Bollinger Band: let's build a strategy together - page 2

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Sergey Golubev
Moderator
112529
Sergey Golubev  
Sergey Golubev
Moderator
112529
Sergey Golubev  

The book - 

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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:

  • Analysis of the primary indicators derived from Bollinger Bands %b and BandWidth
  • How traders can use Bollinger Bands to work with instead of against commonly encountered trading patterns
  • Strategic use of Bollinger Bands in short-, mid-, and long-term trading program
  • Three trading systems based on Bollinger Bands

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.

jamalsaleem786
148
jamalsaleem786  

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. 

1.                    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.

2.                    That relative definition can be used to compare price action and indicator action to arrive at rigorous buy and sell decisions.

3.                    Appropriate indicators can be derived from momentum, volume, sentiment, open interest, inter-market data, etc.

4.                    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.

5.                    Bollinger Bands can be used in pattern recognition to define/clarify pure price patterns such as "M" tops and "W" bottoms, momentum shifts, etc.

6.                    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.

7.                    In trending markets price can, and does, walk up the upper Bollinger Band and down the lower Bollinger Band.

8.                    Closes outside the Bollinger Bands are initially continuation signals, not reversal signals. (This has been the basis for many successful volatility breakout systems.)

9.                    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.

10.                 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.

11.                 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.

12.                 Traditional Bollinger 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 consistent.

13.                 Exponential Bollinger 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.

14.                 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)

15.                 %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

16.                 %b has many uses; among the more important are identification of divergences, pattern recognition and the coding of trading systems using Bollinger Bands.

17.                 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.

18.                 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 variation.

19.                 BandWidth has many uses. Its most popular use is to indentify "The Squeeze", but is also useful in identifying trend changes...

20.                 Bollinger Bands can be used on most financial time series, including equities, indices, foreign exchange, commodities, futures, options and bonds.

21.                 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.

22.                 Bollinger Bands do not provide continuous advice; rather they help indentify setups where the odds may be in your favor.

Feng Guozheng
73
Feng Guozheng  

have all of you guys tried of BBands_STOP_V2 indicator?

i think it may give some help to you.


BBandsStop(in yellow/orange and green ) and Bollinger Bands(in blue)

both of them are of same argument:223



Sergey Golubev
Moderator
112529
Sergey Golubev  

Forum on trading, automated trading systems and testing trading strategies

Press review

Sergey Golubev, 2019.09.07 06:28

Bollinger Bands® and MACD Trading System (based on the article)

Bollinger Bands® and MACD Trading System

Bollinger Bands® and MACD Trading System

  • "Bollinger Bands® can provide invaluable signals for technical traders, and when combined with the Moving Average Convergence Divergence (MACD) indicator, gives traders insight into both volatility and momentum in the forex market. Traders can make use of Bollinger Bands® in conjunction with MACD to support trade set ups. Bollinger Bands® allow traders to view the cyclical nature of volatility while the MACD is an effective trend-following, momentum indicator. Using these two indicators together can assist traders when making higher probability trades as they can gauge the direction and strength of an existing trend, along with volatility. As a result, traders can use the MACD to assess if a trend is picking up in momentum or slowing down and setting up for a possible breakout; while the Bollinger Band® can be used as an entry trigger and subsequent confirmation of a trade."
  • "Traders can trade with Bollinger Bands® and MACD in a number of different ways but two of the most common ways to trade with these two indicators involve breakouts and trend trading. The MACD indicator supports the bullish trade as the MACD line has crossed the signal line and continues to move above the signal line, showing strong upward momentum. The Bollinger Band® then confirms the move to the upside as price begins to “walk the band” on increased volatility (expansion of the band). Stops can be placed below the lower Bollinger Band® or at the low of the descending channel. Targets can be placed at a previous high or significant level of resistance - while maintaining a positive risk to reward ratio. Since there is a possibility that the breakout trade turns into a trend reversal, traders should consider multiple target levels and manually move stops up or utilize a trailing stop."

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The chart was made on MT5 with standard indicators of Metatrader 5


Jefferson Metha
1761
Jefferson Metha  

I am loving this one, 
so there is another crazy idea that I was told is an illusion. 

I saw the idea being used by another guy. 

BB uused to determine support and resistance points in the future


period 24
Shift 3
deviation 3.5
apply to Close

Read Here

Please tell me what you think of it

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