Description
This article is from the Glossary of
Technical Analysis Terms.
Glossary of Technical Analysis Terms: B
- Bollinger Bands:
Bollinger Bands plot trading bands above and below a simple moving
average. The
standard deviation of closing prices for a period equal to the
moving average employed is used to determine the band width. This
causes the bands to tighten in quiet markets and loosen in
volatile markets. The bands can be used to determine overbought
and oversold levels, locate reversal areas, project targets for
market moves, and determine appropriate stop levels. The bands are
used in conjunction with indicators such as RSI, MACD histogram,
CCI and Rate of Change. Divergences between Bollinger bands and
other indicators show potential action points. As a general
guidline, look for buying opportunities when prices are in the
lower band, and selling opportunities when the price activity is
in the upper band.
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