Making Bollinger Band fading profitable

Discussion in 'Technical Analysis' started by 1a2b3cppp, May 2, 2013.

  1. Most people see Bollinger Bands as a way to trade counter trend and make money, and this tends to lead to averaging down, and doing this on an intraday basis can lead to blowing your account.

    What if you were to apply rules to keep yourself from blowing your account. For example:

    2.5 SD instead of 2 (note that if you believe that price is random, as I do, this really makes no difference, but it will reduce the number of entries).

    No averaging down. Use a full point stop loss on the ES. Exit is hitting the middle band. Note that sometimes this will still result in a losing trade. For example, price goes up a point or two, hits the band, you enter short. Price goes up 2 more ticks. Now price chops as the middle band catches up with it, triggering a close at loss of two ticks.

    You can't initiate another trade until price touches the center line again. For example, if you take a trade and price goes against you and you close it out for a loss, do not take another trade until price has crossed the middle line again. This will at least keep you from reentering over and over in a trend against you.

    Ok, now the above system will likely be about 50/50.

    What if you only traded it at specific times? Don't day traders love the first hour or two because price moves more? Do this when price is historically boring and choppy.

    Yes, you are right, this is basically asking the same thing as "well why not just use a trend following system only in the morning?".

    But I can think of one other advantage to doing this instead of a trend following system in the morning, and that is that you tend to get better fills when trading counter trend. You can place your order and wait for it to be hit rather than having to place a market order once you decide price is trending.

  2. Here's an example of a losing day.

  3. I know indicators don't work but every once in awhile I go back and try to look at them in different ways.

    It usually makes me a worse trader so I have to limit the amount of time I spend doing it.
  4. How long until someone looks at that chart and sees that if you were to add a second contract after 1.5 point drawdown and move the breakeven to another point away you'd have more winners than losers? Of course your losers would be much bigger than. How often is this all going to happen? Nearly every losing trade with this type of system could've been turned into a winner if you had just added a few more contracts. Of course that one day it's gonna get away from you and blow your account. That's why you absolutely need hard stops if you're going to do this.

    How long until someone suggests starting with two contracts and leaving one on as a "runner" in case you happen to get the very beginning of a trend?
  5. I used Bollinger bands every day and they work for me but you have to know where to apply them. My favorite strategy is shorting off Bolllinger bands.
  6. Yes it is.
    Mean reversion strategies only work in trading ranges. It will fail if the larger time frame is trending.
    Just my fractional 2 cents worth.
  7. Are you willing to share how you know where to apply them?
  8. Yup. If you knew when price was going to be choppy you could just trade mean reversion systems during those times.

    "Trend indicators" and stuff are useless because they only tell you if price has been choppy, not if it's going to continue to be choppy in the future.
  9. Daring


    You can tell if price is rangy or trendy without the need of indicators, indicators can tell you the same, albeit just a bit slower, but what's the point of the past, if it tells very little about the future.

    Unless your tool or the way you use it contains predictive value, the tool will forever remain useless as why would you ever use something that is slower than price.
  10. Agree 100% with both of those.
    #10     May 2, 2013