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Bollinger Bands

How to use bollingers and the history of the bollinger band

Bollinger Bands are a technical indicator for stock charts created by John Bollinger in the early 1980s. Bollinger Bands can also be refered to as trading bands. The purpose of the Bollinger is to provide a projected high and low price by the placement of bands on the stock chart.

The Bollinger Bands appear on the chart as 3 bands. The Middle band being a simple moving average usually plotted in a 20 period. The upper and lower bands are calculated around a simple moving average plus or minus a standard deviation.

A Bollinger band is said to "Squeeze" when a large move is ready to happen. A squeeze is formed by the tightening of the Bollingers to form a tight channel around the price plot on the stock chart Continue to read

In conjunction with other indicators that show "extremes" Bollingers can show reversal points in the trend when a price spikes out of the Bollingers range.

They can also be a good confirmation indicator of a trend, when the price is above the 20 period moving average in the middle of the Bollinger Bands and is pushing up the higher band then the trend will most likely be heading up, vice versa for down.

Bollinger Band example chart

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