The Secrets of the Bollinger Bands Indicator, Part 4. How to Use the Indicator

The indicator’s developer himself lists the following characteristics of Bollinger Bands:

- Sharp price movements (in either direction) usually occur after the distance between the Bollinger Bands has decreased.

- If the price moves outside the Bollinger Bands we should expect a continuation of the current trend.

- If the price forms a high or a low outside the Bollinger Bands and then forms a high or a low inside the Bollinger Bands it’s possible to see a trend reversal.

- Usually a movement that begins at one of the outer bands tends to reach the other outer band. This observation can be useful when planning new positions.

To be continued…