How to use Bollinger bands
How to use Bollinger bands , by using bollinger bands (introduced by John Bollinger) we can measure the volatility of a price. And also can see the market conditions whether in crowded conditions (quiet) or quiet ( quiet ), when in a crowded condition the bollinger band will contract or widen while when in a quiet condition, the bollinger band will narrow.
The following is an example of a graph that can be used to understand bollinger bands more easily. By looking at the graph below, can you predict where the next price will move?The thing we need to pay attention to when using this indicator is that prices will tend to bounce back to the midline and this is indeed the basic idea of the bollinger band itself.
And the graph below is a continuation of the price movement chart above. If your answer is to bounce back down (center) then your prediction is correct.
The thing that we just learned is the classic technique of bollinger bands and we need to underline that this bollinger band is almost similar to Support and Resistance levels. The longer the timeframe you use, the stronger the support and resistance level or the bollinger band.
is a condition when the bollinger band is squashed or depressed and usually a signal breakout will occur. If one of the candlesticks penetrates the top of the band, the movement will tend to move upwards and if otherwise it will tend to move downwards.
When you see each of the upper and lower bands (bands) are squeezed together and the candlestick has just penetrated the top band. Based on this condition what about your prediction of the next price movement?
If your answer is moving up then your answer is correct. And this is the working principle of Bollinger bands.
Now that was the working principle of the indicator bollinger band to be used in predicting prices in a market. And you can use this tool for trading when it’s hard to find a trend in the market. Or you can also combine it with other indicators such as MACD , RSI , Stochastic , or ADX to get the right prediction results 🙂