Bollinger Bands Trading Indicator Bulge and Squeeze Technical Analysis
The Bollinger Band are self adjusting which means the bands widen and narrow depending on Indices price volatility.
Standard Deviation is the statistical measure of the Indices price volatility used to calculate the widening or narrowing of the Bollinger bands. Standard deviation will be higher when prices are changing significantly & lower when the market prices are calmer.
- When Indices price volatility is high the Bollinger Band widen.
- When Indices price volatility is low the Bollinger Band narrows.
The Bollinger Band Squeeze - How to Trade Bollinger Band Squeeze
Narrowing of Stock Indices Bollinger Band is a sign of Stock Indices price consolidation and is known as the Bollinger band squeeze.
When the Bollinger Band indicator show narrow standard deviation it's usually a time of Stock Indices price consolidation, & it's a signal that there will be a Indices price breakout & it shows Stock Indices traders are adjusting their trade positions for a new move. Also, longer the Indices prices stay within the narrow bands the greater the chance of a Indices price breakout.
Bollinger Squeeze - How to Trade Bollinger Band Squeeze
The Bollinger Bulge - How to Trade Bollinger Band Bulge
The widening of Bollinger Band is a sign of a Indices price breakout & is known as the Bollinger Band Bulge.
Bollinger Bands that are far apart can serve as a signal that a trend reversal is approaching. In the Bollinger bands indicator example below, Indices Bollinger bands get very wide as a result of high price volatility on the down swing. The trend reverses as prices reach an extreme level according to statistics and the theory of normal distribution. The "bulge" predicts the change to a down-trend.
Bollinger Bulge - How to Trade Bollinger Band Bulge
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