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There are quite a few rules to understand when mastering Bollinger bands. To read through a rule set may seem a bit intimidating at first, but rest assured that the end result is greater accuracy and a better feel for price direction. You will find them easy to use and incredibly accurate.

20 periods and 2 standard deviations are default values only. – These periods of 20 and 2 are kind of like the “average” values one might consider. If you plan on using Bollinger bands and using multiple time frames then plan on adjusting your period value. The standard deviation of 2 is the same in any time frame but the period will need to be adjusted for many reasons.

Bollinger bands do not work alone. – This is what most people would have you believe, but I’m here to tell that an effective Bollinger band strategy can trade with the bands exclusively with incredible results. I do use other indicators but only as confirmation tools and tools for perspective. Bollinger bands work well alone provided you understand how to read them correctly.

The trend is your friend – Bollinger Bands work exceptionally well with trading ranges that have already been identified by a trader utilizing trend line techniques to form trading ranges. Using trend lines with a Bollinger Band system has proven to be highly profitable and predictable.

It is possible for price to follow one Band – One of my favorite strategies with Bollinger bands is when price follows a band up or down. Rather than reversing price, will actually move up or down with the band and sometimes an explosive fashion. Look to the response of the band to approaching price for a clue on what will happen.

Bollinger Bands work with more traditional technical analysis – Bollinger Bands are great at confirming traditional market patterns. Patterns such as the head and shoulders or double bottoms and tops are easily confirmed by touches to the Bollinger Bands. A double top at the upper range of a Bollinger Band is often a strong sell signal, made stronger by the Bollinger confirmation; this is called confluence and an excellent confirmation tool.

Bollinger Bands set great price targets – Many investors use the 50, 100, and 200 period moving averages to calculate price targets. Bollinger Bands can be used in just the same way. When price bounces off the top range and crosses the center line, the next move is likely to the lower line. Consider the bands for profit targets.

N-Values of less than 10 are not recommended – Because the Bollinger Band is based on a moving average calculation, an N-period value of less than 10 becomes ineffective. Short term moving averages follow price too closely and do not offer a viable trading range due to the tight formation of the Bands.

Bollinger bands are much more effective on time frames that allow for less extreme volatility. For example a tick chart or 1 minute chart has extreme volatility spikes. Bollinger bands is not going to effectively give you any heads up before these moves happen. You’re better off watching a 15 minute and with Bollinger bands and jumping to the 1 minute to trade. Or watching an hourly and jumping to the 15 minute. Something like that.

Bollinger Bands are lagging indicators and should be traded as such – Bollinger Bands are very much lagging indicators and show movement after the trade occurs. Knowing that Bollinger Bands are lagging will help you to understand why the external deviation lines are not perfect. Again pay special attention to how the “bands” (both of them) react to approaching price for a revelation on where price is headed. In this respect Bollinger bands is as much a perfect tool for trading as it gets.

Bollinger band width refers to deviations from the mean. The mean is the average. The default setting is usually 2.0 standard deviations and that’s fine. Price will trade within the 2.0 standard deviation range approximately 90% of the time. I like to lay down an additional 2.5, and 3.0 standard deviation right over my 2.0. Combining candlestick pattern analysis with these entry zones makes for a good system.