I like to use BB bands to give me an idea of the "range of trading" of the current underlying (stock, index, etc). I like to use the RSI index to indicate trend. I like to use the slow stochastic to look at overbought/oversold situations. I also keep my eye on the VIX for relative volatility. The RSI is most useful in trending markets, where the slow Stochastic is most useful for non-trending markets. Remember, underlyings can hug the upper or lower bb bands for quite a while. In addition, underlyings can be overbought and oversold for a while. Looking at the ES (SPX), it appears to be non-trending, so I focus on the slow stochastic. The slow stochastic appears to be approaching oversold levels. I wouldn't be surprised to see the index touching/hugging the lower BB band. The underlying will hug the band until the slow stochastic reemerges above 20 and the VIX goes higher and reverses. The 20-day SMA appears to be a resistance level as well. If I were trading ES futures--as a swing trader, I would wait for clarification. IMO, it is too late to short and too early to buy. Longer term--I believe there is less fear at this level now than last month; so touching or exceeding July 15th lows is possible.
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Bollinger bands
- Thread starter osho67
- Start date
Here are the results of simulated Bollinger Band trading Fannie Mae symbol FNM stock, 31.61 years of daily price data and 5 % heat. This system uses 20 days average price values +- 2 standard deviations. Long position trades only. I suspect profit might be greater if longer term parameters are used. Initial capital $ 100,000.
Number of trades 160
Total profit $ 78727
Profit after subtracting $ 10.00 commission, slippage per transaction: $ 75527
Greatest draw down is 0.1322 (13.22 per cent).
Cumulative Annual Growth Rate (CAGR) is 2.39 per cent.
Number of trades 160
Total profit $ 78727
Profit after subtracting $ 10.00 commission, slippage per transaction: $ 75527
Greatest draw down is 0.1322 (13.22 per cent).
Cumulative Annual Growth Rate (CAGR) is 2.39 per cent.
These are simulation results of a similar system. This is a buy low sell high system using Bollinger bands, 20 days average +- 2 standard deviations. Risk is $ 5000, initial capital $ 100,000, long position trades only, Fannie Mae symbol FNM daily price data for 31.61 years. Other parameters might show greater profit.
Number of trades 172
Total profit $ 71565
Profit after subtracting $ 100 commission & slippage per trade: $ 54365
Greatest draw down is 0.2288 (22.88 %)
Number of trades 172
Total profit $ 71565
Profit after subtracting $ 100 commission & slippage per trade: $ 54365
Greatest draw down is 0.2288 (22.88 %)
Quote from cashmoney69:
agree
I'd like to see someone who trades bb's successfully. I just dont see how its usefull.
I use them all the time, and find them very useful. The proper way to use Bollinger bands is to understand that they are a dual indicator, and that you need to look at them in two completely different contexts depending on market conditions.
Here is what I mean:
You first have to determine for yourself (using whatever criteria you want, usually it's just reading price action) whether the market is in "chop" mode or in "trend" mode. If it is in "trend" mode , you hold your position as the price tracks along the upper edge (or lower edge) of the BB. Also, trend pullbacks will often go right to the middle part channel if you set it up right (I use it on range charts which work great).
If you determine that the market is in "chop" mode however, you need to do the exact opposite. As soon as price touches the outer bands it is a great overbought/oversold indicator.
Personally I think that BB is one of the best indicators out there because it is useful in all types of markets, and sits right on top of price without obscuring the price action itself too much. EMAs are great in trends but give misleading signals in chop, and oscillators are great in chop but give very dangerous signals in trends.
BBs don't have this problem if you know how to use them (which I suspect most people don't). Like everything, it comes down to the individual trader and your own ability to interpret all the signals that you see. The real trick is identifying chop vs. trend conditions, which is something that no indicator can help you with consistently.
http://wl4.wealth-lab.com/cgi-bin/WealthLab.DLL/getpage?page=Top25APR.htm
Have a look at SuperBands, with Linear Regression Analysis on that page. That's the most profitable limit order script ever written on WL, and it uses bollinger bands, not the way John Bollinger uses them, but as a shortcut to calculating what standard deviation away from the mean the current low bar is and simply selling on the open the next day.
Realistically, that's the only system based on bollinger bands that has been shown to be long term profitable. I guarantee you'll have a nice robust backtest on the NAZ100 with that script at 1% of equity.
This is the backtest I have currently on all the data.
Long + Short Long Only Short Only Buy & Hold
Starting Capital $1,000,000.00 $1,000,000.00 $1,000,000.00 $1,000,000.00
Ending Capital $16,673,493.24 $16,673,493.24 $1,000,000.00 $6,671,276.22
Net Profit $15,673,493.24 $15,673,493.24 $0.00 $5,671,276.22
Net Profit % 1,567.35% 1,567.35% 0.00% 567.13%
Annualized Gain % 32.36% 32.36% 0.00% 20.82%
Exposure 6.48% 6.48% 0.00% 121.28%
Number of Trades 18,654 18,654 0 95
Avg Profit/Loss $840.22 $840.22 $0.00 $59,697.64
Avg Profit/Loss % 1.57% 1.57% 0.00% 287.28%
Avg Bars Held 1.00 1.00 0.00 2,523.00
Winning Trades 11,652 11,652 0 61
Winning % 62.46% 62.46% N/A 64.21%
Gross Profit $29,879,477.58 $29,879,477.58 $0.00 $6,020,686.27
Avg Profit $2,564.32 $2,564.32 $0.00 $98,699.77
Avg Profit % 4.71% 4.71% 0.00% 474.63%
Avg Bars Held 1.00 1.00 0.00 2,523.00
Max Consecutive 169 169 0 N/A
Losing Trades 7,002 7,002 0 34
Losing % 37.54% 37.54% N/A 35.79%
Gross Loss $-14,205,984.34 $-14,205,984.34 $0.00 $-349,410.05
Avg Loss $-2,028.85 $-2,028.85 $0.00 $-10,276.77
Avg Loss % -3.66% -3.66% 0.00% -48.86%
Avg Bars Held 1.00 1.00 0.00 2,523.00
Max Consecutive 86 86 0 N/A
Max Drawdown $-1,559,751.00 $-1,559,751.00 $0.00 $-6,892,553.00
Max Drawdown % -9.85% -9.85% 0.00% -65.80%
Max Drawdown Date 11/20/2008 11/20/2008 N/A 3/9/2009
Wealth-Lab Score 450.46 450.46 0.00 5.87
Profit Factor 2.10 2.10 0.00 17.23
Recovery Factor 10.05 10.05 N/A 0.82
Payoff Ratio 1.29 1.29 0.00 9.71
Sharpe Ratio 1.67 1.67 0.00 0.66
Ulcer Index 1.60 1.60 0.00 30.54
Wealth-Lab Error Term 14.38 14.38 0.00 18.26
Wealth-Lab Reward Ratio 2.25 2.25 N/A 1.14
Luck Coefficient 7.81 7.81 0.00 8.19
Pessimistic Rate of Return 2.10 2.10 0.00 12.97
Equity Drop Ratio 0.05 0.05 0.00 0.28
Annually, though, it has quite a few quiet years.
Period Starting $ Return % Return % Max DD Exposure Entries Exits
8/10/1999 77,517.75 7.75 -1.98 5.13 518 518
1/3/2000 2,097,997.75 194.71 -9.04 19.98 4,781 4,781
1/2/2001 915,093.50 28.82 -9.34 14.77 3,676 3,676
1/2/2002 1,391,236.00 34.01 -4.30 9.91 2,526 2,526
1/2/2003 464,555.00 8.47 -2.81 2.83 713 713
1/2/2004 545,377.00 9.17 -3.06 2.85 718 718
1/3/2005 620,283.50 9.55 -1.62 1.80 454 454
1/3/2006 237,629.50 3.34 -1.92 2.06 515 515
1/3/2007 969,233.00 13.19 -1.66 3.18 783 783
1/2/2008 7,696,673.00 92.52 -9.85 14.38 3,304 3,304
1/2/2009 657,896.00 4.11 -4.29 4.21 666 663
Have a look at SuperBands, with Linear Regression Analysis on that page. That's the most profitable limit order script ever written on WL, and it uses bollinger bands, not the way John Bollinger uses them, but as a shortcut to calculating what standard deviation away from the mean the current low bar is and simply selling on the open the next day.
Realistically, that's the only system based on bollinger bands that has been shown to be long term profitable. I guarantee you'll have a nice robust backtest on the NAZ100 with that script at 1% of equity.
This is the backtest I have currently on all the data.
Long + Short Long Only Short Only Buy & Hold
Starting Capital $1,000,000.00 $1,000,000.00 $1,000,000.00 $1,000,000.00
Ending Capital $16,673,493.24 $16,673,493.24 $1,000,000.00 $6,671,276.22
Net Profit $15,673,493.24 $15,673,493.24 $0.00 $5,671,276.22
Net Profit % 1,567.35% 1,567.35% 0.00% 567.13%
Annualized Gain % 32.36% 32.36% 0.00% 20.82%
Exposure 6.48% 6.48% 0.00% 121.28%
Number of Trades 18,654 18,654 0 95
Avg Profit/Loss $840.22 $840.22 $0.00 $59,697.64
Avg Profit/Loss % 1.57% 1.57% 0.00% 287.28%
Avg Bars Held 1.00 1.00 0.00 2,523.00
Winning Trades 11,652 11,652 0 61
Winning % 62.46% 62.46% N/A 64.21%
Gross Profit $29,879,477.58 $29,879,477.58 $0.00 $6,020,686.27
Avg Profit $2,564.32 $2,564.32 $0.00 $98,699.77
Avg Profit % 4.71% 4.71% 0.00% 474.63%
Avg Bars Held 1.00 1.00 0.00 2,523.00
Max Consecutive 169 169 0 N/A
Losing Trades 7,002 7,002 0 34
Losing % 37.54% 37.54% N/A 35.79%
Gross Loss $-14,205,984.34 $-14,205,984.34 $0.00 $-349,410.05
Avg Loss $-2,028.85 $-2,028.85 $0.00 $-10,276.77
Avg Loss % -3.66% -3.66% 0.00% -48.86%
Avg Bars Held 1.00 1.00 0.00 2,523.00
Max Consecutive 86 86 0 N/A
Max Drawdown $-1,559,751.00 $-1,559,751.00 $0.00 $-6,892,553.00
Max Drawdown % -9.85% -9.85% 0.00% -65.80%
Max Drawdown Date 11/20/2008 11/20/2008 N/A 3/9/2009
Wealth-Lab Score 450.46 450.46 0.00 5.87
Profit Factor 2.10 2.10 0.00 17.23
Recovery Factor 10.05 10.05 N/A 0.82
Payoff Ratio 1.29 1.29 0.00 9.71
Sharpe Ratio 1.67 1.67 0.00 0.66
Ulcer Index 1.60 1.60 0.00 30.54
Wealth-Lab Error Term 14.38 14.38 0.00 18.26
Wealth-Lab Reward Ratio 2.25 2.25 N/A 1.14
Luck Coefficient 7.81 7.81 0.00 8.19
Pessimistic Rate of Return 2.10 2.10 0.00 12.97
Equity Drop Ratio 0.05 0.05 0.00 0.28
Annually, though, it has quite a few quiet years.
Period Starting $ Return % Return % Max DD Exposure Entries Exits
8/10/1999 77,517.75 7.75 -1.98 5.13 518 518
1/3/2000 2,097,997.75 194.71 -9.04 19.98 4,781 4,781
1/2/2001 915,093.50 28.82 -9.34 14.77 3,676 3,676
1/2/2002 1,391,236.00 34.01 -4.30 9.91 2,526 2,526
1/2/2003 464,555.00 8.47 -2.81 2.83 713 713
1/2/2004 545,377.00 9.17 -3.06 2.85 718 718
1/3/2005 620,283.50 9.55 -1.62 1.80 454 454
1/3/2006 237,629.50 3.34 -1.92 2.06 515 515
1/3/2007 969,233.00 13.19 -1.66 3.18 783 783
1/2/2008 7,696,673.00 92.52 -9.85 14.38 3,304 3,304
1/2/2009 657,896.00 4.11 -4.29 4.21 666 663
I love looking at the Bollinger Bands on the SPY 1 min chart intraday also with VWAP, pivot points and other support/resistance levels while i'm trading ES and even YM as some nice scalping entries.
Seems like the entire market follows the trend on the SPY
They also work fairly well on the 15 min chart on ES and YM too if I'm looking for a little longer position.
They're in no way the only reason i enter a trade but it helps confirm when a little correction is due.
Just wait for the turn to be in progress. Losing out on a few extra bucks because you didnt time your entry Exactly right pays off in the long run
Seems like the entire market follows the trend on the SPY
They also work fairly well on the 15 min chart on ES and YM too if I'm looking for a little longer position.
They're in no way the only reason i enter a trade but it helps confirm when a little correction is due.
Just wait for the turn to be in progress. Losing out on a few extra bucks because you didnt time your entry Exactly right pays off in the long run
Bands are beautiful with a 20 day. Pull up a chart..any chart on pretty much anything and watch the correlation between the 20 day and the bands. Market always responds to the 20.
Bands generally mean overextention and a correction to within the bands. But you must notice the 20 and if its beginning to trend or not.
The problem for me is the hesitation that can come from trading around the 20. Don't want to put the position on too early if theres a break out or reversal, and if you wait too long you've missed a good portion of the move.
Bands with a 20 are a must. Use with a 14 day RSI for great reversal indicators.
Bands generally mean overextention and a correction to within the bands. But you must notice the 20 and if its beginning to trend or not.
The problem for me is the hesitation that can come from trading around the 20. Don't want to put the position on too early if theres a break out or reversal, and if you wait too long you've missed a good portion of the move.
Bands with a 20 are a must. Use with a 14 day RSI for great reversal indicators.
I found BB's to be completely useless.
1. the bands get tight to show consolidation and any possible breakout.......ok. you dont need bb's to see a sideways market
2. When the market breaks the upper or lower band the market is said to be in extremes and should return within the bands...........ok. Fade a stock breaking out from a previous trend and see what happens to your account.
1. the bands get tight to show consolidation and any possible breakout.......ok. you dont need bb's to see a sideways market
2. When the market breaks the upper or lower band the market is said to be in extremes and should return within the bands...........ok. Fade a stock breaking out from a previous trend and see what happens to your account.