How to use the Bollinger bands?

<p id="isPasted">A Bollinger band is an indicator that provides a range where the price of an asset is generally traded. Bollinger bands are useful for recognizing when an asset is trading outside its normal levels and are used primarily as a method to predict long-term price movement.&nbsp;</p><p>Check out the graphic below. The Bollinger Bands (BB) is a graph overlay indicator indicating that it is displayed above price.</p><p class="forexqa-img-container"><img src="https://prod-forexqna.s3.amazonaws.com/uploads/froala_editor/images/1649329340074.png" style="width: 485px;" class="fr-fic fr-dib fr-draggable fr-fil forexqa-img"></p><p id="isPasted">Note that when the price is quiet, the bands are close together. When the price goes up, the bands disperse. The top and bottom ranges measure volatility or the degree of price change over time. As Bollinger strips measure volatility, they automatically adjust to changing market conditions.</p><p>Bollinger Bands are typically plotted as three lines:</p><ol style="list-style-type: decimal;margin-left:26px;"><li>An upper band</li><li>A middle line</li><li>A lower band</li></ol><p><br></p><p>The middle line of the indicator is a simple moving average (SMA).</p><p>Most default mapping programs have a period of 20, which is great for most traders, but you can experiment with different moving average lengths after getting a little experience applying Bollinger bands.</p><p>By default, the top and bottom bands represent two standard deviations above and below the mid-line (moving average).</p><p>If the upper and lower ranges correspond to a standard deviation, this means that about 68% of recent price changes are CONTAINED within those standard deviations.&nbsp;</p><p>Considering that the upper and lower bands are 2 standard deviations apart, this means that nearly 95% of recent price moves have been contained within these bands.</p>

<p id="isPasted">Bollinger Bands are a type of technical indicator frequently used by traders on many markets, including stocks, futures, and currencies. Bollinger Bands were created by John Bollinger in the 1980s and offer unique insights into price and volatility.1 In fact, Bollinger Bands can be used as a trend-following tool and for monitoring breakouts, as well as determining overbought and oversold levels.</p><p>Bollinger Bands consist of three lines. For the middle band, a 20-day simple moving average (SMA) is often used. In order to calculate the upper band, take the middle band and multiply it by twice the daily standard deviation. Lower bands are calculated by subtracting the middle bands from two times the daily standard deviation.&nbsp;</p><p>The Bollinger Band® formula consists of the following :</p><p>BOLU=MA(TP,n)+m??[TP,n]</p><p>BOLD=MA(TP,n)?m??[TP,n]</p><p>where:</p><p>BOLU=Upper&nbsp;Bollinger&nbsp;Band</p><p>BOLD=Lower&nbsp;Bollinger&nbsp;Band</p><p>MA=Moving&nbsp;average</p><p>TP&nbsp;(typical&nbsp;price)=(High+Low+Close)÷3</p><p>n=Number&nbsp;of&nbsp;days&nbsp;in&nbsp;smoothing&nbsp;period</p><p>m=Number&nbsp;of&nbsp;standard&nbsp;deviations</p><p>?[TP,n]=Standard Deviation over last n periods of TP</p>

<p id="isPasted">By showing the relative strength-or momentum-of a stock or other investment, Bollinger Bands can help you decide when to make your move. This indicator can even be applied to the broader market.</p><p>A Bollinger Band is plotted at a standard deviation above and below the price moving average. The upper band is the moving average plus a standard deviation, and the lower band is the moving average minus the standard deviation.</p><p>This indicator was created by John Bollinger, who considers the stock price relatively low (attractive) close to the lower band, and relatively high (overvalued) close to the upper band. Investors should not buy or sell solely based on these signals, but they can help assess relative value alongside other factors.</p>

<p id="isPasted">Bollinger bands are a technical analysis tool that consists of a simple moving average and two additional lines that are plotted at a standard deviation above and below the moving average. The purpose of Bollinger bands is to provide a relative definition of high and low. By definition, prices are high in the upper band and low in the lower band. This can be used to identify overbought and oversold conditions or to identify potential trend reversal points.</p><p>Here are some strategies that traders can use when using Bollinger bands in forex trading:</p><ol><li>Trend-trading: When the market is trending, Bollinger bands can be used to identify potential trend reversal points by looking for overbought or oversold conditions. For example, if the market is in an uptrend and the price reaches the upper Bollinger band, it could be a sign that the market is overbought and a trend reversal is imminent.</li><li>Breakout trading: Bollinger bands can also be used to identify potential breakout points. For example, if the price has been consolidating within a range and then breaks out above the upper Bollinger band, it could be a sign of a strong bullish trend.</li><li>Range trading: In range-bound markets, Bollinger bands can be used to identify potential entry and exit points. For example, if the market is in a range and the price reaches the upper Bollinger band, it could be a good time to sell. Conversely, if the price reaches the lower Bollinger band, it could be a good time to buy.</li></ol><p><br></p><p>It's important to note that Bollinger bands should be used in conjunction with other technical analysis tools and not as a standalone indicator. It's also important to remember that Bollinger bands are based on past price action, so they can't predict future price movements with 100% accuracy.</p>

<p id="isPasted">Bollinger Bands is a technical analysis tool that can be used to identify trends, overbought/oversold conditions, and potential breakouts. They are calculated by taking a simple moving average of a security's price over a certain period of time (typically 20 days) and then adding and subtracting two standard deviations. This creates two bands around the moving average, which are called the upper and lower bands.</p><p>Bollinger Bands can be used in a variety of ways, but some of the most common uses include:</p><ul style="margin-bottom:0cm;" type="disc"><li style="margin-top:0cm;margin-right:0cm;margin-bottom: 7.5pt;margin-left:0cm;line-height:normal;font-size:15px;font-family:&quot;Calibri&quot;,sans-serif;color:#1F1F1F;background:white;">Identifying trends:&nbsp;When the Bollinger Bands contract, it indicates that the price is moving within a narrow range. This can be a sign that a breakout is imminent. When the Bollinger Bands expand, it indicates that the price is moving within a wider range. This can be a sign that a trend is underway.</li><li style="margin-top:0cm;margin-right:0cm;margin-bottom: 7.5pt;margin-left:0cm;line-height:normal;font-size:15px;font-family:&quot;Calibri&quot;,sans-serif;color:#1F1F1F;background:white;">Identifying overbought/oversold conditions:&nbsp;When the price closes above the upper band, it is considered to be overbought. This means that the price has risen too quickly and is due for a correction. When the price closes below the lower band, it is considered to be oversold. This means that the price has fallen too quickly and is due for a rebound.</li><li style="margin-top:0cm;margin-right:0cm;margin-bottom: 7.5pt;margin-left:0cm;line-height:normal;font-size:15px;font-family:&quot;Calibri&quot;,sans-serif;color:#1F1F1F;background:white;">Identifying potential breakouts: When the price breaks out above the upper band or below the lower band, it can be a sign that a new trend is about to start. However, it is important to note that breakouts can be false, so it is important to confirm the breakout with other technical indicators or fundamental analysis.</li></ul>