I recently started using Bollinger Bands and find them to be very useful. I’ve had some good success with them mainly entering at the top or bottom band in a ranging market and using an increased volitity, shown by the bands, to try to catch a breakout. I believe that BBs are a very powerful tool and I’m looking for more info on them. I’ve searched and all I’ve really found is trading stratagies. What I’m looking for is more of a basic explanation of what band patterns mean, what to look out for when bands are moving in a certain way and how they can be used in conjunction with other indicators. Can anyone point me in the right direction? Any chapters in books give a good explanation? Any YouTube videos? or even an explanation from yourself as to how to use them effectively?
IMO John Bollinger is one of the best sources of information on the bands. He has a web site “ Bollingerbands.com” with some good free basic information and a few free videos. Last weekend I watched the vids on “Bbands and Candles” and a webinar “22 Rules for using Bbands….”. I thought both the vids were pretty good!
If you have some extra cash to spend try getting a copy of “ Bollinger on Bollinger Bands”. But if your tight on cash I think you can find the useful and important stuff from the book free online at Bollinger’s site and at “investopedia.com”.
Bollinger Bands where created by Bollinger,for the purpose of visual read on volatility,
it is composed of 3 bands, a SMA of 20 (because in the stock market there is 20 trading days in one month) the SMA serves as the Mean, to which price is supposed to revert to. (this is dangerous mentality, price is supposed to do nothing, and the mean will always follow the move, so for prediction, its as bad as all the other indicators that work till they dont)
HOWEVER, if you are really trading, and are using them to measure actual future volatility, they are a great tool, it calculates standard deviations, what you would expect price variations to be. (in my opinion, 22,2 for forex (5.5 trading days a week for the SMA, or 20,2 as standard) is good enough when looking at a daily chart, the deviations need to be adjusted, for measuring lower TF per se. So a good volatility tool to use when zooming in on the market is S/R.
these tools are useful to measure market probabilities (volatility is an essential information to have) but as to predict the move, not so much.
John Bolliners book, Bollinger on Bollinger Bands is probably a reasonable first step. The best book on Bollinger Band’s is without a doubt Phillipe Cahen’s book DTAFM dynamic technical analysis of the financial markets. The books probably out of print now, and IIRC correctly was probably the most expensive trading book that I’ve bought.
The good news is that a lot of the material about BB’s from that that book is covered in a thread by Tymen, here at babypips, and there are no shortage of forums where the DTAFM method has been discussed.
Thanks for the replies guys. I’ve found BBs to be a very useful tool. I used to use a number of moving averages to try to trade the trend with limited success, loosing (demo) pips in the long run. As soon as the averages would give the signal to enter it was like I’d missed most of the trend. I was also getting killed when the market was ranging. With BBs I rather trade a ranging market. I wait till the bands have flattened out and buy at the lower and sell at the upper band. So far I’ve had much more success than with MAs and I’m picking up much more pips off a BB range trade than a MA trend trade. Still getting used to them and looking for as much info on them as I can but I feel they give me a much better idea of when to get in/out and where to set SL and TP targets than moving averages.