How to Trade Bollinger Bands

Interesting input. I use them in a completely different way. Maybe I should shut my mouth and keep using them. It has been making good/reliable money for me. I might post an equity curve to show what it leads to.

 

I use them standard 20 (4 weeks of daily price), 2 standard deviations. You can use them as a sign of reversal or continuation, I use them as a filter along with a few others. You can set bollingers or keltner bands to . (20, .50 ) for scalping.

Behold a well chosen example, here is a chart fading a close above the band for two cherry picked winners. Now I can call it my super razzle dazzle es fader and sell it for a grand.

 

How I use Bollinger Bands

http://elitetrader.com/vb/showthread.php?s=&postid=1744371#post1744371

 

3 Phases of Bollinger Bands

<img src="http://www.elitetrader.com/vb/attachment.php?s=&postid=1803735">

 

Well, in his book "Bollinger on Bollinger Bands" he outlines three trading systems that are all pretty interesting and could work depending on your trading style.

I use bollinger bands as part of a volatility breakout system for stock options, and it works pretty well... Just look for the "squeeze" and buy or sell on volume.

 

Good observation, but how do we exactly make money with this?

 

Do you buy or sell options? When indicate "buy or sell on volume", which volume are you refering to (options volume, stocks volume, etc/volume)? What is the volume criterion you use?

Thanks

 

one more note on bollinger bands...

a technique he outlines in his book and one that I find very useful is using the bands to define relative highs and lows and looking for reversal patterns.

For example, if a stock falls bellow a previous low but stays within that band, it usually means something quite different than a new low outside of the bands.

 

If we're talking about day trading, here's the best way to trade Bollinger Bands:

Trade them for price action. (In other words, don't use Bollinger Bands.)

 

I usually do all analysis on the underlying security before looking at the option itself. I do take into consideration the amount of contracts floating around, etc., but that isn't where my search begins.

One cool thing about using volatility breakout is that you buy the option when the bands shows low volatility - so there's usually few contracts and they're usually undervalued. I might look at a couple indicators to confirm direction once the breakout occurs, and then wait for the security's volume to pick up. Usually the biggest moves follow periods of very low volatility.

Hope that helps a bit.