since in a trend volatility is actually low,the AB is tight. but in BB in a strong trend the market moves away from the moving average which lags.And the stronger the trend the more the gap between the average and the market-so whenever the gap is large, i used to conclude that the trend is strong and enter at market. i am not sure this makes sense.
but whatever the info given by BB or AB can be inferred by PA so both bands are not telling us anything new. If you see the chart below,if you consider the down move which ended at the arrow, the market when it retraced, took 14 bars to break the high of the LAST bar of the down move [ marked by the arrow]. Do you need a quant with numerous super computers to tell you which move, the up move or down move is stronger? I am not saying the quants are wrong but what i am saying is why use a complicated way when there is a simple way
No doubt that indicators based on price can't tell you anything new about price. So why are they used by all the tier 1 banks and trading shops? Will leave that to your imagination....
because they want to use an atom bomb, when a normal bomb is enough to to kill, will do-it is not wrong it is unnecessary.
that said BB has helped me in stopping blowing my account. PA i just used to over trade could not judge the bars. I am a good judge of trend, but BB has helped me in my entry,because of the nature of the band. To get full benefit of the bands it is critical to understand of they work.
The bands work because they reflect the market.when the market becomes less volatile the bands contract. the bands follow the market-the market does not follow the bands so the bands are not necessary to see or measure:you can eyeball the market and come to the same conclusion
https://www.tradingschools.org/reviews/john-bollinger-of-bollinger-capital-management/ His trading record is listed...For the whole 18 years didn't beat the SPX but beat the Nasdaq...
Observations: 1. In 2008 he took the exact same bath as the market. You would think he could have done better, just like in 2002, when his loss was half of the market's. 2. In the last 10 years his return was 90%, as compared to the market's 130%. That is quite a big difference. 3. At least he has longevity and one of the few who doesn't just teach but plays too.
How can traditional BB work when the underlying MA has a positive group delay (ie lag), and a fixed lookback window? I don't use BB, but at least people should calculate them using some of the newer adaptive or near-zero lag MAs.
For swing and trend trading I couldn't agree more. However, BB are excellent for identifying volatility squeezes.