Question regarding Bollinger Bands - Page 2 - Traders Laboratory
Forum Guidelines | Contact Us
Home

Go Back   Traders Laboratory > Technical Laboratory > Technical Analysis

Technical Analysis The technical discussion forum for traders. Moderated by mister ed.


Reply
 
LinkBack (3) Thread Tools Display Modes
  #11 (permalink)  
Old 09-23-2006, 07:04 AM
Robert has no status.

 
Join Date: Sep 2006
Posts: 18
Thanks: 0
Thanked 0 Times in 0 Posts
This member is the original thread starter. Re: Question regarding Bollinger Bands

Quote:
View Post
Linda Raschke uses BB after a trend day when consolidation is expected. She uses it to fade the upper and lower BB and uses the 20EMA as the target. She only takes the first 2 signals in the morning though. The 3rd signal is slightly positive based on her testing. This setup is not used in the afternoon session. In general, she doesn't use BB for her other setups, she uses the Keltner Channel. BB may work better with Options because they are both volatility based.
Does fading the upper and lower bands only work during a consolidated market. If the markets were in an uptrend, can I expect a pullback to the upper band?

I read that once prices expand out of the bollinger bands they have a tendency to return inside the bands. Would this offer a fading opportunity? Also, how would I use the the middle band? Thank you

Reply With Quote
  #12 (permalink)  
Old 09-23-2006, 12:35 PM
ant's Avatar
ant ant is offline
ant has no status.

 
Join Date: Sep 2006
Posts: 293
Thanks: 0
Thanked 3 Times in 1 Post
Re: Question regarding Bollinger Bands

Quote:
View Post
Does fading the upper and lower bands only work during a consolidated market. If the markets were in an uptrend, can I expect a pullback to the upper band?

I read that once prices expand out of the bollinger bands they have a tendency to return inside the bands. Would this offer a fading opportunity? Also, how would I use the the middle band? Thank you
Robert, consolidating markets and trending markets are traded differently! In a trading range, you should fade near the bracket limits (i.e., short the upper limit and go long at the lower limit) and in a trending market you should buy pullbacks and short rallies. Do not fade anymore. No doubt you will lose big bucks fading a trending market. Trading a trending market is a lot easier than trading a consolidating market. When a market is trending just jump on board and then manage the trade. You don't need to use many tools to trade a trending market. Don't complicate this.

When a market is in a trading range, you do not want to enter in the middle of the range. There is a lot of noise there and offers poor trade location. From the middle of a range, you really don't know in which direction the market is likely to go. From a Market Profile perspective, the middle of the range would contain the value area and the limits would contain the "unfair" prices. When prices trade in the "unfair" area, it is likely that price will rotate back to value. This is exactly what you said about about markets trading beyond the BBs and then back inside it (until the market breaks out, of course).

You can use the middle band of the BBs for your target (according to Linda Raschke), which makes sense to me. So you could short at the upper BB and cover when it reaches the middle band. Keep in mind that prices don't always trade directly from the upper limit to the lower limit and vice versa. Again, the idea is that after range expansion, consolidation is expected and that's when you could employ the BB trading strategy.

Reply With Quote
  #13 (permalink)  
Old 09-24-2006, 09:13 AM
Robert has no status.

 
Join Date: Sep 2006
Posts: 18
Thanks: 0
Thanked 0 Times in 0 Posts
This member is the original thread starter. Re: Question regarding Bollinger Bands

Thank you for the explanation ant. It was extremely helpful. You mentioned not to fade during a trending market; instead buy the pullbacks and short the rallies.

I have heard of traders who are counter trend traders. How do they employ their strategy in a trending market? They would basically be fighting the trend? Is counter trending even profitable? New traders are told not to catch a falling knife, yet professional traders seem to find ways to profit from this.

Reply With Quote
  #14 (permalink)  
Old 09-24-2006, 09:45 PM
ant's Avatar
ant ant is offline
ant has no status.

 
Join Date: Sep 2006
Posts: 293
Thanks: 0
Thanked 3 Times in 1 Post
Re: Question regarding Bollinger Bands

Perhaps I shouldn't have made such a blanket statement about not fading a trend. I believe a countertrend strategy can be implemented successfully, but probably not by many. An example of a countertrend strategy in a trending market might be to monitor a trend for loss of momentum and then fade the trend, such as a divergence, three pushes in a trend, etc. That is, trade the pullback/rally in an uptrend/downtrend. However, this would be a scalp only, not a big picture play. The point that I was trying to make was that fighting the trend is a tough way to trade, and hence, make money, IMO. Why not follow the trend and trade with the wind at your back? Catching a trend early and riding it is the best trading opportunity that the market presents, but unfortunately it only happens about 30% of the time. That's why I believe learning to trade brackets is important for full-time daytraders. Just my opinion, so take it FWIW.

Reply With Quote
  #15 (permalink)  
Old 09-24-2006, 10:13 PM
Soultrader's Avatar
Soultrader is focusing on discipline.

Trader Specs
 
Join Date: Aug 2006
Location: Tokyo, Japan
Posts: 3,218
Thanks: 162
Thanked 467 Times in 208 Posts
Send a message via Skype™ to Soultrader
Re: Question regarding Bollinger Bands

Great point ant. Counter trend trading is alot harder than trend trading. I know a trader who is an amazing counter trend trader but when I tried to use her methodology into my trading style, it did not work. Also, counter trend trading is more geared towards scalping. You may catch the dead highs/lows but this is a rare case.

You don't always have to try to be the man by catching the top or bottom. You can make a comfortable living just by catching the meat or the middle of the trend.

__________________
James Lee - Founder
Forum Guidelines | Forum Manual | Support Coder | Report a Bug
------------------------------------------------------------------------------------
Empowering traders with knowledge.

Please support TL by visiting our sponsors. Thanks!
Reply With Quote
  #16 (permalink)  
Old 09-24-2006, 10:21 PM
Robert has no status.

 
Join Date: Sep 2006
Posts: 18
Thanks: 0
Thanked 0 Times in 0 Posts
This member is the original thread starter. Re: Question regarding Bollinger Bands

Thank you guys. I find this thread very useful. I have to admit, I have lost plenty of money trying to short a trending market. In my early weeks as a trader I thought the RSI and price divergence was the Holy Grail. Alot of times price did not move and I ended up taking comission losses.

Is there a way to anticipate a trend market or a bracketed market? I understand different trading strategies must be employed in both cases. But it would be extremely helpful if a trader knew which strategy to use before the trading day. Thank you

Reply With Quote
  #17 (permalink)  
Old 12-03-2006, 12:52 PM
Reaver has no status.

Trader Specs
 
Join Date: Nov 2006
Location: FL
Posts: 922
Thanks: 0
Thanked 3 Times in 3 Posts
Send a message via AIM to Reaver Send a message via MSN to Reaver Send a message via Yahoo to Reaver
Re: Question regarding Bollinger Bands

The TTM Squeeze is a very good concept, but having observed it for a while, have found it to be less accurate than many people think. Of course we know that no indicator is anywhere near perfect, but with that being the case, I still wouldn't feel comfortable relying on an indicator to enter a position. But there is a good chance I was reading it wrong, so definitely check it out and see for yourself what you think. Good luck.

Reply With Quote
  #18 (permalink)  
Old 04-29-2007, 11:58 AM
cooter's Avatar
cooter has no status.
Banned

 
Join Date: Mar 2007
Posts: 633
Thanks: 0
Thanked 7 Times in 2 Posts
Re: Question regarding Bollinger Bands

Quote:
View Post
Namstrader, I see what you mean (see chart below). By the way, attached is the Squeeze indicator re-created by other traders. Note that I have never used this indicator and cannot vouch for its accuracy.
Actually the TTM Squeeze is itself a rip-off, er, "re-creation" of the BB Squeeze originally posted and coded on the Tradestation forums.

Hubert and Carter were just smart enough to clean it up, repackage it and market it to the masses. That's all.

Reply With Quote
Reply



LinkBacks (?)
LinkBack to this Thread: http://www.traderslaboratory.com/forums/f34/question-regarding-bollinger-bands-414.html
Posted By For Type Date
FORMULAS KELTNER SELL LINE Fun & Super Search - Stocks, Bonds and Commodity Trading, 2008 This thread Refback 01-05-2008 08:56 AM
keltner channel bands linda raschke - Google Search This thread Refback 11-29-2006 09:52 PM
digg - Question regarding Bollinger Bands This thread Refback 09-23-2006 03:07 PM

Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are On
Pingbacks are On
Refbacks are On
Forum Jump


All times are GMT -4. The time now is 10:50 PM.

 

 
 


1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76