Wednesday, July 06, 2016

The Secrets of Bollinger Bands Part 3 - Indicator Description



The Bollinger Bands determine the natural highs and lows in a developing trend. If the bands are pointing north, then the price usually climbs, until there’s a good enough reason to stop.

The zone of stagnation develops either above the upper band or below the lower band.

This stagnation does not end until the Bollinger Bands begin to spread, moving away from the price bars, which is a signal that the resistance (or the support) has been overcome.

The price could move sharply in the direction of the current trend, sticking closely to the Bollinger band. Of course, one should always keep in mind that price movement depends on all levels of support and resistance, not just those that are associated with Bollinger Bands.

One should not look for ideal conditions to open new positions. We have to be aware that the conditions will never be perfect, and we need to learn to trade in imperfect conditions, even when we see false signals.


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