There are a lot of rules to remember when trading with Bollinger bands. When reading about how to use Bollinger bands it may seem rather difficult to implement, but truth be told, Bollinger bands are not only easy to use but insanely accurate at short term price movement.

20 and 2 are just the default values – These periods are just a starting point. Yes they are effective, but adjustments will need to be made as you change timeframes. Your period (20) and standard deviation (2) will need to be smoothed or not directly related to the timeframe you are trading. For highly volatile markets consider making an adjustment to your period (20).

Bollinger bands need other confirmation. – I say BS, Bollinger bands are about the only tool / indicator I would ever consider using exclusively. I don’t use them exclusivey, only because I don’t have to. Truth be told Bollinger bands are just about the only indicator i would ever consider using exclusively. With a good understanding of Bollinger bands you don’t need anything else.

The trend is your friend – Bollinger Bands work exceptionally well with trading ranges that have already been identified by a trader utilizing trend line techniques to form trading ranges. Using trend lines with a Bollinger Band system has proven to be highly profitable and predictable.

Following the bands. – Yes, rather than revert to the mean price will often gravitate to either band and head in that direction aggressively. This is one of the huge profit potential zones Bollinger bands offers. For clues on whether price will reverse or follow the bands with the band reaction as price approaches.

Bollinger bands are an excellent tool when used with other forms of technical analysis. If you are looking at other chart patterns or formations use Bollinger bands and the reversion to the mean in conjunction with the pattern for better accuracy. For example a bullish patterns penetrating the lower band(s) can together give you near perfect entry.

Bollinger Bands set great price targets – Many investors use the 50, 100, and 200 period moving averages to calculate price targets. Bollinger Bands can be used in just the same way. When price bounces off the top range and crosses the center line, the next move is likely to the lower line. Consider the bands for profit targets.

Bollinger bands has just 2 values to set. The first is the N value, the second, K value is the standard deviation. 2 standard deviations is pretty common and works rather well in all timeframes. I like to set-up a 2.0, 2.5, and 3.0 standard deviation one on top of the other. As far as the N value 10 is the absolute minimum. This is the look-back period and anything less than 10 is just noise.

Bollinger bands are not necessarily perfect for short trend and high volatility. Bollinger bands does measure and display high volatility it is not as effective on a 1to 5 minute chart as it is on say a 15 minute or hourly chart. Shorter term charts can experience volatility spikes that Bollinger bands may not signal.

Bollinger bands do not predict the future. In fact Bollinger bands are providing you with information only after price and not before. That said, the secret in trading Bollinger bands is your ability to understand and respond to Bollinger band signals as price approaches the bands. Watch closely how Bollinger bands responds to approaching price for clues on how to make the best trades.

Bollinger Band width is important too – Often forgotten, the width of the Bollinger Band does serve some importance to trading, especially in the realm of reversals and changes in direction. Mixing candlestick analysis with contractions in the Band width is a great way to trade reversals.