Trading with Bollinger Bands

Trading with Bollinger Bands

Bollinger Bands were invented by John Bollinger way back in the 1980’s and are so popular in trading, most traders and analysts would always be keeping the Bollinger Band close to hand to help give them the trading edge.

Bollinger Bands are placed in two standard deviations away from the simple moving average to keep a check on the measures of volatility.

The default parameters are the 20 period and two standard deviations which can be changed to each persons preference.

 

How to Trade

When a candle touches one of the bands, it signals the price has reached a point at which buyers have bought or sellers have sold, these can indicate a Call or Put, when a candle touches the top band, that can be an signal for a Put and when a candle touches the bottom band that can be a signal for a Call position.

Another interesting note, when volatility drops, the Bollinger Bands come closer together and can form a tight squeeze… get ready, a massive move is about to take place, so have a Call or Put ready.

 

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