Bollinger Bands. An imperfect strategy for an imperfect world.I have seen and tested many strategies in my trading history but I have yet to find anything that can guarantee a 50% or higher win rate (And that 50% rate is before fees and taxes!). Bollinger bands do not provide a competitive edge, but rather, provide something more important to a retail trader. Clarity.
Bollinger bands are based on the standard deviation of the price of an asset at the current point. Standard deviation (std dev) is based on normal distribution. If you dont know what this is, thats okay. All you need to know is after 3 std dev 99.7% of prices are included. This can be used as an imperfect probability metric as only 0.3% of price points over the last 200 days lay outside of the green bollinger band shown above.
Regardless of biases, news and other such factors, bollinger bands can be used to guage whether a liquid asset is cheap or expensive.
As seen on the graph above, everybody's favourite asset (BTCUSD) can be traded with this simple 200 day bollinger (3) and (4) on daily price metrics. However, don't use indicators as a ground rule for strategies. Low liquidity assets and small timeframes significantly reduce the effectiveness of bollinger bands. Furthermore, I would not use bollingers for shorting or leveraged positions as the price has no obligation to obey its standard deviation metrics.
I recommend using bollingers on a spot position of liquid assets as displayed in the above graph. (Notice "position" not "Whole account" as all strategies should be)
