Here's a graph of Apple. The blue bands represent the regular Bollinger bands.
This graph can provide an investor with a whole lot of valuable information. If you're familiar with the Bollinger bands, then you will be able to quickly see that the price is pursuing the upper band at the end of May to the beginning of June and then again in July. There is a whole lot of times where the price acts as a support or resistance during the movement from one band to another.
It is evident that in the beginning of May and then in June, the stock overbought and the price lowered on these instances.
Many of the programs used for charting with Bollinger bands use the settings as BB(20,2.0), which means standard 20 bars with 2 standard deviation numbers. This is the typical view, this is how all the people uses this fantastic instrument for trading. These methods work well, but there are other more effective techniques that you can utilize.
Start thinking differently from the common people and you will be able to gain more advantage from the indicators of this instrument. In the subsequent chart we have used 13 bars instead of 20 bars in the previous chart.
This graph gives you a lot more information. The 13 bar bands for this graph are represented with red, whilst the 20 bar bands are represented with blue. As you can tell that the price moves more closely to the upper red band at many places. On all the three uptrend, it appears to paint a far greater boundary.
Moreover, in this chart you can also see that the lower band provided support in the middle of May and middle of June, which was not demonstrated in the previous chart. The 13 bar input appears to improve the accuracy of the price motion represented by the graph.
You must be thinking now that this is not a surprise. If we continue lowering the lines and take them to only one line, the it would basically trace the price line accurately when looking at it retrospectively. However, if you wish to be one step ahead of the people with intraday trading then you should test out several time frames for the bands.
The following graph draws on an 8 period band. Have a look at the graph and see what you can predict regarding the trend and the support levels.
This graph can provide an investor with a whole lot of valuable information. If you're familiar with the Bollinger bands, then you will be able to quickly see that the price is pursuing the upper band at the end of May to the beginning of June and then again in July. There is a whole lot of times where the price acts as a support or resistance during the movement from one band to another.
It is evident that in the beginning of May and then in June, the stock overbought and the price lowered on these instances.
Many of the programs used for charting with Bollinger bands use the settings as BB(20,2.0), which means standard 20 bars with 2 standard deviation numbers. This is the typical view, this is how all the people uses this fantastic instrument for trading. These methods work well, but there are other more effective techniques that you can utilize.
Start thinking differently from the common people and you will be able to gain more advantage from the indicators of this instrument. In the subsequent chart we have used 13 bars instead of 20 bars in the previous chart.
This graph gives you a lot more information. The 13 bar bands for this graph are represented with red, whilst the 20 bar bands are represented with blue. As you can tell that the price moves more closely to the upper red band at many places. On all the three uptrend, it appears to paint a far greater boundary.
Moreover, in this chart you can also see that the lower band provided support in the middle of May and middle of June, which was not demonstrated in the previous chart. The 13 bar input appears to improve the accuracy of the price motion represented by the graph.
You must be thinking now that this is not a surprise. If we continue lowering the lines and take them to only one line, the it would basically trace the price line accurately when looking at it retrospectively. However, if you wish to be one step ahead of the people with intraday trading then you should test out several time frames for the bands.
The following graph draws on an 8 period band. Have a look at the graph and see what you can predict regarding the trend and the support levels.
About the Author:
If you know how to use Bollinger band properly, they can be of superb advantage. Bollinger bands is an amazing indicator and when you understand it thoroughly, you will understand its power.
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