Over the years traders and market experts have invented a large number of trading tools.
Those are little nifty things that can help traders be successful in the market and understand its movements and patterns. The real art of trading is knowing what tool Is supposed to be used in every given situation. Implementation of correct tools is one of the most important trading skills one could ever master in the trading world.
One of the most important and widely used trading tools in the markets is Bollinger Bands. Every trader with at least a little bit of experience is familiar with Bollinger Band. These are indicators which were invented and further developed by John Bollinger - American author and financial analyst.
Bollinger bands are used in order to mark and measure market’s volatility. The placing of the band on the field is telling us when the market is quiet and when it is loud. Indicators of a quiet market are contracted; indicators of the loud market are expanded. Also, when the price for the asset is still, the bands are situated closer together. When the price for the asset is growing the candles are drawn further away from each other.
And that is really everything there is to know about the Bollinger Band. Although this little tool might seem difficult it really is that simple to learn how to read it. Nothing to overthink here.
Now there is such thing as Bollinger Bounce. It is connected to the Band with one important fact about the price – it always goes back to the middle of the band. That means that if the price is growing rapidly, sooner or later the fall is going to bring it back to the middle price.
Bollinger Bounce is a perfect indicator for the dynamic support and resistance level. Bands tend to gain power overtime which means the longer you are watching the band, the stronger the bands become. Trading strategy that relies on the bounce is better implemented when the markets are shaking and there is no clear movement pattern.
When the bands are sticking closer to each other that means that a breakout is going to happen fairly soon. If the candles on the chart are edging higher and higher that means that we are going to keep on seeing the up-movement. In case you have been seeing a fall beyond the band, that means that the descend is going to keep on rolling.
Bollinger-invented trading tools are the perfect helpers for traders with both a lot of experience and newbies alike.
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