Bollinger Band Trading Indicator Bulge and Squeeze Technical Analysis
The Bollinger Bands 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 in calculating the widening or narrowing of the Bollinger bands. Standard deviation will be higher when the market prices are changing significantly and lower when market prices are calmer.
- When Indices price volatility is high the Bollinger Bands widen.
- When Indices price volatility is low the Bollinger Bands narrows.
The Bollinger Bands Squeeze - How to Trade Bollinger Bands Squeeze
Narrowing of Indices Bollinger Bands is a sign of Indices price consolidation and is known as the Bollinger band squeeze.
When the Bollinger Bands indicator show narrow standard deviation it's usually a time of Indices price consolidation, & it's a signal that there will be a Indices price breakout & it shows Index 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 the Bollinger Bands Squeeze
The Bollinger Bulge - How to Trade Bollinger Bands Bulge
The widening of Bollinger Bands is a sign of a Indices price breakout & is known as the Bollinger Bands Bulge.
Bollinger Band that are far apart can serve as a signal that a trend reversal is approaching. In the Bollinger bands indicator illustration 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 & the theory of normal distribution. The "bulge" predicts the change to a down-trend.
Bollinger Bulge - How to Trade Bollinger Bands Bulge
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