ForexSecret123 (4)

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What is Bollinger Band?

• Technical analysis is an approach to analyze the
  market. Because the price itself is a kind of
  data. Technical analysis presents those data in a
  visual form in front of you.
• Technical analysis helps you so that you can take
  better decisions. If you use multiple tools in
  technical analysis, the chances is higher that
  your decision will be better. But there is no
  guarantee that your projections will be accurate.
  So if we talk about trading indicators, Bollinger
  band is one of the best indicators.
• A Bollinger Band is a technical analysis tools.
  This tool is defined by a set of lines. These
  lines are plotted on both sides of the moving
  average. Basically it is a range of moving
  average.

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Bollinger Band Continue
Bollinger Bands use standard deviations
positively and negatively kipping the simple
moving average at the middle. The idea of
Bollinger Bands were developed and copyrighted by
technical trader John Bollinger. Band means
range. For example, when we say data band it
means a cluster of data. It might not be very
important for you but some people will not
understand this. I am trying to narrate in such
a way that anyone can understand it.
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Important Key Points of Bollinger Bands

• Bollinger Bands are a technical developed by John
  Bollinger for share market.
• There are minimum three lines that compose
  Bollinger Bands
• Middle Band A simple moving average
• An upper band.
• A lower band.
• The upper and lower bands are mainly 2 standard
  deviations /- from a 20-day simple moving
  average, but if you want you can modify it.

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The procedure to Calculate Bollinger Bands

• The first step is you have to calculate the
  simple moving average. To calculate the best
  reliable average we normally take 20 days Simple
  Moving Average (SMA).
• In calculating 20 day moving average, it choose
  the moving average. It uses the last 20 days.
  After 21 days it use the 21th price and release
  the earlier day price and so on.
• The Next step is to calculate the standard
  deviation of the currency's price. Standard
  deviation means the mathematical calculation of
  average variances which is prominently used in
  statistics, economics, finance and accounting.

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Calculate Bollinger Bands Continue

• In a given data set, it standard deviation means
  how the numbers are spreader around the average
  value. Standard deviation (SD) is calculated by
  doing the square root of the variance.
• The next step is to multiply the standard
  deviation value by two and after add and subtract
  that from each point along the Simple moving
  Average (SMA).In this way we produce upper and
  lower bands.

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Interpreting the Bollinger Bands

• Bollinger Band is highly popular technique. The
  closer the price moves to the upper band, the
  more overbought the market, and the closer the
  prices move to the lower band the
  more oversold the market. John Bollinger has
  a set of 22 rules to follow when using the bands
  as a trading system.
• Some people think that in Bollinger band, band is
  made from the beginning but if you look very
  closely I will see that (22, 2) which means.
• The Bollinger band is made up the last 22 days
  average. First the candela is being developed and
  after that the band is forming or you can say
  band is forming along the candles.

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Interpreting the Bollinger Bands

• So when the candle goes up to the upper band we
  will put sell and when the candle goes down we
  will put buy. But there is no guarantee that
  after touching the upper band, it will come back,
  and touching the lower band it will go up.
• So when the candle touches the lower
• band you have to be cautious that
• the price might go up and when it goes up
• it indicates that the price
• might go down. This might give you an alert.
• Data can change at any time. The behavior
• can be erratic. Say for example if we use
• 15Minute data the chart will be like this

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Interpreting the Bollinger Bands

• If we use 30Minute data (30M),
• the candle will be like this
• So it will differ from person to
• person according to the time frame
• it is looking for. It is not like you see
• the candle and the money will come
• to follow you. Try to understand the
• standard deviation and the historic
• standard deviation then you will
• analyze data. Try to look one
• standard deviation, two standard
• deviation, three standard deviation.

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What is Squeeze?

• If you look at different concepts of Bollinger
  bands, you will find the squeeze is the central
  idea of Bollinger Bands. When the bands come
  close together, it creates a very narrow place
  alongside the moving average. In this situation
  taking a trade is very difficult. And this is
  called the Squeeze of Bollinger Band.
• A squeeze provides signals of low volatility.
  When
• it appears, it provides future increased
  volatility
• and possible trading opportunity. On the other
• hand the wider apart the bands move, the more
• likely the chance of a decrease in volatility and
  it
• provides greater opportunity of exiting trade.
• But it is not the trading signals. The bands
  provides no indication when the change may take
  place and in what direction the price could move.
  

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Breakouts

• Most of the trade (Approximately 90) occurs
  between the two bands. If you are seeing any
  brake out that means it is happening due to any
  major events. The break out doesnt provide any
  signals for trading.
• Most of the time people make mistake because they
  believe that hitting or exceeding the outer band
  is an indicator to buy or to sale. But break out
  provides no such indication for future price
  movement.

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Limitations of Bollinger Bands

• There are also some limitations of Bollinger
  Bands. They are not a standalone trading system.
  This is simply one indicator designed to provide
  trades regarding related information with trading
  volatility.
• So there is no guarantee that it will follow the
  trend. You have to be very cautious regarding the
  other factors of Bollinger bands.

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