Hi everyone,
Another question from a relative newbie…
What is the optimum number of periods to use for the BBs?
The standard period for the Bollinger Bands is 20. However, the “optimum” number will depend on each market and time interval. The bollinger bands are just mathematical equations, so one-size-fits-all doesn’t apply because each market is different and trends may be fit to a different period than 20.
Many thanks.
So does the same apply to standard deviations? I know 3 is the max but the auto setting seems to be 2.
The standard settings for Bollinger Bands are 20-days for the look-back period (with a simple moving average) and 2 standard deviations. As TradePlayer noted, however, you should pick a look-back period that suits the timeframe of trading you do. As for how many standard deviations, it depends on your purposes. For example, in my case I look at the width of the Bands, not their actual location, so really all I’m interested in is the standard deviation. The multiplier doesn’t add any information for me.
Many thanks once again to both of you.
The maximum number of deviations allowed will depend on the broker and how much data is available. One of mine will allow only 3 deviations, the other will allow 999. Definitely play with the indicator in order to custom-mold it for each individual market and each individual market’s time frame.
20 periods and 2 standard deviations is the default, as stated above. If you go to 10 periods, John Bollinger suggests 1.9 standard deviations. Less than 10 periods you will not have enough data. Bollinger’s got a free forex website, bb4x.com. If you are new to BBs, read the Using Bollinger Bands guidelines in the BB tutorial. It covers the basics of how to use the bands and some errors to avoid.
Thanks Dee, I’ll have a look at Bollinger’s site.