Not sure how the statistics measure up, at the end of the day there only there to act as a tripwire if you like, to make sure your paying attention. I think their a useful filter for abc reversals for example, not because of any guarantee it will reverse, but because using bollinger bands will give you better value for your stops if it does, by ensuring significant degrees of price divergence at reversal entries.
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I recently found two interesting articles about using the BB's which seem to have some merrit. Both authors are using the same concept. I don't know what I did with the one I read originally, but this one is saying basically the same thing. I haven't used BB's very much in the past, but I've been watching the concept outlined in the article and from what I'm seeing it's seems to be working. http://www.investopedia.com/articles/forex/06/BBInsideDay.asp
Years ago... The trouble I have had with Bollinger Bands is when the trend sets in they fail. They may work for a while but then comes THAT day....So learn to take your loss and try not to martingale, as it is not appropriate for this indicator. I have tried using two "sets" of Bollinger Bands to make the entry safer by using the two bands themselves to signal the entry, or even the divergence of them. Michael B. P.S. If you break out of Keltner, watch out Bollinger!
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Excellent article, which suggests a good solution to trying to judge whether the price is going to reverse near the BB limits or carry on riding up the BBs. The article says that the occurence of an inside day price pattern when the price is near the BB limits will suggest a likely reversal of the price. Anyone with experience trading this way can tell us whether this method works most of the time?
I have used it many times. If you are not sure use a daily chart. If you get a day where price touches the band and pulls back I wait for the close of that candle and sometimes I will see what the next day does. If you are using a daily chart and the bands hve expanded quite a bit the reversal is usually pretty good so waiting an extra half day isn't going to matter that much. The more you observe it and practice it the better you will get. Times where price will ride the bands are most likely when price has consolidated for a while and the bands have gotten close together (which signifies a big move coming soon. A good one to watch right now will be goog. Look at a one year daily chart. The bands are coming getting very tight. We should get a big move soon. Then just watch the whole move and see if you can decide when it will reverse base only on the BB's.
Hi 4re. In your experience, does it matter whether the price has actually pierced through the band is is outside of it, or is just touching the band or just inside it? Reading your comments, are you saying that a series of expanding range days is also another sign that a reversal is likely to happen soon? Thanks!
I think of Bollinger Bands as measures of statistical deviation from purely random motion. As such, if the price pierces the Band and walks along it, then price is no longer mean-reverting in the short term, but trending. I like to use a variation of Joe Ross' "Gimmee Bars" to trade using the Bands during trading range markets. I use the slope of the BBs, the slope of the Moving averages, and the ADX (<15), to help me gauge if the market is trending or in a trading range. Here is a link to a Joe Ross chapter regarding Gimmee Bars http://www.trading-naked.com/library/JoeRossTradingManual_C14_110_115.pdf
For a reversal I do like to see a pierce of the band. the second question is no. Those expanding range days are when the bands start moving together. The bollinger bands will not tell you which way a movement will but when they get real tight start expecting a big move coming soon. On goog I was looking at a continuation pennant and expect it to go up and since the bands are getting tight I expect it to pop up very soon. If it does then you will probably see price ride the bands up for while. Now, the price going up is just my opinion and you know about opinions. But I do know it is going to have a strong movement soon.