Using Bollinger bands to determine(Predict) Support Resistance and areas of Consolidation.

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Jefferson Metha
1742
Jefferson Metha  

Good day. 

I meet a friend of mine and he told me of a system using Bollinger bands peaks and troughs to determine levels of Support and resistance and also possible areas of consolidation. 

where there is a peak/trough we expect the current price at that set peak (NB not of candles or market), to in future act as a level of Support or resistant. 

In an  uptrending market the peaks of the upper BB band are used, if the market is down trending then the opposite is true. 

Now moving ahead to when price returned to the same region. 

moving to the right of the chart 

further to the right 

retake of previous image 
even further to the right Price Action is Obeyed around the set Levels. 
change Time frame from M15 to H4

observing last touch of the Zones 
Now My problem is I am coding an EA, and if you observe here are many peaks and troughs that are created by the BB bands. 

 Is there any Literature i can get on this system ?

I am programming an EA based on this System.

i am having a challenge as to how to store past data from the BB to an external file and retrieve it to the EA when price approaches a particular level. 
such that when other signals suggest that the  level price is headed towards it will break it, the EA will be having the next 3 to 5 coming levels.. 
 
please do not ell me to go to Freelance service,  I intend to go there after am done with the EA coding just to find someone to recheck and fix bugs. I need help, thank you.


Brian Rumbles
1005
Brian Rumbles  

I don't know if I understand right but are you saying that the past turning point of the BB are used to predict the future support and resistance?

Woudnt you be able to store this in variables or an array?

Jefferson Metha
1742
Jefferson Metha  
Brian Rumbles:

I don't know if I understand right but are you saying that the past turning point of the BB are used to predict the future support and resistance?

Woudnt you be able to store this in variables or an array?

exactly

however with particular settings of the BB it holds true, and stronger with higher time frame. 

Chris70
405
Chris70  

Your idea isn't complicated to code because you don't even need the graphical representation of the Bollinger Bands indicator, but can just quickly calculate the values.

What are Bollinger Bands? N-period moving average +/- k times the N-periods standard deviation.

- Moving average: just sum up the past N prices and divide the result by N

- standard deviation: substract each price from the moving average and sum up the squares of those differences, then you take the square root of the final result

You can store the MA and std.dev. values into an array or indicator buffer. If the second last value for MA+k*StdDev is higher than the one before and the one after, you just had an upper turning point (+vice versa for lower turning points).


But what's the whole point? It all seems totally arbitrary to me and given your chart examples, I get the impression, that your eyes just see what your mind wants them to.

How many (=N) periods and how many (=k) standard deviations? 20 periods and 2 standard deviations? or better 14 periods and 2.5 standard deviations... You get the point, why it's arbitrary and I don't see how those values could act as support and resistance.

Brian Rumbles
1005
Brian Rumbles  

I also think it could be an optical illusion, however it is still a fair hypothesis worth testing which is what back testing is good for.

Jefferson Metha
1742
Jefferson Metha  
Brian Rumbles:

I also think it could be an optical illusion, however it is still a fair hypothesis worth testing which is what back testing is good for.

yes I had same debate with the guy that was talking about it but how ever I haven't seen area that it hasn't held true. 
but considering that S/R zones are determined by smart money

Jefferson Metha
1742
Jefferson Metha  


the deleted details(edited). 

if the chart this is used on Volatility indices or Symbols that are not affected by News the peaks and troughs follow the above stated description provided the parameters are as follows 
Period: any fibonacci based number or ratio percentage: (1,2,3,5,6,13,21,etc) or the rounded percentages. 
Shift = deviation = 3
applied to close. 

the  Idea will be to export all the values of the peaks of upper BB or the troughs of the lower BB, to an external file after they have been rounded off 5 Digits to 3 and 3 digits to 1 d.p as for the case of Volatilities rounding off to the nearest 1000 points. 


areas where there is no change of upper or lower bands for  several bars the zone will in future be a zone of consolidation 

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