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Methods Introduction

The three Methods of using Bollinger Bands® presented in "Bollinger On Bollinger Bands" illustrate three completely different philosophical approaches. Which one is for you we cannot say, as it is really a matter of what you are comfortable with. Try each out. Customize them to suit your tastes. Look at the trades they generate and see if you can live with them.

Though these techniques were developed on daily charts--the primary time frame we operate in--short-term traders may deploy them on five-minute bar charts, swing traders may focus on hourly or daily charts, while investors may use them on weekly charts. There is really no material difference as long as each is tuned to fit the user's criteria for risk and reward and each tested on the universe of securities the user trades, in the way the user trades.

Why the repeated emphasis on customization and fitting of risk and reward parameters? Because, no system no matter how good it is will be used if the user isn't comfortable with it. If you do not suit yourself, you will find out quickly that these approaches will not suit you. 

"If these methods work so well, why do you teach them?" This is a frequent question and the answers are always the same. First, I teach because I love to teach. Second, and perhaps most important, because I learn as I teach. In researching and preparing the material for this book I learned quite a bit and I learned even more in the process of writing it. 

"Will these Methods still work after they are published?" The question of continued effectiveness seems troublesome to many, but it is not really; these techniques will remain useful until the market structure changes sufficiently to render them moot. The reason effectiveness is not destroyed--no matter how widely an approach is taught, is that we are all individuals. If an identical trading system was taught to 100 people, a month later not more than two or three, if that many, would be using it as it was taught. Each would have taken it and modified it to suit their tastes, and incorporated into their unique way to doing things. In short no matter how specific/declarative a book gets, every reader will walk away from reading it with unique ideas and approaches, and that, as they say, is a good thing.

The greatest myth about Bollinger Bands is that you are supposed to sell at the upper band and buy at the lower band; it can work that way, but it doesn't have to. In Method I we'll actually buy when the upper band is exceeded and short when the lower band is broken to the downside. In Method II we'll buy on strength as we approach the upper band only if an indicator confirms and sell on weakness as the lower band is approached, again only if confirmed by our indicator. In Method III we'll buy near the lower band, using a W pattern and an indicator to clarify the setup. Then we'll present a variation of Method III for sells.

Method IV, not mentioned in the book, is a variation of Method I.