Is it common to Buy Above and Sell Bellow with Bollinger bands ?

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Hello,



On some EA that I use, there is the option of Buying Above and Selling Bellow w.t.r Bollinger bands, which is, from what I understand, the opposite of the normal use of the Bollinger bands.

Here it is in action on GBPUSD M15



The first trade is a short and the two last are longs. It seems to work strangly...


But, I could not find any explanation on why.


Any idea ?

Bollinger Bands - Trend Indicators - Technical Indicators - Price Charts, Technical and Fundamental Analysis - MetaTrader 5 Help
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Bollinger Bands (BB) are similar to Envelopes. The only difference is that the bands of Envelopes are plotted a fixed distance (%) away from the...
 
You can use indicators in the way you prefer.

Buying lows and selling highs is a common mean-reverse strategy.
The opposite is more like a volatility breakout (or trend following) approach.

No one is better than the other. Profitability depends on lot of factors: traded symbol, timeframe, money management and others.

Do your studies and choose the strategy that is better for you.
 
Fabio Cavalloni #:
You can use indicators in the way you prefer.

Buying lows and selling highs is a common mean-reverse strategy.
The opposite is more like a volatility breakout (or trend following) approach.

No one is better than the other. Profitability depends on lot of factors: traded symbol, timeframe, money management and others.

Do your studies and choose the strategy that is better for you.

funny, I was talking about this with an italian fellow this evening... anyway, I guess breaking a bollinger band is like breaking any meaningful level, it's either strong or doesn't happen.

[EDIT] actually total BS , it's more like: if it traversed or touched a bollinger band, it's a sign of the price going in this direction

It feels like I already heard this song... the price just goes up and down... this is the only rule to know, isn't it ?

 
AYMERIC75 #:

funny, I was talking about this with an italian fellow this evening... anyway, I guess breaking a bollinger band is like breaking any meaningful level, it's either strong or doesn't happen.

[EDIT] actually total BS , it's more like: if it traversed or touched a bollinger band, it's a sign of the price going in this direction

It feels like I already heard this song... the price just goes up and down... this is the only rule to know, isn't it ?

Bollinger Bands plot the standard deviation of the close price.

Understanding the statistical meaning of standard deviation is crucial to interpretation of Bollinger bands.

Read this please:


EDIT: If you use a factor of 3, it can be interpreted as a reversal, if price touches or goes beyond the band.

But it is also relevant to understand that the middle band is a non-stationary value. So expecting price to return to the middle band does not automatically mean, there will be profits, as the middle band might surpass the absolute value of the upper band when price was exceeding that value.

The general expression Bollinger is doing, is giving you a "zone" in which price is most likely to be.
 
Dominik Christian Egert #:
Bollinger Bands plot the standard deviation of the close price.

Understanding the statistical meaning of standard deviation is crucial to interpretation of Bollinger bands.

Read this please:


EDIT: If you use a factor of 3, it can be interpreted as a reversal, if price touches or goes beyond the band.

But it is also relevant to understand that the middle band is a non-stationary value. So expecting price to return to the middle band does not automatically mean, there will be profits, as the middle band might surpass the absolute value of the upper band when price was exceeding that value.

The general expression Bollinger is doing, is giving you a "zone" in which price is most likely to be.

Thanks, in  my case I use a factor of 2, so I don't know if it can be considered as a reversal level, if so, then it does not explain the graph I showed (e.g. the first trade is a short, and has a target price in the same direction of the entry's direction).


[EDIT]


Here are the next trades, still good so far (actually I have tested this EA on historical data on 6 months and it showed very good results). My interpretation is that touching the bands is an indication that the price wants to push in the similar direction, so you buy on the upper band, and you sell on the lower one...

 
AYMERIC75 #:
Thanks, in  my case I use a factor of 2, so I don't if it can be considered as a reversal level, if so, then it does not explain the graph I showed (e.g. the first trade is a short, and has a target price in the same direction of the entry's direction).
Exit of thinking that rule X will generate Y consequences. No rules on market is always true or always false.

You can trade reversal with deviation of 1.5 and make profitable trades, in the same way of you can use deviation of 3.0 and making profit with a follower apporach.

The only thing you need to do is statistical studies to build a strategy that, not only prooved to work fine on the past, but keep its solidity also into the future.

Again, if u see a chart (that print 3 days only) with some profitable trades, don't assume that next months the market will react into the same way. (This is a simple and stupid joke used by who sell strategies using a specific period as sample, creating illusions of an holy grail. It's easy to apply the same strategy on longer period and see that the strategy fail in most of times).
 
Fabio Cavalloni #:
Exits of thinking that rule X will generate Y consequences. No rules on market is always true or always false.

You can trade reversal with deviation of 1.5 and make profitable trades, in the same way of you can use deviation of 3.0 and making profit with a follower apporach.

The only thing you need to do is statistical studies to build a strategy that, not only prooved to work fine on the past, but keep its solidity also into the future.

Again, if u see a chart (that print 3 days only) with some profitable trades, don't assume that next months the market will react into the same way. (This is a simple and stupid joke used by who sell strategies using a specific period as sample, creating illusions of an holy grail. It's easy to apply the same strategy on longer period and see that the strategy fail in most of times).
"You can trade reversal with deviation of 1.5 and make profitable trades, in the same way of you can use deviation of 3.0 and making profit with a follower apporach."

Ok, so it seems to comply with what I am doing, a higher std factor (from 2 and above) would be more fitted for a follower approach


"The only thing you need to do is statistical studies to build a strategy that, not only prooved to work fine on the past, but keep its solidity also into the future."


What I have done so far is using the Strategy Tester, in my mind it can be considered as a statistical tool (since it uses actual data), but if you have any other way to do a statistical study I am open to it :)

 
AYMERIC75 #:
"You can trade reversal with deviation of 1.5 and make profitable trades, in the same way of you can use deviation of 3.0 and making profit with a follower apporach."

Ok, so it seems to comply with what I am doing, a higher std factor (from 2 and above) would be more fitted for a follower approach


"The only thing you need to do is statistical studies to build a strategy that, not only prooved to work fine on the past, but keep its solidity also into the future."


What I have done so far is using the Strategy Tester, in my mind it can be considered as a statistical tool (since it uses actual data), but if you have any other way to do a statistical study I am open to it :)

Strategy tester is for sure the quickest tool you can use to study and create strategies.

Don't forget to take also other periods to test you strategy, it seems you are testing GBPUSD in last months, where it's nature been clearly directional.

Try a period in which GBPUSD moved sideways, you will see that the follower approach don't pay well.

Also, in most of your trades (in screenshots) market reverses in the same exact moment of the open of the trade, so waiting after the band touch can provide a better risk reward ratio of your trades.

 Also, it seems you are using no stop loss, so a trade will stay opened forever until the TP is hit.

You need to consider a lot of stuffs, but from your messages it seems you are on a good path and with a good approach, so keep it up ;-) 


PS. Using a deviation like 3 and entering following will provide trades opened at very bad prices. It do not means that it can't be profitable, but very probably in long run, this will not pay good.
 
AYMERIC75 #:

Thanks, in  my case I use a factor of 2, so I don't know if it can be considered as a reversal level, if so, then it does not explain the graph I showed (e.g. the first trade is a short, and has a target price in the same direction of the entry's direction).


[EDIT]


Here are the next trades, still good so far (actually I have tested this EA on historical data on 6 months and it showed very good results). My interpretation is that touching the bands is an indication that the price wants to push in the similar direction, so you buy on the upper band, and you sell on the lower one...

Ether you are using a very large SL value, or you are not using any...

Whatever the case is, your R:R is below 1:1, and as far as I can see, you need a WR above 80% to be sure this will generate profits in the long run...

This seems a bit unlikely to be honest.

It looks to me if you get stopped by SL, you need at least 8 or more winners to make up the loss.

Please don't forget, when losing 50% of balance, you need to make 100% profit to go break even, and have your initial balance.

Honestly, if you would take the signal short when you currently go long, your SL could be much tighter and your DD would be much smaller. At least for what you have shown in the charts.
 
You better not trade like that with a broker. It's ridiculous to go long at the high peak, and then wait for the market to correct upwards while you ignore the loss, you could hit drawdown doing that
 
Never do this, and stop using the bollingers that way.
Professional traders would never do this
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