Best Bollinger Bands Settings

measure volatility

With this strategy, we only use the one trade that we initially make. But if your rules allow you to make multiple trades at a time with the same currency pair, then you may consider adding a second position at the middle line. This means that the price zone created between the 1 and 2 standard deviations can trigger many buy and sell signals. There are many different ways on how to trade Bollinger Bands from trend continuation to reversal, range trading, volatility breakouts or swing trading and day trading. These indicators should come standard on your trading platform. There is no need to adjust these, as we will use the default settings.


What I do before is confirm the candle polarity change for a buy or sell at the upper and lower bands respectively. It has been about 70% efficient but I have always had a reservation that it can work better. I am glad I read this strategy from you and I hope to put it to practice.

Conclusions on Bollinger Trading

Few of them will want to buy again, and the inflow of new money is limited to the formation of a new low point. The technical analyst Richard Wyckoff once called this phenomenon a spring, and this term is still used in the trading circles to this day. Earlier, we have already discussed the main signals of the Bollinger Bands.


CCI then identified tradable pullbacks with dips below -100. This is an example of combining Bollinger Bands with a momentum oscillator for trading signals. The middle band is, by default, the same as a 20-period simple moving average. Many traders mistakenly believe that because a security’s price has touched the upper band they should go short, or vice versa.

Bollinger Bands Strategy for IQ Option. 4 Powerful Trading Signals You Can Choose From

In column B, indicate the multiplier in the purple cell. The default ratio is 2, but you can enter any other number instead. It is designed to accurately calculate Bollinger Bands at a specific point in time. This tool can also be used to experiment with inputs to calculate the MA or the multiplier. As an example, let’s calculate the value of one point of the upper Bollinger band.

Learn about crypto in a fun and easy-to-understand format. Stop losses are typically set just the other side of the middle band. Figuring out what is MACD & how to use the Moving Average Convergence Divergence indicator to make a profit.

In addition to the classic setting of Bollinger Bands, combined options are possible as well. For example, a chart might contain two band indicators plotted using the same calculation period but with different ratios. In his book, the analyst gives an example of a chart with two bands in 20 periods that differ in width by 1 and 2 standard deviations. PeriodsMultiplier101, ,1Let me explain why you need these ratios.

For example, a scalper would need to adjust the BB settings to a short-term period. This will make the BB indicator more sensitive to the short-term price action. John Bollinger the developer of the Bollinger Bands indicator recommends using settings of 9 – 12 based on a 2 standard deviation. By default the Bollinger Bands period is set at 20 and StdDev at 2. I prefer to use this trading strategy using the 1 hour or 4 hour time chart. You can adjust according to what style of trader you are.

Combining Bollinger Bands and Bollinger Bands Width

For example, if the Bollinger Bands squeeze is happening at a period when there is a bullish pennant or flag, it could be a signal of a bullish breakout. Today, they have become some of the most common indicators in the industry. Traders use them to identify a trend by checking overbought and oversold positions.

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It’s better to stick with 20, as this is the value most traders are using to make their decisions, versus trying to look for a secret setting. In this post we’ll provide you with a solid foundation on the bands, plus six trading strategies you can test to see which works best for your trading style. If you don’t know the basics of the Bollinger bands tool, I highly recommend you read this article before reading this for better understanding. The buy crossover happened below the 0 level and below the middle Bollinger Band.

Explained: What Are Bollinger Bands & How to Use It For Crypto Trading?

The of movement is determined by the side of the exit from the figure. If you look closely at this formula, you will understand that if the last price is located on the upper band, the calculation result will be 1. If it is located on the moving average, the %b value will be 0.5. And if the price stops at the lower band, the result of the above formula will be 0.

  • Scalping became a very popular trading method in recent years.This trading technique is used by both experienced traders and market beginners.
  • We see that Alligator helps us correctly interpret the Bollinger signal.
  • Watching the price behave like this, a trader may wonder if the stock is in a new uptrend, or if it has met its resistance.
  • As John Bollinger acknowledged, “tags of the bands are just that, tags, not signals.”
  • Most of the money to be made in the market, with minimal risk, is in the margins.

Changing this number will move the Bands either Forwards or Backwards relative to the current market. Determines what data from each bar will be used in calculations. From equities, fixed income to derivatives, the CMSA certification bridges the gap from where you are now to where you want to be — a world-class capital markets analyst. The middle line is a Simple Moving Average of N periods. 5) Price consolidates sideways, not reaching the outer band anymore and the rejection-pinbar ended the downtrend.

High and low volatility periods are quickly spotted by examining the bands’ behavior. In fact, when bands are contracting, there is a high chance of sharp price changes as volatility increases. He also served on the board for the Market Technicians Association and also on the Federation of Technical Analysts . He based his Bollinger Bands on Keltner Bands and similar to Donchian channels and focused on volatility standard deviation to make his bands more adaptive. The name Bollinger Bands was coined by chance on one of the programs on FNN. Bollinger bands are named after John Bollinger, an American asset manager, and technical analyst.

Bounces from the upper and lower Bollinger Bands

Keltner channels​​ are volatility-based indicators that are similar to Bollinger Bands. The key difference is that Keltner Channels use the average true range to set the band widths, instead of standard deviation. Keltner channels also use an exponential moving average as the middle line. Bollinger Bands can be used on all chart timeframes​ including weekly, daily, or five-minute charts. The settings can be adjusted to suit different trading styles.

bollinger bands ®

The one thing the bands manages to do as promised is contain the price action, even on something as wild as bitcoin. I indicated on the chart where bitcoin closed outside of the bands as a possible turning point for both the rally and the selloff. But let’s be honest here, this is a 60-minute chart of a highly volatile security. Let’s dig deeper into this price action by looking at the charts. Instead, I want to center this piece of the article on how you can use bands to trade bitcoin.

What are the Most Profitable Bollinger Bands Forex Strategies?

If you’re a new trader, it can be difficult to identify the volatility of the markets. Because in trending markets, the market can remain “cheap” or “expensive” for a long period of time. And if the is price near the lower Bollinger Band, it’s considered “cheap” because it’s 2 standard deviation below the average. Many new traders think they need more indicators to be a consistently profitable trader. It’s one thing to know how the E-mini contract will respond to the lower band in a five-day trading range. Remember, price action performs the same, just the size of the moves are different.

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Bollinger Bands is a significantly different indicator to a VWAP. For starters, VWAP stands for Volume-Weighted Average Price. It is an intraday indicator that looks at the average price of an asset when compared to its volume. Another strategy of using Bollinger Bands is in trend following.

When there are pullbacks , and the price stays below the middle band and then moves back to the lower band, it is an indication of a lot of downtrend strength. In a downtrend, prices should not break above the upper band since this would indicate that the trend may be reversing, or it is slowing. If the price pulls back within the uptrends, and it stays above the middle band and moves back to the upper band, that indicates a lot of strength. Generally, a price in the uptrend should not touch the lower band, and if it does, it is a warning sign for a reverse or that the stock is losing strength. This pattern indicates that downward pressure has subsided. Often, the next price movement is a strong move upwards off the second low.