How to Trade Bollinger Bands

[riskfreetrading]

I would like to ask how ET people trade using bollinger bands?
I read in a book by Bollinger that there is a frenchman (maybe his name is cahen or cohen?) who has found various ways to trade them, but bollinger did not elaborate more. I was not even sure whether bollinger himself makes anymoney with them. He seemed to dodge the issue in the book.

Any opinion?

 

[silvermotion]

use a setting like 14 period and 2 std dev (some ppl like to plug a fib value in there like 1.618 because apparently fib numbers makes everything better)

when a market is in a congestion (bands will be flat), fade the bands with the midpoint as a tgt

when the market is in a trending phase, wait for pullbacks at the midpoint line and enter there, ride the trend.

 

[riskfreetrading]

Quote from silvermotion:

use a setting like 14 period and 2 std dev (some ppl like to plug a fib value in there like 1.618 because apparently fib numbers makes everything better)

when a market is in a congestion (bands will be flat), fade the bands with the midpoint as a tgt

when the market is in a trending phase, wait for pullbacks at the midpoint line and enter there, ride the trend.

Excellent response. Thanks.

I trade them similar to what you said with the exception of the setting in the MA and the fib thing.

When BBs are flat and I fade them, sometimes price goes to the lower bands. From there it can go up, but it can also go down (hugging the lower band for a down move if previous move was up).

Do you use them to identify reversals? How do you deal with multiple time frames?

 

[positiontrade]

Bollinger himself said that bollinger bands didn't work for him. but you can't blame the man for trying to make a buck selling his method.

 

[Rufawana]

The book he's talking about is Dynamic Technical Analysis of the Financial Markets - Phillipe Cahen.
The DTAFM trading methodology uses BB's as a part of the system, but only a small part.
It is ladden with indicators though, which I am not so sure about in general.

Worth reading, yes; a holy grail; no.

If any one else has any experience trading with DTAFM, I would appreciate comparing some notes ?

 

[FredBloggs]

Quote from positiontrade:

Bollinger himself said that bollinger bands didn't work for him. but you can't blame the man for trying to make a buck selling his method.

i read somewhere that he initially developed them for a project to do with an options pricing model. i could be wrong.

maybe he just sucks as a trader - his original career was as a financial journalist. ie full of opinion.

i know traders who use them as a guide rather than a signal.

 

[HolyGrail]

When price reaches the upperband flip a coin on what to do next.

When price reaches the lower band, flip a coin on what to do next.

If price moves from upper band to middle band, or from lower band to middle band flip a coin on what to do next.

Bollinger bands are worthless.

 

[davidmaria1]

Worthless? I don't know about that. I saw a BB chart on a screenshot during that Wall Street Warrior show. It clearly showed a bollinger band. And we all know how well THOSE guys do. They got their own TeeVee show!

 

[Lucrum]

I use BB's on the volume panes of my daily and weekly charts. So I'll know at a glance what average volume and typical fluctuations are.

 

[Anekdoten]

If the upper bands are hit the immediate trend is bullish if the lower bands are hit the immediate trend is bearish. If the upper bands are hit as much as the lower bands you probably got a consolidation channel in place.

However once you get a few hundreds hours under your belt this info should come to you naturally without the need of bands to confirm you the obvious.

Anek