John Bollinger developed an indicator that simply takes a simple moving average and plots two standard deviations away from it on a chart. This forms the Bollginer Band indicator. The advantage of the Bollinger Band is that it automatically adjusts to volatility because the measure of standard deviation is always assessing what the market is doing. This makes the Bollinger Band one of the most popular technical indicators for stocks, futures, commodities, or currencies.
The Bollinger Band EA from FXCM can be downloaded here. The EA is set to trigger long positions when the price moves above the upper Bollinger Band standard deviation line and sell short when the price drops below the lower line. User adjustable stops and take profit levels are used to manage trades.
Findings: The EA was tested on the EUR/USD on multiple timeframes and generally broke even fro the timeframe between 2001-2008. This is an unacceptable return for the time period and therefore the EA is not worthwhile to run. However, it is a very simple system and it is exciting to see that the simple Bollinger Band indicator by itself was able to breakeven. This would be a good indicator to try and add to an existing system or build a system around. In a future review we will examine the Bollinger Band EA from FXCM that has an ADX filer.