Bollinger Bands are used widely in the trading community and are a key component of many trading strategies. By their nature, Bollinger bands offer a particular perspective of the market. But that perspective is not without its drawbacks.
This article will present a revised approach to the trading band concept with the aim of sharpening the focus of this class of indicator significantly. Both are valid and share a common heritage, but they are quite different under evaluation and in application. The derivation here is termed a volatility band. This article will explain why this derivation is necessary and how it is constructed and provide high-level preliminary test results.
This article was originally published on May 1, 2010 in Futures Magazine by David Rooke. For more information, visit www.futuresmag.com