Bollinger Bands Trading Strategies | Are %B Systems Profitable in 2024? (Backtest And Performance)
Can we make a profitable Bollinger Bands trading strategy? The Bollinger Bands are renamed after its inventor, John Bollinger. The indicator was invented in 1980 and made John Bollinger a pretty famous trader. The bands are included in all software platforms and frequently mentioned in the financial media. What is all the fuzz about? Are Bollinger Bands profitable?
We conclude that Bollinger Bands are somewhat profitable in the stock market, which is a market that is very mean-revertive. We tested some ideas for Bollinger Band trading strategies, and it seem to work as a breakout indicator in gold. However, we didn’t manage to find any useful Bollinger Bands strategies for stock indices.
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Thus, you have three bands:
The above chart shows the 20-day simple moving average (the blue line), and the red lines above and below are added and subtracted 2 standard deviations from the moving average.
In times of high volatility, the bands expand. In times of low volatility, the bands contract. Why do they expand and contract? This is because the bands react to the volatility of the share price – the standard deviation: