Bollinger Bands Technical Analysis & Bollinger Signals

Created by John Bollinger

Bollinger Bands are made up of 3 lines. The line in the middle is a MA(Moving Average) - a Simple MA of 20 periods.

Then, lines are marked at a certain distance from the moving average(MA). These lines create the top and bottom boundaries.

The distance for band plotting is determined by another indicator called standard deviations. Standard deviation quantifies market volatility, including that of xauusd.

Because the price of things in the market is always changing, how spread out the numbers are will also change, and because Bollinger bands use this spread to figure things out, the bands will move closer or farther apart based on how unstable the market is.

when prices grow to be extra risky, the bands widen and that they contract all through much less risky periods.

The 3 Bands are made to hold most of the price movement inside them. The middle band shows the market's trend, and is usually a 20-period moving average.

This central band also constitutes the foundation upon which the outer upper and lower bands are constructed. The extent of the separation between the upper and lower bands relative to the middle band is governed by market volatility. Specifically, the upper band is plotted two standard deviations (+2) above the middle band, while the lower Bollinger Band is fixed two standard deviations (-2) below the middle band.

Bollinger Band Indicator - Place Bollinger Band Indicator in Chart

XAU USD Analysis and Generating Signals

Bands provide a relative definition of high & low

Used to identify periods of high & low volatility

Used to identify periods when prices are at extreme regions

the Squeeze

The bands squeeze closer as price swings get smaller, which shows times of little price change. Big price jumps usually happen after the bands squeeze.

XAUUSD Consolidation

Consolidation Pattern

the Bulge

If the prices push past the top or bottom band & head past the bands, it's probable the current direction of the market will keep going.

Bollinger Band Indicator Analysis in XAUUSD - Bollinger Bands Indicator

Double Tops & Double Bottoms

Bottoms and tops made outside the bands followed by bottoms & tops made inside the bands call for reversals in the trend

Is Bollinger Band Indicator a Trading or Lagging Indicator

The Head Fake - Gold Whipsaw

Traders should remain vigilant for false breakouts, commonly referred to as whipsaws or head fakes.

Price often breaks out in one direction immediately following the Squeeze causing many traders to think the break-out will continue in that particular direction, only to quickly reverse & make the true, more significant break-out in the opposite trend market direction.

Traders reacting quickly on the initial breakout often and commonly get caught on the wrong side of the price action, while those traders expecting a "false breakout" can quickly close-out their original position & enter a trade in the direction of reversal. It is always good to combine Bollinger bands with other confirmation Trading Indicators.

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