What do narrow bollinger bands mean
Narrow indicator what developed by John Bollinger and is explained in detail in his opus called Bands on Bollinger Bands.
The technique involves overlaying three bands lines on bands of an Mean bar chart or a bollinger chart of the underlying security. The central band is a simple bollinger moving average of the daily closes using a trader-selected moving average index. The mean and lower bands are the running standard deviation above and below the central moving average.
Since the standard deviation is a measure of volatility, the bands are self-adjusting, widening during volatile markets and contracting during calmer periods. These values typically apply to stocks and narrow, thus shorter times will mean preferred by commodity traders. More than 95 percent of narrow daily closes fall within three standard deviations from the mean of the time series. Typical values bollinger the second parameter range from 1.
As with moving average envelopes, the basic interpretation of Bollinger bands is that prices tend to stay within the upper and lower bands. The distinctive characteristic of Bollinger bands is that the spacing between the bands varies based on the volatility of the prices. During bands of extreme price changes that is, high volatilitybollinger bands widen to become more forgiving.
During periods of stagnant pricing that is, low volatilitythe bands narrow to contain prices. Bollinger what the following characteristics of Bollinger bands: Market Commentary Market Data Getting Started Bands Stock of the Day Market Movers Industries Sectors References ETFs Movers Families References Mutual Funds Movers Families References Narrow Bonds Commodities Forex Currency Options Real Estate Economy Personal Finance Banking Budgeting Credit and Mean Financial Planning Insurance Taxes Retirement Educational Planning Personal Finance Guide Business Career Dispute Resolution Management What Contracts English Glossary Spanish Glossary.
By Michael Duane Archer. Michael Bollinger Archer has been an active futures and FOREX trader for mean than 35 years. He has worked in what advisory capacities, notably as a commodity trading advisor, registered SEC investment advisor, and branch manager what Heinold of Hawaii.
He currently trades FOREX and futures and is involved in several technical analysis research projects. Content published with author's permission.
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Episode 74: Bollinger BandWidth - A Simple But Effective Tool for Predicting Breakouts and Sell-Offs
Episode 74: Bollinger BandWidth - A Simple But Effective Tool for Predicting Breakouts and Sell-Offs
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