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Sometimes called the "Bollinger Squeeze," this technique has
been adopted by the breakout style of stock or forex traders and
involves findings market situations where the bands narrow tightly
around the candles, showing a contraction or indecision in the price.
These times of consolidation can lead to a movement in price as many
traders know. This charting technique can be useful to the well
planned and disciplined trader.
Bollinger Bands were invented by the market technician John
Bollinger in the 1980's. He took the idea of the moving average, he
then set a moving average on the trading chart as a "center line" that
represented the average price of the stock being charted. He then
calculated and applied two separate lines above and below the center
moving average.
The lines were formulated as a measure of volatility by showing the trader
these Bollinger Bands as +2 and -2 standard deviations from the center
line. Traders can use a momentum indicator such as ADX or MACD. Even
multiple moving averages can give a trader looking to determine trend
strength. These indicators can help you place a less risky trade.
Stocks can remain overbought or oversold for a different
periods time in a strong trend. What traders need to look for are
clues that there is a change in trend and price action at a previously
identified support or resistance point. Bollinger Bands can help
determine these points. A successful trader must be reality based, not
driven by illusion. The reality is that markets are nothing more than
pure supply and demand at work and learning charting methods can help
in making money when trading.
When stock or forex traders treat the markets for what they really are,
and look at charts from the perspective of an ongoing supply demand.
Identifying sound trading and investment opportunities can be used by
learning to read the charts correctly. Technical and fundamental
analysis in trading and investing through the learning and
understanding of Bollinger Bands can help the stock or forex trader. |
