Settings can be adjusted to suit the characteristics of particular securities or trading styles.
What Are Bollinger Bands
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.
John Bollinger teaches you the basics of Bollinger Bands so you can use the effectively. Bollinger on Bollinger Bands: For the 30th anniversary of Bollinger Bands, John Bollinger held a special two-day seminar teaching how to use his Bollinger Bands and which indicators to use for confirmation. The theme for the seminar was Bollinger Bands: I have to admit that I was wrong and Bollinger Bands became one of the most relied on technical indicators that was ever created.
The upper and lower bands are then set two standard deviations above and below this moving average. The bands move away from the moving average when volatility expands and move towards the moving average when volatility contracts. Many traders length of the moving average depending on the time frame they use.
Notice in this example how the bands expand and contract depending on the volatility and the trading range of the market. Notice how the bands dynamically narrow and widen based on the day to day price action changes. The indicator is called Band-Width and the sole purpose of this indicator is to subtract the lower band value from the upper band. Notice in this example how the Band-Width indicator gives lower readings when the bands are contracting and higher readings when bands are expanding.
One particular Bollinger Bands Strategy that I use when volatility is decreasing in the markets is the Squeeze entry strategy. Just like in trading, some trading tools and indicators are best used in particular environments or situations.
So, the more tools you have, the better you can adapt to the ever-changing market environment. For this lesson, as you learn about these indicators, think of each as a new tool that you can add to that toolbox of yours.
You might even find one that you understand and comfortable enough to master on its own. Now, enough about tools already! When the market is quiet, the bands contract and when the market is LOUD, the bands expand. Notice on the chart below that when price is quiet, the bands are close together.
When price moves up, the bands spread apart.