Introduction to Bollinger Bands
Bollinger Bands (BB) are a versatile technical analysis tool developed by John Bollinger. They consist of:
- Middle Band: A Simple Moving Average (SMA) typically set to 20 periods.
- Upper Band: SMA + (2 × Standard Deviation).
- Lower Band: SMA − (2 × Standard Deviation).
These bands dynamically adjust to market volatility, expanding during high volatility and contracting during low volatility.
Key Bollinger Band Strategies
1. Williams BBDiv Signal
Combines Williams %R with Bollinger Bands to identify divergences and trade signals.
- Buy Signal: When Williams %R crosses the lower BB band upward.
- Sell Signal: When Williams %R crosses the upper BB band downward.
- Divergence Detection: Bullish (price lower low, RSI higher low) or bearish (price higher high, RSI lower high).
Optimization Tips:
- Adjust minimum bars between signals to reduce noise.
- Use "Wait for Opposite Signal" mode to filter false entries.
👉 Enhance your trading with Williams BBDiv Signal
2. Uptrick: Smart Boundaries
Integrates RSI and Bollinger Bands for momentum/volatility extremes.
Entry Rules:
- Long: RSI < 30 + price closes below lower BB.
- Short: RSI > 70 + price closes above upper BB.
- Pyramiding: Limits consecutive signals to avoid overexposure.
Visualization:
- Labels mark entries; Bollinger Bands highlight volatility.
3. DT Bollinger Bands
Customizable BB with dual deviation bands (2σ and 3σ).
Features:
- Alerts when price enters 2σ–3σ range (high volatility).
- Color-coded backgrounds (green/red) for trend clarity.
Usage: Ideal for breakout and mean-reversion strategies.
4. RSI and Bollinger Bands Screener
Multi-timeframe RSI + BB crossover strategy.
Long Setup:
- RSI > 60 (15-min) + RSI > 60 (1hr/daily).
- Price above 20MA or upper BB.
- Screening: Identifies assets meeting criteria across timeframes.
Advanced Applications
DCA Strategy with Mean Reversion
- Approach: Dollar-cost average into positions when price dips below lower BB.
- Profit Targets: Tiered exits at 3%, 8%, and 17% gains.
- Filter: 200 EMA ensures trades align with the trend.
👉 Optimize DCA with BB mean reversion
Bitcoin CME-Spot Z-Spread
Trades spreads between CME futures and spot prices using BB.
- Entry: Spread crosses upper/lower BB (2.618σ).
- Hold Period: 20 bars; auto-exits if targets unmet.
Backtest: 67.8% net profit (2020–2024).
Visual Indicators & Custom Tools
UVR Channels
Volatility-based bands using Ultimate Volatility Rate (UVR).
- Formula: Custom volatility metric + EMA centerline.
- Usage: Detects overextension beyond ±2σ bands.
MACD x BB x STDEV x RVI
Hybrid momentum/volatility system.
- Triggers: MACD/BB crossovers + RVI confirmation.
- Alerts: Customizable for bullish/bearish conditions.
FAQs
Q: How do I avoid false signals with Bollinger Bands?
A: Combine BB with RSI or volume filters, and use longer timeframes (e.g., 200-period EMA) to confirm trends.
Q: Best settings for day trading?
A: Use 20-period BB + 14-period RSI; tighten stops with ATR (1.5–2×).
Q: Can BB predict reversals?
A: Yes—price touching upper/lower bands often signals overbought/oversold conditions, but confirm with volume or divergence.
Conclusion
Bollinger Bands excel in identifying volatility, trends, and reversals. Pair them with complementary indicators (RSI, MACD) and robust risk management for optimal results.
Final Tip: Backtest strategies on multiple assets to refine parameters.
👉 Explore advanced BB strategies