Senior Honors Theses

Bollinger Bands and Stop-Loss Orders: An Econometric Analysis

Daniel M. White, Liberty University

Document Type Article

Abstract

The use of Bollinger Band trading strategies has become increasingly popular since Bollinger Bands were conceived in the 1980s, yet little documentation exists measuring Bollinger Band trading strategy performances in market conditions post January 1, 2000. This study examines the efficacy of a representative sample of Bollinger Band trading strategies against a standard buy-and-hold strategy spanning each sector, and relative beta in market conditions post January 1, 2000. Among these strategies was John Bollinger’s recommended volatility breakout trading system.

Twenty-eight strategies were tested on 245 securities for a total of 6,860 backtests. Not one Bollinger Band Strategy consistently outperformed a standard buy-and-hold strategy. Additionally, the volatility breakout system failed significantly in every circumstance when compared to a standard buy-and-hold strategy.