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Bollinger Bands Indicator

Bollinger Bands Indicator

Bollinger Bands indicator (Bands, waves, Bollinger bands) is a technical analysis indicator developed by John Bollinger in the 80s of the twentieth century. Represents three lines. It is very similar to a regular channel based on moving averages, like the Envelopes indicator. The difference between BB and its counterparts is how its boundaries are constructed. Usually, the boundaries of such channels are at some fixed value, but in this case, the distance from the center is indicated in standard deviations and depends on the current volatility of the trading instrument. That is, if the channel expands, it means that volatility is growing, if on the contrary, it is falling.

Pay attention to the concept of volatility, in fact, this is a key point for the Bollinger Bands indicator. We all know and are able to trade in the channel - we sell / buy when bouncing off the borders, and so on. In the case of Bollinger Bands, things are somewhat different. Since volatility is taken into account when calculating the channel, the following assumption can be made - when there is a large movement (high volatility) there is a high probability of an error when entering the market by a rebound signal. Therefore, it is better not to use such tactics when working on BB.

In general, many traders of our time agree that Bollinger Bands should not be used for trading, but should be analyzed. The assertion is controversial, but it is undoubtedly worth bearing in mind. Remember, there are no grails in the markets, but there is a constant search for working tactics. And this indicator definitely deserves your attention. A large number of successful traders trade on it, despite the opinion of other equally successful traders.

Bollinger bands have another interesting property, namely, usually from 90% to 95% of the time the prices of trading instruments are inside the indicator. This feature is used in trading one way or another by all traders who work with this indicator.