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Bollinger Bands Technical Indicators Analytics

bollinger bands

Conversely, as the bands expand, an increase in price action/market volatility is indicated. When the bands have only a slight slope and track approximately parallel for an extended time, the price will generally be found to oscillate between the bands as though in a channel. The Double Exponential Moving Average is a technical indicator similar to a traditional moving average, except the lag is greatly reduced. Traders generally use Bollinger Bands to determine overbought and oversold zones, to confirm divergences between prices and studies, and to project price targets. It is recommended to use 20-period Simple Moving Average as the middle line, and plot top and bottom lines two standard deviations away from it. Besides, moving averages of less than 10 periods are of little effect. Still, the biggest challenge is identifying the direction of the breakout.

bollinger bands

The price is above the 20 period MA but RSI is showing the market is overbought. He is the most bollinger bands followed trader in Singapore with more than 100,000 traders reading his blog every month…

Bollinger Bands Calculation

The basic rule of moving averages is that if a security’s price is above the moving average, the trend is up. If the price is below the moving average, the trend is down. Traders also look for Bollinger ‘squeezes’ and Bollinger ‘bounces’, which are used as indicators for levels of support and resistance. Squeezes – when the upper and lower band contract toward the moving average – could show that there is about to be a breakout of the asset’s price. Conversely, bounces – which occur when the price movement hits the upper band and bounces back down – might be indicative of an upcoming retracement. Another limitation of Bollinger Bands is that the standard settings will not work for all traders. Traders must find settings that allow them to set guidelines for specific stocks that they are trading.

bollinger bands

When the center of the curve is shorter, the data has a much higher variance. should be use in conjunction with other indicators as part of a complete trading methodology. Here are some trading functions and strategies that can implemented with the information derived from BBs. In this article, we show you how to use Bollinger Bands ® to improve your chart reading skills and how to identify high probability trade entries. However, before we are sure, there must be an upward impulse and we must probably bounce… We are literally dealing with a descending triangle formation.

Indicators Q ~ U

I am glad I read this strategy from you and I hope to put it to practice. Whereas in this article you said when BB is squeezed / tight then breakout is heppened in the direction of trend ( Some times BB is squeezed after the decline / advance market). If you’re a new trader, it can be difficult to identify the volatility of the markets. As you can see, it’s a painful thing to do if you blindly short when the price is at the upper bands. Because in trending markets, the market can remain “cheap” or “expensive” for a long period of time. The risks of loss from investing in CFDs can be substantial and the value of your investments may fluctuate.

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