How to use Bollinger Bands: A powerful technical tool for traders
How to use Bollinger Bands: A powerful technical tool for traders Bollinger Bands are a popular technical analysis tool used by stock market traders to assess price volatility and identify potential buy or sell signals. Developed in the early 1980s by John Bollinger, a renowned trader and Chartered Market Technician (CMT), Bollinger Bands provide insights into market conditions by combining the concepts of a moving average and a volatility measure in one indicator. According to Bollinger, his namesake indicator is not just for stocks, but can also be used for futures , commodities , and currency trading . In addition, Bollinger Bands are time frame agnostic, meaning they apply to all time period charts. The mechanics of Bollinger Bands Bollinger Bands combine a simple moving average (SMA) and a measure of price volatility via standard deviations (SD). The calculation of Bollinger Bands involves three main components: Simple moving average. The SMA is calculated by summing up a