Using Bollinger Band Stops to Track Trends and Set Stops

Summary

The BBands Stop indicator uses Bollinger Band levels to identify a directional trend and plot a trailing reference line. A close above the prior upper band changes the state to bullish; a close below the prior lower band changes it to bearish. In an established trend, the relevant band is constrained so the stop line does not move against the position. The MoneyRisk parameter adjusts the distance between the line and the band range, while the period and deviation settings control the underlying bands.

The indicator is presented as similar in purpose to Supertrend and as a possible stop-loss guide, with chart markers highlighting state changes. The document provides calculation logic, but no backtest, transaction-cost analysis, or evidence that its signals are profitable. It also does not specify an asset class or timeframe, so settings and usefulness would need testing for the intended market and trading horizon.

Key ideas

• The indicator switches its trend state when price crosses the prior Bollinger Band boundary.
• It trails a line along the lower adjusted band in an uptrend and the upper adjusted band in a downtrend.
• The period and deviation settings determine the Bollinger Bands used by the calculation.
• MoneyRisk adjusts the stop line's distance from the band range.
• The document presents the line as a possible stop guide but supplies no performance testing.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.