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Further
Reading ...
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Emotional Challenges Facing Older Woman Starting Their Own Business - Ted Riley
INTRODUCTION In the age of the Internet, people of all ages and abilities are trying and succeeding in starting their own home based business. A surprisingly large number of these people are older workers and retired female workers who are...
7 Tips for Writing Winning Resume Cover Letters - Donna Monday
Writing a good resume cover letter is something you should seriously consider when preparing to send off your resume to potential employers. Here are seven important cover letter writing tips: Address the individual by name. If you...
If You Don't Have a Home-Based Business, Start One Today! - Sandy Botkin
This may be a decade of tremendous corporate profits and economic growth, but for the vast majority of North Americans, the 90's have been a dismal, uphill climb. And many economists believe that this next, new millennium won't be getting better...
Taking Responsibility – A Step Toward Progressive Leadership - Carole Nicolaides
© 2002 Carole Nicolaides http://www.progressiveleadership.com Recently, I was asked to facilitate a meeting and offer coaching to 20 executive members at a company’s strategic conference. As I sat quietly and observed everyone in the room, I began...
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Bollinger Bands Strategies
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Written By:
Steven T. Ng
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The Bollinger Band theory is designed to depict the volatility of a stock. It is quite simple, being composed of a simple moving average, and its upper and lower "bands" that are 2 standard deviations away. Standard deviations are a statistical tool used to contain the majority of movement or "deviation" around an average value. Bear in mind that when you use the Bollinger Band theory, it only works as a gauge or guide, and should be use with other indicators.
Normally, we use the 20-Day simple moving average and its standard deviations to create Bollinger Bands. Strategies some investors use include shorter- or longer-term Bollinger Bands depending on their needs. Shorter-term Bollinger Bands strategies (less than 20-Days) are more sensitive to price fluctuations, while longer-term Bollinger Bands (more than 20-Days) are more conservative.
So how do we use the Bollinger Band theory?
The Bollinger Band theory will not indicate exactly which point to buy or sell an option or stock. It is meant to be used as a guide (or band) with which to gauge a stock's volatility.
When a stock's price is very volatile, the Bollinger Bands will be far apart. In technical indicator charts, this is depicted like a widening gap. On the other hand, when there is little price fluctuation, hence low volatility, the Bollinger Bands will be in a tight range. This is depicted as narrow "lanes" along the chart.
As for how we use the Bollinger Band theory, here are a couple of guidelines.
History shows that a stock usually doesn't stay in a narrow trading range for long, as can be gauged using the Bollinger Bands. Strategies include relating the width with the length of the bands. The narrower the bands, the shorter the - continued below ...
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time it will last. Therefore, when a stock starts to trade within narrow Bollinger Bands, we know that there will be a substantial price fluctuation in the near future. However, we do not know which direction the stock will move, hence the need to use Bollinger Bands strategies together with other technical indicators.
When the stock starts to become very volatile, it is depicted in the chart by the actual stock price "hugging" or staying very close to either the upper or lower Bollinger Bands, with the Bands widening substantially. The wider the Bands are, the more volatile the price is, and the more likely the price will fall back towards the moving average.
When the actual stock price moves away from the Bands back towards the moving average, it can be taken as a signal that the price trend has slowed, and will move back towards the moving average. However, it is common for the price to bounce off the Bands a second time before a confirmed move towards the moving average.
As usual, and for the Bollinger Band theory in particular, it should be noted that individual indicators should not be used on their own, but rather with one or two additional indicators of different types, in order to confirm any signals and prevent false alarms.
For more information on bollinger bands, visit:
http://www.option-trading-guide.com/bollingerbands.html
About the Author
Steven is the webmaster of http://www.option-trading-guide.com If you would like to learn more about Option Trading or Technical Analysis, do visit for various strategies and resources to help your stock market investments.
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| _Additional Resources ... |
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Secrets of Super Affiliate - Akinori Furukoshi
Most affiliate program owners say 80% of their affiliate sales come from 20% of affiliates. Here is the difference between top 20% affiliates and the rest. --Normal Affiliate-- Most affiliate program owners tell their affiliates how to "sell," such...
Small Business Q & A: The Secrets Of Starting A Successful Ebay Business - Tim Knox
Q: I hear so much about people who started selling on eBay and eventually turned it into their full time business. Is it really possible to build a profitable business just selling junk on eBay? -- Alex K. A: If Fred Sanford were alive today,...
Web site strategy #2. "Stay with Me" concept - Pavel Lenshin
The most of what I've planed to say is already explained in these three words mentioned above. It would probably be the end of the article. :0) Maybe somewhere else, but not here, as I haven't yet explained you the blueprint for success with content...
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