Bollinger Bands Strategy – How to use in our trades

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What we will learn here

Different categories of Technical indicators

About Bollinger Bands (General information)

How to use B.B in our trades

Different settings and what is Best setting

Different categories of Technical indicators

Totally we can divide Technical indicators into 3 different categories:

Trend-following indicators: (some example)

I. Moving averages (both simple and exponential),

II. MACD (Moving Average Convergence Divergence),

III. Parabolic SAR,

IV. ADX (Average Directional Movement Index)

Momentum indicators: (some example)

I. Relative Strength Index (RSI),

II. Stochastics,

III. Commodity Channel Index (CCI)

Volatility indicators : (some example)

I. Bollinger Bands and

II. ATR (Average True Range)

Bollinger Bands – General Information

  Bollinger Bands is including 3 lines. Moving average + 2 wings. The middle line shows the simple moving average by 20 days period. The upper band is two standard deviations of price plus the 20-day (Simple Moving Average) SMA. The lower band is the middle band minus two standard deviations of price. The standard deviation is a measure of how the prices move in comparison to the average price.

This indicator propounded by John Bollinger in the 1980s. Financial traders usually using that as a methodical tool to inform trading decisions, control automated trading systems, or as a component of technical analysis. How you can see below, technically this is the way how this indicator works, however today we will talk about how we can use it and not going into mathematics calculation.

Settings

Bollinger Bands shows us the range of price movement

Try to use Standard settings, unless if you have special idea or plan to go.

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