Bollinger Band Indicator | Strategy | Squeeze | Trading strategy | Settings | Breakout Strategy | & more

Bollinger Band Indicator | Strategy | Squeeze | Trading strategy | Settings | Breakout Strategy | & more:

Hello…how are you?

Today in this article in this article I am going to talk about one of the most famous trading indicators i.e Bollinger Band Indicator.

So, Keep reading ahead Bollinger Band Indicator | Strategy | Squeeze | Trading strategy | Settings | Breakout Strategy | & more

What is Bollinger Band Indicator?

Bollinger Band is a technical analysis tool that measures the strength of the trend.

This indicator was developed by one of the greatest trading analysts of all time John Bollinger.

The Bollinger Band helps us to identify the strength of the trend by using the sets of trend lines plotted over with two standard deviations (positively and negatively ) away from the SMA (Simple moving average) of a security price.

The Bollinger band Fomula is:

BOL U= MA (TP, n ) + m *σ ( TP, n)

BOL D = MA (TP, n ) – m *σ ( TP, n)

Where,

BOL U = Upper Bollinger band

BOL D = Lower Bollinger band

MA = Moving Average

TP = Typical price = (High + Low + Close) /3

n = Number of days in smoothing period (Typically 20)

m = Number of Standard deviation (Typically 2)

σ (TP, n) = Standard Deviation last n period of TP (Typical Price).

Bollinger Bands Settings

Here, to illustrate on Bollinger Bands Settings. I am going to use the IQ Option.

In case you don’t have an IQ Option. click here.

You can sign up here try….

Once you click the link above you will land on the IQ Option homepage.


Now, fill in your details, password & hit try now.

Once you have signed up you will land on the IQ Option dashboard.

Firstly, click on the chart button and select candle from the given menu.

Secondly, click on the indicator and select Bollinger band from the given menu.

Thirdly, change the period to 20 and you can change the colours for better visibility.

That’s it!! The basic setup is over.

Bollinger Band Trading strategy

The Bollinger band consists of three lines:

  • SMA = It is a simple moving average for 20 periods.
  • Upper band: It is the value of SMA20 plus twice the 20 – day standard price deviation.
  • Lower band: It is the value of SMA20 minus twice the 20 – day standard price deviation.

The lower and upper bands widen when the volatility is high and contract during the flat market.

For investors finding the strength of the trend is really important as it gives you more proper entry/exit points.

Now, Talking about How to Trade with Bolling Band? Well, It’s very easy.

The golden rule of the BB band says:

If the candle gets over the lower band of the Bollinger band and there is a candle outside the band Here, we should take a Buy Trade.

Similarly, If the candle gets over the upper band of the Bollinger band and there is a candle outside the band Here, we should take a Sell Trade.

Let’s check a few examples:

Given above is a 1 -hour chart and we clearly see that the candle gets over the lower band of the Bollinger band and there is a candle outside the band So, Here, we should take a Buy Trade.

Given above is a 1 -hour chart and we clearly see that the candle gets over the upper band of the Bollinger band and there is a candle outside the band So, Here, we should take a Sell Trade.

Final Point:

Bollinger Band is a technical analysis tool that measures the strength of the trend by using a series of trend lines plotted over with two standard deviations (positively and negatively ) away from the SMA (Simple moving average) of a security price.

The indicator was developed by one of the greatest names of all time John Bollinger.

Trading and understanding this indicator is very easy. You just need to remember the golden rule.

If the candle gets over the lower band of the Bolling band and there is a candle outside the band Here, we should take a Buy Trade.

Similarly, If the candle gets over the upper band of the Bolling band and there is a candle outside the band Here, we should take a sell Trade.

You can use Support and resistance for better results.

So, this is the end of this article I hope you have found this article helpful.

This article was all about Bollinger Band Indicator, Bollinger Band Strategy, Bollinger Band Squeeze, Bollinger Band Trading strategy, Bollinger Band Settings, Bollinger Band Breakout Strategy

 

 

 

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