Bollinger bands paper

This paper endeavours to evaluate the profitability of Bollinger Bands through an empirical study. Bollinger Bands are able to capture sudden.
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Log In Sign Up. Download Free PDF. An empirical comparison of moving average envelopes and Bollinger Bands. Jimmy Hui. Download PDF. A short summary of this paper. Despite the fact that Bollinger Bands can capture sudden price fluctuations which Moving Average Envelopes cannot, our study reveals that Bollinger Bands do not outperform the Moving Average Envelopes.

There are many theories explaining price movements in stock markets. For example, the Orthodox Theory which suggests that the primitive source of stock price movement II. Taylor, The Moving Average Envelopes will studied trading rule in the literature. However, when the contract when k or the stock prices fall.

Day Trading With Bollinger Bands

Tel: Fax: E-mail: Chong cuhk. Leung and T. If the T is the number of trading days in the sample. The data is extracted of the price movements. Nikkei Stock Avg. If there are more than one highest crosses the lower bound from below. Similarly, a sell signal rate, highlight this study the one with the smallest number will be generated when the price penetrates the upper of transactions.


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Both trading rules generate a considerable bound from above. Bands of 2 standard deviations are studied. This paper Note that the number of transactions generated by the assumes that the transaction cost and the stock dividend Moving Average Envelopes rule falls with the value of k. These three guidelines, similar to uptrend guidelines, can help use Bollinger Bands in a downtrend. Check the "Issues" section below for occasions when Bollinger Bands tend not to provide reliable information.

How to Use Bollinger Bands for Trading

Using the trend guidelines, here are the summary guidelines for spotting reversals. The first issue with Bollinger Bands is their limitation as just one indicator. John Bollinger recommends using them with two or three other un-correlated indicators, instead of seeing them as a stand-alone trading system. With established guidelines on how to use the Bollinger Bands, find settings for the indicator that allow you to apply the guidelines to a particular asset you are day trading. Alter the settings so that when you look at historical charts you can see how the Bollinger Bands would have helped you.

If the Bollinger Bands don't help you then change the settings or don't use the bands to trade that particular asset. Ideal Bollinger Bands setting vary from market to market, and may even need to be altered over time even when trading the same instrument. Once the indicator is set up and seemingly working well, the indicator may still have a tendency to produce false signals.

During low volatility times, the bands will contract, especially if the price is moving sideways.

Charts of JKPAPER with Bollinger Bands on Weekly Tick

During such times the price may bounce off both the upper and lower band. In this case, it isn't necessarily a reversal signal, though. The narrow bands are just closer to the price and thus likely to be touched. Bollinger Bands aren't a perfect indicator; they are a tool. They don't produce reliable information all the time, and it's up to the trader to apply band settings that work most of the time for the asset being traded.

The Bollinger Bands indicator is just a tool. It has flaws, and won't produce reliable signals all the time. It can help you stay on the right side of trend and spot potential reversals, though. For that, you'll need to set up the indicators so they align with the guidelines discussed above. Random or default setting on the indicator may not work well. Adjust the indicator and test it out with paper trades before using the indicator for live trades. The guidelines above are not a trading strategy on their own.

A trading strategy requires entry points, exit points, and risk management, which weren't discussed in this article.

Using Bollinger Bands to Improve Your Trading

Bollinger Bands can be combined with a trading strategy, though, such as the day trading stocks in two hours method. The Balance does not provide tax, investment, or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors.

Past performance is not indicative of future results.


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Investing involves risk including the possible loss of principal. Trading Day Trading. Table of Contents Expand. Table of Contents.


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Bollinger Band Basics. Uptrends with Bollinger Bands. Downtrends with Bollinger Bands.