Bollinger Band Strategies
- How Bollinger Band Works
- Bollinger Bands Market Volatility Analysis
- Bollinger Bands Bulge and Squeeze
- Bollinger Bands Price Action in Trends
- Bollinger Bands Price Action in Ranging Market
- Bollinger Bands & Trend Reversals
- Bollinger Bands Strategy Summary
Bollinger Band Indicator Strategy
Bollinger Band indicator acts as a measure of volatility. Bollinger Bands indicator is a price overlay indicator.
Bollinger Bands indicator consists of three lines or bands: the middle band (moving average), an upper band a lower band. These 3 bands will enclose the price & the price action will move within these 3 bollinger bands.
Bollinger Bands indicator forms upper & lower bands around a moving average. Default moving average for bollinger bands indicator is the 20-SMA. Bollinger Bands indicator use the concept of standard deviations to form their upper and lower Bands.
The example of Bollinger Bands indicator is illustrated below.
Bollinger Bands Indicator - How to Trade with Bollinger Band Strategy
Because standard deviation is a measure of price volatility and volatility of the market is dynamic, the bollinger bands keep adjusting their width. Higher price volatility means higher standard deviation & the more the bollinger bands widen. Low price volatility means the standard deviation is lower and the bollinger bands contract.
Bollinger Band fore indicator use price action to give a large amount of price action movement information. The price information given by the this bollinger bands indicator includes:
- Periods of low volatility- consolidation phase of the market.
- Periods of high volatility - extended trends, trending markets.
- Support and resistance levels of the price.
- Buy & Sell points of the price.
