(12) Real Time Inputs In Technical Charts Is Always Delayed
It is one of the most basic issues or limitations of Bollinger Bands in technical analysis. The Simple Moving Average (SMA) is the most common of the moving averages that is used for trading.
Its formula is calculated by considering the average closing price of a script or bond over the last “x” periods. This results in delaying the chart pattern of all SMA-based indicators to some extent.
Bollinger Bands® are not a different thing in this regard. They are also saddled with high lag like various other SMA-based indicators.
Therefore, traders should be mindful enough of the delay in the chart pattern. It is particularly true when looking for chart patterns in real time.
(13) Movements Of Bollinger Bands Doesn’t Correlate Historical Volatility
It is one of the most significant drawbacks or limitations of Bollinger Bands in technical analysis. In markets, it is often considered that history tends to repeat in terms of price.
But, with Bollinger Bands, it is not the case. Bollinger Bands® are a good indicator of prevailing market volatility. But, the price volatility or the movement of the bands against the moving average never correlate with historical volatility.
Therefore, traders are advised never perform any attempt to compare historical volatility of price bands with prevailing price volatility.
The price volatility will always show unique patterns of its own kind. Thus, you should not waste your time in analyzing it.
- Bollinger Bands Limitations: Azureedge.net