Anyone using Bollinger Bands to make money?
- Thread starter jbtrader23
- Start date
I trade hundreds of contracts a day and use BB to identify my oscillation range.. I know they work, if used properly with other tools. I was told as a child, if you do not like something, its generally because you are doing or using it wrong to begin with...
Just my opinion, but I do trade frequently and have yet to have a down year over the past 10....
Just my opinion, but I do trade frequently and have yet to have a down year over the past 10....
Yes, you can make money trading Bollinger Bands, but the instrument must have a minimum volatility percentage of 4%. Here are the rules, using a length of 20 and 2 standard deviations.
1. Calculate the daily Average True Range (ATR) of the instrument.
2. Calculate the upper Bollinger Band (SD = 2).
3. Calculate the lower Bollinger Band (SD = -2).
4. Calculate the difference between the upper and lower bands (I think Bollinger calls it bandwidth).
5. Calculate the band ratio, i.e., divide the bandwidth by the ATR. This band ratio must be less than a certain percentage of the ATR, e.g., 0.2 or 0.3. This is Condition 1.
6. Calculate the range ratio, i.e., divide the bandwidth divided by the average bandwidth for the past 20 bars. This range ratio must be a low percentage, e.g., 0.3. This is Condition 2.
7. If Condition1 and Condition 2 are satisfied, then buy a certain number of ticks above the upper BB. Short a certain number of ticks below the lower BB.
8. Exit the position at the close of the day, or whichever profit target / stop strategy you use.
9. Don't trade on Friday afternoons, unless it's a newsworthy day.
In general, the system trades between 5 and 10 times per month, assuming the minimum volatility requirement is met. I focus on stocks that trade an average volume at least 2 million shares per day over the reference period. Sample performance report for QQQ on a 10-minute chart follows:
TradeStation Strategy Performance Report - BB QQQ-10 min (11/13/2000-10/18/2002)
Performance Summary: All Trades
Total Net Profit $235,810.00
Open position P/L $0.00
Gross Profit $391,770.00
Gross Loss ($155,960.00)
Total # of trades 146
Percent profitable 61.64%
Number winning trades 90
Number losing trades 56
Largest winning trade $15,070.00
Largest losing trade ($6,480.00)
Average winning trade $4,353.00
Average losing trade ($2,785.00)
Ratio avg win/avg loss 1.56
Avg trade (win & loss) $1,615.14
Max consec. Winners 12
Max consec. losers 4
Avg # bars in winners 10
Avg # bars in losers 9
Max intraday drawdown ($18,470.00)
Profit Factor 2.51
Max # contracts held 21,000
Account size required $18,470.00
Return on account 1276.72%
1. Calculate the daily Average True Range (ATR) of the instrument.
2. Calculate the upper Bollinger Band (SD = 2).
3. Calculate the lower Bollinger Band (SD = -2).
4. Calculate the difference between the upper and lower bands (I think Bollinger calls it bandwidth).
5. Calculate the band ratio, i.e., divide the bandwidth by the ATR. This band ratio must be less than a certain percentage of the ATR, e.g., 0.2 or 0.3. This is Condition 1.
6. Calculate the range ratio, i.e., divide the bandwidth divided by the average bandwidth for the past 20 bars. This range ratio must be a low percentage, e.g., 0.3. This is Condition 2.
7. If Condition1 and Condition 2 are satisfied, then buy a certain number of ticks above the upper BB. Short a certain number of ticks below the lower BB.
8. Exit the position at the close of the day, or whichever profit target / stop strategy you use.
9. Don't trade on Friday afternoons, unless it's a newsworthy day.
In general, the system trades between 5 and 10 times per month, assuming the minimum volatility requirement is met. I focus on stocks that trade an average volume at least 2 million shares per day over the reference period. Sample performance report for QQQ on a 10-minute chart follows:
TradeStation Strategy Performance Report - BB QQQ-10 min (11/13/2000-10/18/2002)
Performance Summary: All Trades
Total Net Profit $235,810.00
Open position P/L $0.00
Gross Profit $391,770.00
Gross Loss ($155,960.00)
Total # of trades 146
Percent profitable 61.64%
Number winning trades 90
Number losing trades 56
Largest winning trade $15,070.00
Largest losing trade ($6,480.00)
Average winning trade $4,353.00
Average losing trade ($2,785.00)
Ratio avg win/avg loss 1.56
Avg trade (win & loss) $1,615.14
Max consec. Winners 12
Max consec. losers 4
Avg # bars in winners 10
Avg # bars in losers 9
Max intraday drawdown ($18,470.00)
Profit Factor 2.51
Max # contracts held 21,000
Account size required $18,470.00
Return on account 1276.72%
I like your post niba.
I just replied to another thread regarding E Wave. same kind of attitude : the indicator is supposed to be holy grail and work 100% and be easy mechanizable... LOL
BB is common sense (well, not really, but common floor traders knowledge : price distribution is normal unless you are trending).
think about it :
2 things can happen, the normal thing = price bounce back, the rarer thing = price rides the BB line.
in either case you KNOW precisely what is going on. Real trading is about knowing what IS happening as opposed to what WILL happen (since we can't know that).
In that sense BB (as well as market profiles, but I find them more difficult) is very good at objectively tell you what is happening, so you can trade, profit or exit (potentially reverse).
Granted, discretion is very suitable to this.
John B did not invent anything, but it was a brilliant idea to fold it the way he did. brilliant in its simplicity. it's no holy grail, since that does not exist.
but if you know how to trade, I can't imagine you won't find a way to make money with it.
I know, it sucks to read that. but that's the truth : the indicator does not make the trader. trading makes the trader.
It is frustrating, but it's true. that's why some make it, others don't, with the same machine, setup and even training. sorry.
what I mean by trading makes the trader, is just that. some do succeed (after months of trying) by selecting a method that works for someone else. ie use BB, or open strategy or pairs etc.. and try it for months until he learns what does not work (yep, the key is to know what does not work, as opposed to what works).
and, sadly maybe this trader will be totally incompatible with the method (or market) and will have to try another one for months. until finally it clicks and becomes easy in his mind.
because trading is very difficult until you realize it can be simple.
BB is as a good tool as another one. maybe it is tricky because it has 2 working modes, while most want to work only in one mode.
but the markets don't care and does have 2 modes, so if you really understand BB then you are much closer to understand how the market does really work.
tntneo
I just replied to another thread regarding E Wave. same kind of attitude : the indicator is supposed to be holy grail and work 100% and be easy mechanizable... LOL
BB is common sense (well, not really, but common floor traders knowledge : price distribution is normal unless you are trending).
think about it :
2 things can happen, the normal thing = price bounce back, the rarer thing = price rides the BB line.
in either case you KNOW precisely what is going on. Real trading is about knowing what IS happening as opposed to what WILL happen (since we can't know that).
In that sense BB (as well as market profiles, but I find them more difficult) is very good at objectively tell you what is happening, so you can trade, profit or exit (potentially reverse).
Granted, discretion is very suitable to this.
John B did not invent anything, but it was a brilliant idea to fold it the way he did. brilliant in its simplicity. it's no holy grail, since that does not exist.
but if you know how to trade, I can't imagine you won't find a way to make money with it.
I know, it sucks to read that. but that's the truth : the indicator does not make the trader. trading makes the trader.
It is frustrating, but it's true. that's why some make it, others don't, with the same machine, setup and even training. sorry.
what I mean by trading makes the trader, is just that. some do succeed (after months of trying) by selecting a method that works for someone else. ie use BB, or open strategy or pairs etc.. and try it for months until he learns what does not work (yep, the key is to know what does not work, as opposed to what works).
and, sadly maybe this trader will be totally incompatible with the method (or market) and will have to try another one for months. until finally it clicks and becomes easy in his mind.
because trading is very difficult until you realize it can be simple.
BB is as a good tool as another one. maybe it is tricky because it has 2 working modes, while most want to work only in one mode.
but the markets don't care and does have 2 modes, so if you really understand BB then you are much closer to understand how the market does really work.
tntneo
Mark, that's an interesting way to use the BB.
Although I think your system is more a directional system (based on the MA component in the BB), using BB to have enough volatility to make worthwhile.
This is not criticism at all, on the contrary. As Niba remind us, BB is a tool, it's not a trading system in itself. So it how you use it.
with the volatility filter, you ensure that the price distribution is wide enough so your trade has a decent chance to make money. it's nice.
tntneo
Although I think your system is more a directional system (based on the MA component in the BB), using BB to have enough volatility to make worthwhile.
This is not criticism at all, on the contrary. As Niba remind us, BB is a tool, it's not a trading system in itself. So it how you use it.
with the volatility filter, you ensure that the price distribution is wide enough so your trade has a decent chance to make money. it's nice.
tntneo
Originally posted by NihabaAshi
I own a copy of his book (Bollinger on Bollinger Bands)...the book sucks
NihabaAshi
yes, the book is perhaps the worst trading book every written...
bollinger bands relate to common statistical analysis - no genius there. his bollinger bars are really candlesticks with a minor tweak - volume i think... and his recent sector analysis is suspiciously like IBD's set-up. the guy (bollinger) takes an idea tweaks it and calls it bollinger - something or other -. what's next - a tweak of the MAs and a ... bollinger bowtie trade. how about a bollinger reversal.... a bollinger bounce....
trading the bands to take partial profits at the first touch in an oscillating market may have merit (if for no other reason than others are watching it), but how many times have you watched the "sticks" just walk up the top band line?
now having said all that, let me contradict myself... i do use BB in my scalping to take partial profit, but not based upon the default 20 period/2 standard deviation set-up.
I would not be able wether JB is loosing money with his Bands or not, neither would I like to follow the highly unempirical proof. All I know is that we have a couple of BB's systems on our site that look profitable to me. Since the systems are made for stocks they look different then for futures.
Take a look here:
http://www.wealth-lab.com/cgi-bin/WealthLab.DLL/getpage?page=ChartScriptSearch.htm
and key in Bollinger in the title search.
Regards.
Take a look here:
http://www.wealth-lab.com/cgi-bin/WealthLab.DLL/getpage?page=ChartScriptSearch.htm
and key in Bollinger in the title search.
Regards.
I do not use Bollinger Bands as I do not like to put too many lines on my prices, but if there was one Indicator that I HAD to make to use and no other to go along with what I do now, I think I would try to make this one work.
I have heard that Keltner (correct spelling ?) is also an alternative to BB?
nitro
I have heard that Keltner (correct spelling ?) is also an alternative to BB?
nitro
