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1999issue C121-6

Evaluating Bollinger Bands against fixed-width and range-based envelopes

Bollinger Bands scale envelope width with volatility from a moving-average middle line. A shared-series comparison asks how much price action those bands contain relative to a fixed-width envelope and to Keltner channels, while a band extreme still needs confirmation from another indicator.

  • Bollinger Bands place outer lines two standard deviations from a moving-average middle line, so bandwidth expands and contracts with volatility.
  • Fourteen-period and twenty-period moving averages of the close are described as common starting choices for constructing those bands.
  • On one Apple daily series, two-standard-deviation 14-day Bollinger Bands contained more of the price action than a fixed 3 percent envelope and more than Keltner channels.
  • The original framing treated a band extreme as a warning that still needed confirmation from another indicator before a position was opened.
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Current trackBollinger Bands84 readings

What the bands are built to show

Bollinger Bands place outer lines two standard deviations of price from a moving-average middle line so bandwidth expands and contracts with volatility.

Fourteen-period and twenty-period moving averages of the close are described as common starting choices for constructing those bands.

Bollinger Bands were originally framed as a warning of price extremes that still needed confirmation from another indicator before a position was opened.

The same series, three envelopes

On the same Apple daily series used for a fixed 3 percent envelope, two-standard-deviation 14-day Bollinger Bands contained more of the price action than the fixed-width envelope.

The same comparison notes that Keltner channels contained more of that Apple price action than the 3 percent envelope but less than the Bollinger Bands.

A later reading of channel rules

A later backtest comparison of channel interpretations concluded that STARC bands and Bollinger Bands under one tested rule set merited closer study, while one Keltner-channel rule set looked less promising.

Editorial interpretation: those later remarks rank selected rule sets for further study. They do not replace confirmation from another indicator, and they do not turn containment on one series into a trading instruction.

AAPL daily with 14-period two-sigma Bollinger Bands

Weekly samples read off the daily Apple Computer chart in Figure 2. Two-standard-deviation bands around the 14-day average hold most of the winter range and then gap wide on the May 1999 surge, which is the contrast the article draws with a fixed 3 percent envelope on the same bars.
Weekly samples read off the daily Apple Computer chart in Figure 2. Two-standard-deviation bands around the 14-day average hold most of the winter range and then gap wide on the May 1999 surge, which is the contrast the article draws with a fixed 3 percent envelope on the same bars.AAPL · daily · 1998-12-10T00:00:00.000Z to 1999-06-24T00:00:00.000Z

Outer bands are the 14-day simple moving average of the close plus or minus two standard deviations, as given in the source. Coordinates are digitized from the raster, so they are approximate to the nearest half dollar.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
14 of 45 in the Bollinger Bands track
20001-5 pp.Next on Bollinger BandsConstructing a Bollinger Band target as a forward priceA band-target construction restates a two-standard-deviation, 30-period Moving average penetration rule as the unknown next price that would make the close sit on the band, so the system can plot the trigger instead of guessing it.
All readings on this track · 45 readings
  1. 1992Constructing volatility-scaled bands with relative strength index confirmation
  2. 1994Implied volatility as a band-defined regime filter for index options
  3. 1995Constructing projection bands from least-squares slopes
  4. 1995Constructing regression projection bands and range oscillators
  5. 1996Constructing Bollinger bands, percent-b, and stochastics
  6. 1996Constructing mechanical rules from Bollinger Bands and stochastics
  7. 1996Constructing a standard-error envelope around a linear regression
  8. 1996Dual-horizon ratio envelopes and regression error channels
  9. 1997Rational group structure with a trend screen, RSI, and bands
  10. 1997Asymmetric volatility band construction
  11. 1998Constructing three-state filters from Bollinger band envelopes
  12. 1999Combination filters with Bollinger Bands and the relative strength index
  13. 1999Constructing stochastic timed exits and band-RSI reversals
  14. 1999Evaluating Bollinger Bands against fixed-width and range-based envelopes
  15. 2000Constructing a Bollinger Band target as a forward price
  16. 2001Numeric candlestick encoding with local size bands
  17. 2001Ranked candlestick sentiment to band-cross entries
  18. 2002Combining Bollinger Bands, RSI, and a stop-loss
  19. 2002Bollinger Bands remain filters, not forecasts
  20. 2002Constructing a stochastic RSI with Bollinger bands
  21. 2002Constructing a StochRSI and Bollinger mechanical system
  22. 2003Constructing volatility-scaled Bollinger envelopes
  23. 2003Why tick breadth fails as a market personality
  24. 2005Constructing Bollinger bands versus fixed trading bands
  25. 2006Squared versus absolute deviation in envelope construction
  26. 2006Confirming yen crossovers with implied volatility and bands
  27. 2006A daily candle reversal is a hypothesis until shorter sessions fail at the same zone
  28. 2008Rebuild the Relative Strength Index as price-scale bands
  29. 2008Reading Relative Strength Index extremes on one price axis with Bollinger Bands and moving averages
  30. 2011Three-filter confirmation for short-swing futures
  31. 2011Constructing an inverse Fisher stochastic with bands and averages
  32. 2012Constructing a Bollinger Band indicator suite
  33. 2012Stacking price extremes, crossovers, bands, and MACD
  34. 2012Adaptive Bollinger band impulse, trend, and momentum filters
  35. 2013Rescaling stochastic, percent-B, and wave-count parameters
  36. 2014Industry-group quartile pivots as a Bollinger Bands case study
  37. 2014Bollinger Bands as adaptive price envelopes: a 2014 classroom case
  38. 2016Trend-channel entry rules from stacked moving averages
  39. 2016A permission stack for Bollinger, RSI, and the 50-period average
  40. 2017Constructing weighted Bollinger bands and volume averages
  41. 2017Four swing-entry rules that share a timed exit
  42. 2017Two-wave monthly cycles as a regime filter
  43. 2019Constructing exponential-deviation-bands from a midline-average
  44. 2020Critiquing exponential variants of Bollinger Bands
  45. 2020Constructing selectable volatility and moving-average bands
By fieldIndicators and filters682 readingsBy year199959 readings
All 84 readings tagged Bollinger Bands
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1992Constructing a banded weighted open-TRIN oscillator1992Constructing volatility-scaled bands with relative strength index confirmation1992Constructing a weighted-average TRIN10 with Bollinger envelopes1993Listed-option timing as three separable clocks1993Score one swing with volume, bands, and price divergence