There are a lot of rules to remember when trading with Bollinger bands. When reading about how to use Bollinger bands it may seem rather difficult to implement, but truth be told, Bollinger bands are not only easy to use but insanely accurate at short term price movement.
20,2 are just preset default figures - The N-period value of 20 and the K-period of 2 are just presets and the most generic application of Bollinger Bands to a trading system. Depending on the market, manipulating the values within the Bollinger Band makes for smoother or more volatile changes in the indicator and provides a better indicator. For volatile markets, smoothing the indicator with a greater N-value will create a more static Bollinger Band.
Bollinger bands need other confirmation. - I say BS, Bollinger bands are about the only tool / indicator I would ever consider using exclusively. I don't use them exclusivey, only because I don't have to. Truth be told Bollinger bands are just about the only indicator i would ever consider using exclusively. With a good understanding of Bollinger bands you don't need anything else.
The trend is your friend - Bollinger Bands work exceptionally well with trading ranges that have already been identified by a trader utilizing trend line techniques to form trading ranges. Using trend lines with a Bollinger Band system has proven to be highly profitable and predictable.
Climbing or falling with the bands. - In the text books it is presented that price will hit a band and revert to the mean, and while this is true a lot of times, very often price and the band will continue in the opposite direction following the bands. This is an incredible trading opportunity for the trader that understand the explosive possibilities of following the bands.
Bollinger Bands work with more traditional technical analysis - Bollinger Bands are great at confirming traditional market patterns. Patterns such as the head and shoulders or double bottoms and tops are easily confirmed by touches to the Bollinger Bands. A double top at the upper range of a Bollinger Band is often a strong sell signal, made stronger by the Bollinger confirmation; this is called confluence and an excellent confirmation tool.
If you are already familiar with trend lines and support and resistance, then adding Bollinger bands to this type of trading is an excellent combination. Bollinger bands will help to identify high probability zones when combined with a trend line / support and resistance style of trading.
The N value in Bollinger band settings represents the look-back period. Any setting less than 10 is not recommended. A setting less than 10 is going to give you results that are basically equal to price action. Short term time frames require an N period adjustment, but not less than 10. Consider an N period of 13 for intraday charts and the standard 20 N period for daily charts.
Bollinger bands are not necessarily perfect for short trend and high volatility. Bollinger bands does measure and display high volatility it is not as effective on a 1to 5 minute chart as it is on say a 15 minute or hourly chart. Shorter term charts can experience volatility spikes that Bollinger bands may not signal.
Bollinger bands do not predict the future. In fact Bollinger bands are providing you with information only after price and not before. That said, the secret in trading Bollinger bands is your ability to understand and respond to Bollinger band signals as price approaches the bands. Watch closely how Bollinger bands responds to approaching price for clues on how to make the best trades.
Bollinger band width. The width of the bands is important. I use 3 set of bands personally. 2.0, 2.5 and 3.0 standard deviations on every time frame I trade. this allows me to see the extreme nature of the move or potential reversal. Using high probability candlestick patterns with band width is an excellent tool for identifying entry. - 16928
20,2 are just preset default figures - The N-period value of 20 and the K-period of 2 are just presets and the most generic application of Bollinger Bands to a trading system. Depending on the market, manipulating the values within the Bollinger Band makes for smoother or more volatile changes in the indicator and provides a better indicator. For volatile markets, smoothing the indicator with a greater N-value will create a more static Bollinger Band.
Bollinger bands need other confirmation. - I say BS, Bollinger bands are about the only tool / indicator I would ever consider using exclusively. I don't use them exclusivey, only because I don't have to. Truth be told Bollinger bands are just about the only indicator i would ever consider using exclusively. With a good understanding of Bollinger bands you don't need anything else.
The trend is your friend - Bollinger Bands work exceptionally well with trading ranges that have already been identified by a trader utilizing trend line techniques to form trading ranges. Using trend lines with a Bollinger Band system has proven to be highly profitable and predictable.
Climbing or falling with the bands. - In the text books it is presented that price will hit a band and revert to the mean, and while this is true a lot of times, very often price and the band will continue in the opposite direction following the bands. This is an incredible trading opportunity for the trader that understand the explosive possibilities of following the bands.
Bollinger Bands work with more traditional technical analysis - Bollinger Bands are great at confirming traditional market patterns. Patterns such as the head and shoulders or double bottoms and tops are easily confirmed by touches to the Bollinger Bands. A double top at the upper range of a Bollinger Band is often a strong sell signal, made stronger by the Bollinger confirmation; this is called confluence and an excellent confirmation tool.
If you are already familiar with trend lines and support and resistance, then adding Bollinger bands to this type of trading is an excellent combination. Bollinger bands will help to identify high probability zones when combined with a trend line / support and resistance style of trading.
The N value in Bollinger band settings represents the look-back period. Any setting less than 10 is not recommended. A setting less than 10 is going to give you results that are basically equal to price action. Short term time frames require an N period adjustment, but not less than 10. Consider an N period of 13 for intraday charts and the standard 20 N period for daily charts.
Bollinger bands are not necessarily perfect for short trend and high volatility. Bollinger bands does measure and display high volatility it is not as effective on a 1to 5 minute chart as it is on say a 15 minute or hourly chart. Shorter term charts can experience volatility spikes that Bollinger bands may not signal.
Bollinger bands do not predict the future. In fact Bollinger bands are providing you with information only after price and not before. That said, the secret in trading Bollinger bands is your ability to understand and respond to Bollinger band signals as price approaches the bands. Watch closely how Bollinger bands responds to approaching price for clues on how to make the best trades.
Bollinger band width. The width of the bands is important. I use 3 set of bands personally. 2.0, 2.5 and 3.0 standard deviations on every time frame I trade. this allows me to see the extreme nature of the move or potential reversal. Using high probability candlestick patterns with band width is an excellent tool for identifying entry. - 16928
About the Author:
Bollinger bands may seem confusing at first, but they are hands down the most telling technical indicatior you will ever lay your eyes on. To get your hands on Mark Deatons latest Bollinger band tips and tricks visit us at http://www.bollingerbandgenius.com
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