|
New Bollinger Band indicator |
|
John Bollinger - the author of a technical indicator called Bollinger Bands. This indicator is plotted and shows the range and speed of price changes.
The indicator consists of three bands:
* - Middle band - this is the usual moving average
* - Top band - is a moving average + 2 standard deviations
* - Lower band - it is a moving average - 2 standard deviations
Trader may choose period of moving average, just as the number of standard deviations (standard size 20 and 2, respectively).
The interpretation of Bollinger Bands is based on the fact that prices tend to stay within the upper and lower boundaries of the band.
At a time when there is high volatility (large price changes) at the market Bollinger Bands expand.
In the period of low volatility, Bollinger bands narrow and keep prices within its borders.
The following features of this indicator:
* - After narrowing of the band trader should expect sharp price changes
* - When prices move outside the bands, trader should expect a continuation of current trends
* - If the pikes and hollows outside the bands followed by bottoms and tops inside the bands trader should expect reversals in the trend
* - When prices begin to move from one of the band, they usually reaches the opposite, and thus help to predict price direction.
|
to post comments.
