Bollinger bands which was invented by Bollinger is drawned with the help of moving average. 3 lines are obtained by calculating standard deviation of moving average. Low volatiity creates high volatility, and high volatility causes to low volatility. That continues as cycle. Standard period values are 20 and 2. It can be used 2 against 10, and 4 against 10. It is up to your experience, and market expectation. These bands become narrow when valutility is little. They are expands when valutility is excessive. It should not be forgotten that, if there is valutility, there is also movement. Shrinker band signs that there will be upward or downward movement. But it does not give any information about direction of movement. Other indicators or exchange data can be used in this point. Top band is accepted as resistance, and lower band is accepted as support. If price movement, which begins in lower band, exceed to middle band, it is presumed that there will be a movement till top band. John Bollinger mentioned that it is not a generally accepted situation in Bogazici University when he came to Turkey, but many analysts belive this hypothesis. Hard and sudden rising out of bands shows that pricec will enter channel again.
If there is a overflow out of band, and if there is no change of direction, prices move on by holding on to overflowing side. And it shows that there is a trend. I witnessed an analysts’ comment. “ Upward trend will begin if the bant broken to high”. Subject, which is specified with dark, is the point. If there is no situation like that, price of moving average pull toward itself like a magnet.
- Date: 03 December 2016 Sat 22:17
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