Bollinger Bands vs. Envelopes

[Forexwatchman]

So there is a debate going on in my own trading world regarding the effectiveness of both of these indicators, and I thought it would be a good thing to have on here for debate as well. The question is: Are Bollinger Bands better due to their more sensitive nature in relation to volatility, or are envelopes (a.k.a. Standard Deviations of a Moving Average) more effective because of there consistency? I personally use the envelopes due to the advice of Andrei Pehar, who once said during a live webinar that he heard first hand from experts that Bollinger Bands are only used to set prices on Futures and are never used in currency trading by the big dogs. But he's only one opinion, what's yours?

 

[Doji Dog]

So there is a debate going on in my own trading world regarding the effectiveness of both of these indicators, and I thought it would be a good thing to have on here for debate as well. The question is: Are Bollinger Bands better due to their more sensitive nature in relation to volatility, or are envelopes (a.k.a. Standard Deviations of a Moving Average) more effective because of there consistency? I personally use the envelopes due to the advice of Andrei Pehar, who once said during a live webinar that he heard first hand from experts that Bollinger Bands are only used to set prices on Futures and are never used in currency trading by the big dogs. But he's only one opinion, what's yours?

Don't forget Acelleration Bands. IMHO these track the prices much better without the wide swings. But like Envs & BBs, they suck in choppy markets.

Bottom line, test each on the different timeframes you trade and see which one you respond/react to the best.:err:

 

[PerniciousPips]

Bollinger and Envelopes

I'm not sure this is an "either/or" as much as a "both/and." In my experience, I have found Bollinger Bands helpful in measuring standard deviation, whereas envelopes give me a good read above or below the moving average. BOTH of them are helpful in determined entry or exit points. Let's face it--trading is hard enough without relying too heavily on one or another indicator or piece of technical data. We are always looking for "convergence," the point where numerous indicators are pointing us in the direction of a trade--Stochastics, Parabolic SAR's, MACD, Fib support/resistance. Again, rather than taking an either/or approach, I have found it helpful to adopt a both/and strategy.
Just some thoughts, part of my steady "scream" of concsiousness.

 

[Music Man]

I use Bollinger Bands, but modified to detect support and resistance in and around the bands. In combination with a trending indicator, I am able to do OK in the right market, but not in all markets. I'm working on that last bit still.

Here's a screen from this morning's back testing. I know it looks like it trades too much, but I'm going for win % at the moment. Then, I'll optimize on trades-per-trend, or something similar.

This particular run is winning over 90% of the time, but the results are not always this good. Depends on the market.

MM

 

[Music Man]

Here's an image uncluttered by trades from today's price action. It shows pretty clearly how support/resistance plays around the BB lines. The orange line in the BB middle line, the blue lines are the BB upper and lower lines. The red lines are the inner price channel.

If we consider the channels as energy levels, we can see that price action with a certain level of energy walks the channels. Then, there are punctuations where the area between the red lines is traversed. This represents an intermediate energy level that will eventually be overcome by additional positive or negative price pressure, causing price action to once again walk one of the price channels.

I haven't worked out all the consequences of this pattern, but it is an interesting discovery. Maybe others have made the same observation?

MM


MM

 

[cowmadagan]

I find Bollingers to be good if you're looking to find where to reenter if you're convinced in the overall trend. If you've exited after a spike, I find it quite safe to reenter when it hits the center line. The SMA line I check at the same time to show how closely I should watch (is it ok to leave the comp). If the SMA is really far from the outer bollinger band, you should never stop watching for a moment because there will be a big returning movement that you'll have to bail on.