TradersCult.com
No Result
View All Result
TRADE NOW
  • Home
  • Brokers
  • Analysis
    • Technical Analysis
    • Fundamental Analysis
    • Strategies
  • Finance Basics
  • Crypto
  • Broker Finder
TradersCult.com
  • Home
  • Brokers
  • Analysis
    • Technical Analysis
    • Fundamental Analysis
    • Strategies
  • Finance Basics
  • Crypto
  • Broker Finder
TRADE NOW
No Result
View All Result
TradersCult.com
No Result
View All Result
Home Analysis Technical Analysis

Bollinger Bands Indicator

Learn how to trade using Bollinger Bands

Traders Cult by Traders Cult
March 12, 2021
in Technical Analysis, Analysis
0
bollinger-bands-indicator-guide
11
SHARES
274
VIEWS
Share on FacebookShare on Twitter

Chapters

Toggle
  • Bollinger Bands Indicator
    • Day trading bullish trends
    • Day trading bearish trends
    • Limitations of Bollinger bands

Bollinger Bands Indicator

Bollinger Bands indicator is a type of technical analysis tool designed for the sole purpose of trading stocks by John Bollinger in the 1980s.

You might also like

Understanding Pivot Points

Technical Indicators: what is the Alligator

Crude Oil News – How to trade it

The bands consist of a moving signal that estimates the proximate high or low of a trade’s price about its prior trades. The volatility of the trades is estimated using standard deviation, which alters with each rise and fall of the volatility. The band expands when there is a price increase, and it contracts when there is a price decrease; like other momentum indicators it can can be used in different types of trades.

Bollinger-bands-sample-traders-cultThe Bollinger bands are made up of 3 lines, which are the upper, middle, and lower bands. The middle band is known to be the moving average, and the parameters of this moving average are selected by the trader. The lower and upper bandsĀ are situated on both sides of the moving average band; trader determines at what particular number the standard deviation should be fixed at. The standard deviation numbers specify the length between the middle band and the lower and upper bands. The situation of these bands gives knowledge on how powerful the trend is and it also shows the possible high and low price levels that should be reached in the immediate future.

Day trading bullish trends

Bollinger Bands can be employed in the specification of how powerful a trade is increasing while potentially reversing or weakening. If a bullish trend is strong, it will often get to the upper band. When a bullish trend touches the upper band it signals that the stock is increasing higher and it’s time for traders to take advantage of the opportunity by going long. If the price decreases within the bullish trends, and remains above the middle band, and then increases back to the upper band, it indicates a strong uptrend. When a price is said to be bullish, it shouldn’t touch the lower band, and if and when it does, it goes to show that the stock is losing strength or reversing.

Many technical traders strive to earn from the strong bullish trends right before a reversal happens. Once a stock ceases to attain its peak, traders begin to sell the asset at that point to prevent loss for funds from a reversed trend.

Day trading bearish trends

Bollinger bands are also used to deduce the intensity with which a trade decreases and also to ascertain when it is likely to reverse to a bullish trend.

During a strong downtrend, the price runs along with the lower band, and it depicts that the selling activity is still strong. But then the price doesn’t touch or move near the lower band, it shows that the downtrend is losing strength. During a bearish trend, prices aren’t supposed to move above the upper band, because that would signal a price reversal trend.

Limitations of Bollinger bands

Albeit the Bollinger Bands are valuable tools for technical analysis, there are few limitations every trader should analyze before employing them. They are as follows:

  • Bollinger bands are mainly reactive, and not predictive. This means that the bands only react to price alterations, either bullish or bearish. Just like most technical indicators, Bollinger bands are slow indicators. This is because the technical tool device relies on a simple moving average, which receives the average price of many price bars. Although the bands can be used by traders to gauge the trends, they shouldn’t be used alone by them to predict price movements. The founder himself of the Bollinger bands, John Bollinger, proposes to incorporate other two or three technical tools to help give a clear and concise prediction of market signals to who is investing.
  • The second limitation of this Indicator is that the default settings will not always work for traders. The accuracy of Bollinger Bands may vary from one trade to another, and its settings might need some adjustments even though the trader is operating on the same stock over some time. This is why is important to find the settings panel that enable traders to adjust the parameters for a particular stock that they’re monitoring. If the chosen settings of the Indicator are not reliable, traders should change the parameters or look for another tool that best suits their trading strategy.
Share4Tweet3
Traders Cult

Traders Cult

Recommended For You

Understanding Pivot Points

by Traders Cult
April 8, 2024
0
Discovering Pivot Points

Unlocking Forex Market Dynamics: a Guide to Pivot Points In the fast-paced world of forex trading, market participants are often in search of tools that can aid in...

Read more

Technical Indicators: what is the Alligator

by Traders Cult
January 6, 2024
0
What is the alligator indicator

What is the Alligator? The Alligator indicator is a technical analysis tool used in trading to help identify trends and potential entry and exit points. It's named after...

Read more

Crude Oil News – How to trade it

by Traders Cult
March 12, 2021
0
Trade-Crude-Oil-News-

The Crude Oil News Economic indicators are employed by investors and traders to enable them to comprehend the underlying fundamentals of the market. The particular economic indicator that...

Read more

Non-farm Payrolls

by Traders Cult
March 17, 2021
0
non-farm-payrolls-news-trade

What is the non-farm payrolls news? The non-farm payrolls is an important economic signal of the United States economy. It depicts the number of jobs added, except the...

Read more

Economic Calendar – How to read it correctly

by Traders Cult
March 12, 2021
0
Economic-Calendar-trading

What is the Economic Calendar? An economic calendar is a type of fundamental analysis that helps traders to understand about the forthcoming events that can affect their trades....

Read more
Next Post
Economic-Calendar-trading

Economic Calendar - How to read it correctly

Please login to join discussion

Suggested

Economic-Calendar-trading

Economic Calendar – How to read it correctly

March 12, 2021
Learn how to use the price crossover strategy

Price Crossover – Trading Strategies

January 4, 2024
Affiliate Marketing in Trading

Discover Affiliate Marketing in trading: how I earned $220,000 in 2 years

April 10, 2024

Browse by Category

  • Affiliate Marketing
  • Analysis
  • Brokers
  • Crypto
  • Finance Basics
  • Fundamental Analysis
  • Strategies
  • Technical Analysis

Home

Privacy

Terms & Conditions

Risk Warning: Your capital might be at risk
This is for information purposes only and should not be considered as personal and/or investment advice and/or incentive to continue trading. We do not guarantee the accuracy, validity, timeliness, or completeness of any information or data made available and assume no liability as to any loss arising from any investment based on the content of this material
The financial products offered by the companies listed on traderscult.com carry a high level of risk and can result in the loss of all your funds. You should never invest money that you cannot afford to lose
CFDs are complex instruments and entail a high risk of losing money rapidly due to leverage.
72% of retail investor accounts lose money when trading CFDs with this provide.
You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Welcome Back!

Login to your account below

Forgotten Password?

Retrieve your password

Please enter your username or email address to reset your password.

Log In

Add New Playlist

No Result
View All Result
  • Brokers
  • Analysis
  • Finance Basics
  • Crypto
  • Broker Finder
  • Contact Us