Bollinger Bands indicator seems a bit hard to understand for a neophyte in the trading markets. But when he is diligent enough to study the industry more seriously, he would be able to understand the technical aspects of the trading market in no time. Ushbu maqolada, everything about the Bollinger Bands and its indicator is explained.
Bollinger Band is said to have been the most popular indicators ever developed for traders to measure the volatility of the market prices relative to the previous tradings. The Bollinger Bands is not only used in Forex trading but also used in options trading as well as implied volatility trading. It is suggested that BB is an accurate indicator to predict future market prices based on the previous trading, usually within a 20-day period. Bollinger Band indicator provides smart traders accurate signals when to buy and sell stocks or options effectively giving them total control of their investments.
The Bollinger Band indicator has three major components namely: moving average, upper band and lower band. The moving average or MA is commonly used by most traders to analyze the market prices based on a series of averages within a given period of trading days. The 2 standard deviations below and above the Bollinger Bands indicate the lower and upper limits of the band.
The lower and upper limits of the Bollinger Bands show the fluctuations of prices within the given period. It further indicates whether a stock is over sold or over bought. Although not an absolute indicator to signal an investor to buy or sell, the Bollinger Bands may influence the investors decision what to do with his assets in reaction to price fluctuations. Many investors would use the bands’ trading activity along with other indicator tool to ensure good investment decision.
In general, the Bollinger Bands indicator would offer traders a tell-tale sign to buy or buy to cover when the price falls below the lower limit of the band. Conversely, it will give signal to traders to sell when the price shoots up above the upper limit of the band.
Boshqa tarafdan, ammo, more conservative traders would carefully analyze the activity before making decisions. They generally wait until the price settles back inside the band before buying or selling happens. This attitude might also allow profitable opportunities to slip away. To conclude, careful analysis is absolutely required to make your buying or selling decisions in the trading market.
