From : inovideos
Added: Nov 15, 2007
The Bollinger Bands were created by John Bollinger in the late 1980s. Bollinger studied moving averages and experimented with a new envelope (channel) indicator. This study was one of the first to measure volatility as a dynamic movement. This tool provides a relative definition of price highs/lows in terms of upper and lower bands. The Bollinger Bands are comprised of three smooth lines. The middle line is the simple moving average, normally set as a period of 20 (number of bar/ticks in a given time period), and is used as a base to create upper/lower bands. The upper band is the middle band added to the given deviation multiplied by a given period moving average. The lower band is the middle band subtracted by the given deviation multiplied by a given period moving averages. What can I use this for? 1.Trend -- When price moves outside of the bands, it is believed that the current trend will continue. 2.Volatility- The band will expand/contract as the price movement becomes more volatile/or becomes bound into tight trading patterns, respectively. 3.Determine Oversold/Overbought Conditions -- When price continues to hit upper band, the price is deemed overbought (may suggest sell). When price continues to hit lower band, the price is deemed oversold (may suggest buy). You can use the Bollinger Bands tool in the studies column of the MarketClub charting applet. Select Bollinger Bands study and enter the standard deviation and the period (default/recommended settings: deviation -- 2.0 and period of 20). As you move your chart through time variations, the Bollinger Bands will automatically recalculate and re-chart. For more info visit http://club.ino.com/trading/youtube/
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