Spaf
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Bollinger Bands [Trend Indicator]
Bollinger Bands
Bollinger Bands were invented by John Bollinger. Used to confirm trading signals, normally from a Momentum Indicator, the bands indicate overbought and oversold levels relative to a moving average.
Bollinger Bands are calculated at a specified number of standard deviations above and below the moving average, causing them to widen when prices are volatile and contract when prices are stable.
Bollinger originally used a 20 day simple moving average and set the bands at 2 standard deviations, suited to intermediate cycles.
Trading Signals
Contracting bands warn that the market is about to trend: the bands first converge into a narrow neck, followed by a sharp price movement. The first breakout is often a false move, preceding a strong trend in the opposite direction.
A move that starts at one band normally carries through to the other, in a ranging market.
A move outside the band indicates that the trend is strong and likely to continue - unless price quickly reverses.
A trend that hugs one band signals that the trend is strong and likely to continue. Wait for divergence on a Momentum Indicator to signal the end of a trend.
Permission to reproduce material on the Bollinger Bands indicator is conditional upon displaying a hyperlink to http://www.incrediblecharts.com/technical/bollinger_bands.htm on your website.
Keeps one from buying high, unless they really want the risk. I'll put 50,1 in my notebook.
