How to use the Bollinger Bands technical analysis indicator 📊
Bollinger Bands are a price envelope that helps determine whether prices are high or low on a relative basis and potential entry and exit points.
This tool consists of a moving average and two bands: upper and lower one. Two bands are set above and below the moving average by a certain number of standard deviations of price, thus incorporating volatility.
How to use it 👇
• When the bands tighten during a period of low volatility, it raises the likelihood of a sharp price move in either direction.
• When the bands are widening by an unusually large amount, volatility increases, and the existing trend may end soon.
• Usually, prices tend to bounce within the upper and lower bands, touching one band and then moving to the other.
• A strong trend continuation can be expected when the price moves out of the bands. However, if prices move immediately back inside the band, then the suggested strength is negated.
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