (easier to analyze).
     
    investing and MarkBrown like this.
  8. JSOP

    JSOP

    No. No indicators are 100% foolproof. You will always always have misses. This is why you have stop-losses and/or hedge.
     
    investing likes this.
  9. stochastix

    stochastix

    This is why you should throw all that crap away, and study probability theory and stochastic processes
     
    investing likes this.
  10. Dazz

    Dazz

    how to avoid false signals from Bollinger Bands

    I don't get it: there are over 2100 futures trade rooms and not one trades with BB and posts a track record, including the comatose king himself -bollingerbands.com. So if no one can trade with it in a manner to generate transparent entries, tgts & stops as well as a track record, how could ever care about a false signal from a channel indicator that has no direct evidence of use?
     
    Last edited: Nov 16, 2020
    #10     Nov 16, 2020
    investing likes this.