Bollinger Bands Explained

This is the hub for everything about Bollinger Bands. Educational videos and articles, the Bollinger Band Letter, Bollinger Band Tool Kits. John Bollinger's boo. This is the hub for everything about Bollinger Bands. Educational videos and articles, the Bollinger Band Letter, Bollinger Band Tool Kits.

This is expected as it has been a bearish market on all time frames. These points therefore served as resistance point A and support point B levels.

What are Bollinger Bands?

This is the second article in our Bollinger Bands series. If you haven’t already we suggest that you check out the first article about the Bollinger Bands that article, we covered the background of the Bollinger Bands indicator, how it is calculated, and how it looks on a chart.

Over time, the bands act like an accordion playing music. In the example above, the volatility starts with high values and a wide spread between the bands. Over time, the candlesticks converge on the centerline, signifying a period of consolidation and low volatility, only to breakout soon thereafter with a strong upward price thrust. The key points of reference are band bounces and squeeze reactions.

Skill in interpreting and understanding Bollinger Band signals must be developed over time, and complementing the Bollinger Bands tool with another indicator is always recommended for further confirmation of potential trend changes. In the next article on the Bollinger Bands indicator, we will put all of this information together to illustrate a simple trading system using Bollinger Band analysis.

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It is even more powerful if combined with other tools such as other indicators for confirmation. Using the SPY as a surrogate so we can calculate volume indicators, we find that both day Intraday Intensity and Accumulation Distribution are quite positive, suggesting that if a breakout were to occur here it would be to the upside.

That stands in marked contrast to our more cautious approach to the market as a whole, so we will be monitoring this set-up quite carefully Bollinger On Bollinger Bands. John Bollinger developed Bollinger Bands in the early s and since their introduction 30 years ago they have become one of the most widely used technical indicators worldwide. Learn how to use Bollinger Bands from the man who developed them. As indicated by rule 21st,. The key is that the bars must contain enough activity to give a robust picture of the price-formation mechanism at work.

But Bollinger says at rule 14th. The distribution of security prices is non-normal and the typical sample size in most deployments of Bollinger Bands is too small for statistical significance. When stock prices are in the upper band, the stock is deemed to be in an overbought area, creating the conditions for a sell signal, and when it is in the lower band, the price is considered oversold, triggering a potential buy signal.

The very basic strategy with the Bollinger Bands is: There are different versions on when to enter the market, whether when the price goes through the lines intraday or when the price closes through them. In trending markets price can, and does, walk up the upper Bollinger Band and down the lower Bollinger Band. Closes outside the Bollinger Bands are initially continuation signals, not reversal signals. This has been the basis for many successful volatility breakout systems.

This strategy has been denied by Bollinger himself at rule 6th of the list of 22 rules about the use of Bollinger Bands: Tags of the bands are just that, tags not signals.