What Are Bollinger Bands?
Bollinger Bands, effectively used to generate trading signals on financial markets, are a technique originally designed by popular analyst and trader John Bollinger in 1980 to measure changes in the market faster.
Bollinger Bands are the most used indicators of technical analysis, serving to predict the future price of the investment vehicle, to see the volatility in the market faster and to develop quick action. Especially at the high volatility like Forex, the success rate is very high. Bollinger Bands are a great signal provider of trends and we can list some of the advantages that the investor offers:
Bollinger bands come in three different curves, lower, middle and upper. The Central Bollinger Band is based on a 20-day simple moving average. The lower and upper bands are formed by shifting the 20 day moving average by 2 standard deviation values in the up and down direction. The role of the upper and lower bands is to determine the highest and lowest points of the average closing prices. The lower band and the upper band are in substantial support and resistance levels.
Use of Bollinger Bands
Bollinger Bands are the first choice of indicators by many investors because of their ease of use, but some detail in the interpretation weakens the success of the analysis. Bollinger Band volatilities give more successful results in high markets.
If the prices go above the upper channel of the Bollinger Band, it is thought that the buyout position should be ascertained, considering that the upward trend will continue. When the lower band of the channel is broken, the sales position is expected to open.
When the Bollinger Band expands and prices go up, the new trend is regarded as the beginning. In practice, it is always wrong to open the process when the arms expand.