The Bollinger Band indicator gives the relative limits of highs and lows. This is also known as the middle band. The upper and lower bands of this indicator are a calculation of volatility in the upside trend and the downtrend. The upper and lower bands are evaluated as two standard deviations from the middle band. Traders believe in generating share market tips with the help of Bollinger bands.
There are many known patterns of technical analysis such as double tops, double bottoms, ascending triangles etc. This indicator helps traders to recognize the highs and lows of the prices of stocks in a day. Some more characteristics of the stocks are also easy to understand with the help of this trading strategy. Traders can know whether the stock is trending or not. Traders may also judge whether the stock is volatile or not. When the traders use Bollinger bands, they find that the bands twisted tightly. This twisting of bands indicates that the stock is traded in a narrow range. This means at this moment there will be price breakout or breakdown.
Double Bottoms and Bollinger Bands
In general, the Bollinger bands strategy engages a double bottom set up. The initial bottom of the double bottoms and Bollinger bands combination has a strong volume. Another movement observed in this formation is a sharp price pullback, which gets close outside of the lower Bollinger band. These kinds of moves are called the automatic rally. When the rally starts, the price tries to retest the current laws that are set in order to check the strength of the buying stress. Technical analysts wish to retest bar inside the lower band. This represents the downward pressure on a price of the stocks, which has fallen down. Now there will be more buyers than sellers. Traders need to keep in mind the volume factor also.
These are some of the immense trading techniques. Many traders and technical analysts use a bunch of technical indicators together in a chart due to the messy feeling they get. Traders put on price, volume and Bollinger bands on the charts. The veteran professionals of Money Classic Research offers accurate stock market tips to their clients.