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Bollinger Bands

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It is an indicator as bands that surround the price chart that has developed John Bollinger and is standard graphics packages. Is calculated from a moving average (simple or exponential) on the closing price which involve two bands that are obtained from Add and subtract the value of the mean 2 standard deviations. This measure of volatility (standard deviation) is that mark the extent of the bands.

What is the use? Used to locate the price within a range relative to its past performance. Helps determine if the value is or nonvolatile. Let’s get price levels and determine if the value is in dynamic areas of support or resistance.

How is it used? The default values used in the calculation are 21 for the average and two standard deviations. If reduced or significantly increases the average value are set in the same sense the number of standard deviations. For values of average above 50 (long term) > 2.5 deviations; average values nearby to 10 (short term) > 1.5 deviations. If prices are above average and near the upper band are relatively high, there may be overbought. If they are below the average and near the lower band are relatively low, there may be overbooked. If the bands become narrow on prices it is indicating that the value is very little volatile, unlike the bands widen if the value is volatile. This provides a very important support to the investor who operates with options. They often produce large and rapid movements in prices after periods when the bands are narrowed. Price movements that originate in one of the bands tend to target the opposite side, making it easy to determine these price targets. Many of the extreme prices (maximum or minimum) of the movements are in the band or its vicinity. When prices exceed the upper band is a sign of strength of the value, if instead are below the lower band is a sign of weakness. When prices are located outside any of the bands is assumable the continuation of the movement. Its use in conjunction with other indicators helps determine with high probability the roofs and floors of markets.

Tips of Trading: Minimum/maximum with prices outside the bands followed by Minimum/maximum with prices within the bands tends to be patterns of change in trends. Indicator References: D. Dobson, Edward. Understanding Bollinger Bands. Traders Press. Greenville, SC

Example Image Momentum in the Metatrader platform

The graphical representation of the Bollinger Bands is two curves that envelop the price chart 

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Erick Gálvez
Author: Erick GálvezWebsite: http://www.asdforex..comEmail: This email address is being protected from spambots. You need JavaScript enabled to view it.
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