The day moving average is rising as long as it is trading above its level five days ago. Well as of today, I no longer use bands in my trading. Final confirmation comes with a support break or bearish indicator signal. See How Tradingsim Works. One reliable trading methodology utilizing Bollinger Bands, is combining Bollinger Bands and Candlestick analysis. The thing that surprised me is that I couldn't find many other famous authors or experts in the space. In the previous section, we talked about staying away from changing the settings.
Developed by John Bollinger, Bollinger Bands® are volatility bands placed above and below a moving average. Bollinger suggests increasing the standard deviation multiplier to for a period SMA and decreasing the standard deviation multiplier to for a period SMA. As with a simple moving average, Bollinger Bands .
As mentioned earlier, Bollinger Bands can be used in many ways and you could write a whole book just about Bollinger Bands strategies alone. The exact sell criteria is not shown so I will assume that we exit the stock when the reverse occurs.
To test this strategy I have also included some extra liquidity rules so that we avoid thinly traded penny stocks , a ranking rule in order to choose between signals and a market timing rule so that we do not trade during a bear market. In addition, we will spread risk so that we can hold up to 20 positions at one time.
This data includes delisted tickers and is adjusted for corporate actions. As you can see from the results of the test, the strategy was able to return The high win rate of this strategy makes it appealing and the idea looks to have potential.
It must be noted, however, that the results do depend on getting good price fills on the open. I tested the strategy again using the buy price as half-way between the open and the high, and the sell price as half-way between the open and the low, and the annualised return dropped to 3. To improve this system I would suggest looking more closely at the entry price and ranking mechanism. This is a bit trickier to model using the simulator.
But it is possible to come up with a strategy by specifying the number of higher opens or closes above the upper band. Or by the number of lower opens or closes below the lower band. The strategy uses the open price to calculate the default Bollinger Band parameters 20,2 and trades are entered on the same day close. And it uses a liquidity filter to avoid thinly traded penny stocks and the like. Choose lowest ranked signals first. The results show a One of the reasons why the strategy works well, however, is that it relies on trading on the close.
This might be a more accurate representation of the price fills we would actually get when trading the system. Overall, the results are pretty good. With some decent tools and a little bit of discretion there may be some potential to be found here. Below is the full equity curve from But what if those tags occur when the stock is already in an uptrend? Maybe there is a possibility that a close below the bottom Bollinger Band could actually be a good time to trade the pullback?
We need the stock to be in an uptrend and we only exit by trailing stop. As can be seen below, the results are OK. Annualised return in the in-sample period was In the out-of-sample period, the annualised return was Again, the strategy suffers from the problem of trading right on the close, so this strategy and strategy three might benefit from some discretion.
However, the higher win rate of strategy 2 suggests that strategy 2 might also be worth investigating. Whereas trading strategy two relies on getting good price fills on the open. Then you'll love some of the free extras I've put together. Just enter your email address below to download and stay alerted to new content.
You can unsubscribe at any time. Wow this was great. Thanks for this, helped clarify quite a bit!! I have been trading almost the exact opposite way they were intended haha I have been shorting on a close above and long on a close below.
I have also been picking break outs or break downs based on the tightening of the bands. There are so many different ways to use the bands. Bollinger Bands are a volatility indicator which creates a band of three lines which are plotted in relation to a security's price. It is all about the relationship between price and the Upper and Lower Bands. There are six basic relationships that can be quantified. It is a way of pinpointing its location and providing the technical analyst an exact value.
When price is "Walking the Bands" these breakthroughs are not actual reversal signals. Price may indeed reverse somewhat but it often turns once again and resumes the overall trend. Identifying when a Breakthrough signifies an actual trend reversal can be a difficult event pinpoint. This is mostly done through historical technical analysis and research. Trading Signals can also be found using the same principles. Opportunities to trade with the trend can present themselves when Breakthroughs occur in the opposite direction of the underlying trend.
Instead of relying on the appearance of prices in relation to the Bands, technical analysts can use exact values to help make more informed decisions.
Bollinger Bands Trading Strategy One
May 11, · Bollinger bands + 50 EMA Trading Systems. Forex Factory. Home Forums Trades News Calendar Market Brokers Login; User/Email: (20 simple moving average) So we get price, 20SMA and 50EMA as variables. They may then be compared with each other to derive entry rules. As for the exit rules: here the upper and lower . Dec 17, · Win $50; Buy with Discount; Home > Forex Strategies > MultiTimeFrame SMA + BB system. MultiTimeFrame SMA + BB system. Trading indicators – 3 SMA, 11 SMA, 34 SMA + Bollinger Bands(20,2) Forex pairs – all. TF (TimeFrame) – 15 min, H1 Home > Forex Strategies > MultiTimeFrame SMA + BB /5(12). This article looks at four Bollinger Bands trading strategies and tests some basic ideas using historical stock data. Bollinger Bands are a useful and well known technical indicator, invented by John Bollinger back in the s. They consist of a simple moving average (usually the 20 period) and two upper and bottom bands which are placed a .