The book -
Bollinger on Bollinger Bands Hardcover by John A. Bollinger
Over the past two decades, thousands of veteran traders have come to view Bollinger Bands as the most representative**and reliable**tool for assessing expected price action. Now, in the long-anticipated Bollinger on Bollinger Bands, John Bollinger himself explains how to use this extraordinary technique to effectively compare price and indicator movements.Traders can look to this techniques-oriented book for hundreds of valuable insights, including:
By understanding how to incorporate Bollinger's techniques into their own investment strategy, investors will greatly increase their ability to ignore often-costly emotions and arrive at rational decisions supported by both the facts and the underlying market environment.
Bollinger Bands 22 Basic Rules
Bollinger Bands were
created by John Bollinger, CFA, CMT and published in 1983. They were developed
in an effort to create fully-adaptive trading bands. The following rules
covering the use of Bollinger Bands were gleaned from the questions users have
asked most often and our experience over 25 years with Bollinger Bands.
provide a relative definition of high and low. By definition price is high at
the upper band and low at the lower band.
definition can be used to compare price action and indicator action to arrive
at rigorous buy and sell decisions.
can be derived from momentum, volume, sentiment, open interest, inter-market
If more than one
indicator is used the indicators should not be directly related to one another.
For example, a momentum indicator might complement a volume indicator
successfully, but two momentum indicators aren't better than one.
Bollinger Bands can be
used in pattern recognition to define/clarify pure price patterns such as
"M" tops and "W" bottoms, momentum shifts, etc.
Tags of the bands are
just that, tags not signals. A tag of the upper Bollinger Band is NOT
in-and-of-itself a sell signal. A tag of the lower Bollinger Band is NOT
in-and-of-itself a buy signal.
In trending markets
price can, and does, walk up the upper Bollinger Band and down the lower
Closes outside the
Bollinger Bands are initially continuation signals, not reversal signals. (This
has been the basis for many successful volatility breakout systems.)
The default parameters
of 20 periods for the moving average and standard deviation calculations, and
two standard deviations for the width of the bands are just that, defaults. The
actual parameters needed for any given market/task may be different.
The average deployed
as the middle Bollinger Band should not be the best one for crossovers. Rather,
it should be descriptive of the intermediate-term trend.
For consistent price
containment: If the average is lengthened the number of standard deviations
needs to be increased; from 2 at 20 periods, to 2.1 at 50 periods. Likewise, if
the average is shortened the number of standard deviations should be reduced;
from 2 at 20 periods, to 1.9 at 10 periods.
Bands are based upon a simple moving average. This is because a simple average
is used in the standard deviation calculation and we wish to be logically
Bands eliminate sudden changes in the width of the bands caused by large price
changes exiting the back of the calculation window. Exponential averages must
be used for BOTH the middle band and in the calculation of standard deviation.
Make no statistical
assumptions based on the use of the standard deviation calculation in the
construction of the bands. The distribution of security prices is non-normal
and the typical sample size in most deployments of Bollinger Bands is too small for statistical significance. (In practice we typically find 90%, not 95%, of
the data inside Bollinger Bands with the default parameters)
%b tells us where we
are in relation to the Bollinger Bands. The position within the bands is
calculated using an adaptation of the formula for Stochastic
%b has many uses;
among the more important are identification of divergences, pattern recognition
and the coding of trading systems using Bollinger Bands.
Indicators can be
normalized with %b, eliminating fixed thresholds in the process. To do this
plot 50-period or longer Bollinger Bands on an indicator and then calculate %b
of the indicator.
BandWidth tells us how
wide the Bollinger Bands are. The raw width is normalized using the middle
band. Using the default parameters BandWidth is four times the coefficient of
BandWidth has many
uses. Its most popular use is to indentify "The Squeeze", but is also
useful in identifying trend changes...
Bollinger Bands can be
used on most financial time series, including equities, indices, foreign
exchange, commodities, futures, options and bonds.
Bollinger Bands can be
used on bars of any length, 5 minutes, one hour, daily, weekly, etc. The key is
that the bars must contain enough activity to give a robust picture of the
price-formation mechanism at work.
Bollinger Bands do not
provide continuous advice; rather they help indentify setups where the odds may
be in your favor.
have all of you guys tried of BBands_STOP_V2 indicator?
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BBandsStop(in yellow/orange and green ) and Bollinger Bands(in blue)
Forum on trading, automated trading systems
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Bollinger Bands® and MACD Trading System (based on the
The chart was made on MT5 with standard indicators of Metatrader 5
I am loving this one, so there is another crazy idea that I was told is an illusion. I saw the
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BB uused to determine support and resistance points in the future
period 24Shift 3deviation 3.5apply to Close
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