The Powerful Variety of Bollinger Band Applications 

The Bollinger Band can be used in an unlimited number of ways, starting with how the Bollinger Band is calculated with different numbers for the N and K values, as well as the difference of simple and exponential moving averages. 

Also, the change of timeframes on your charting software will quickly change the effectiveness and the type of trades that the Bollinger Bands show.

Every trader has different uses 

Each and every trader can utilize Bollinger Bands in their own trading plan for different purposes. 

Some use the Bollinger Band as a method to produce buy and sell signals, while others prefer to use the full power of Bollinger Bands to find trends, changes in market direction, and to show the underlying trend in each market move. 

Momentum and Bollinger Bands 

Momentum indicators, such as the RSI, MACD or CCI, are extremely powerful when mixed with the predicative properties of Bollinger Bands.  As seen in the chart below, the outer Bands work as support and resistance when incorporated with momentum indicators. 

Though the Bollinger Bands are not ordinarily support and resistance lines when punctured, they are extremely effective when mixed with overbought or oversold signals.  The red vertical lines in the chart above show where the RSI and Bollinger Bands agree.

Difference in timeframes 

Short term applications of the Bollinger Band indicator are completely different than longer term strategies.  The volatility of short term timeframes allows for more “give” in the settings for the Bollinger Band. 

Modifying the Bollinger Bands for a shorter N period time is common on short term timeframes that have more bars for trading.  Monthly candlesticks or other chart periods simply include too much time, and ultimately, more high volatility trading times.  Frequently in monthly charts, traders will find that one month is a runaway in one direction, while another month might end the same as it began.

Shorter timeframes mean more trades 

Day traders produce a large volume of trades each and every day due to the fact that trends and patterns form themselves infinitely more often due to the number of frames on each trading day.  Shorter timeframes also limit the chances of a breakdown of the Bollinger Bands due to runaway markets. 

While the one minute chart frames appear to be more volatile, the amount of volatility is spread among more bars or candlesticks and affects the calculation differently than the same volatility held in just one bar.

Shortening the N Period 

Shortening the N Period is best for less volatile markets as a method of “stimulating” the chart to catch smaller but still significant movements in the market. 

N Period changes are some of the most frequent, with 20 and 14 being the more popular options for N Period values.  An N Period of 14 will provide more Bollinger Band action and make more available trades in stagnating markets. 

The chart above shows an N period of 10 marked as yellow, with the N Period of 20 as the Orange.  The 20 N Period completely contains the 10 period bands.

Rallying Trends 

The best application of Bollinger Bands is to profit on the bouncing trends to the top and systematically to the bottom of the range on each bounce.  Bollinger Bands have a sense of memory, where the market moves in between the two external Bands for an extended period of time.