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How to Use Bollinger Bands?

Bollinger bands are an advanced market analysis tool developed by John Bollinger. These
bands are used to measure the volatility of a market, and it traces the state of the market
too. For instance, when the market is active, the band expands, and when the market is
quiet, it contracts.

Formula for calculating the Bollinger Bands:
 Upper Band = Middle band + 2 Standard deviation
 Middle Band = 20 – moving average
 Lower Band = Middle Band – 2 Standard deviation
Using these calculations, several traders have excelled and credit Bollinger bands for the
success of their trade.

Bollinger Bands: An Overview
The bands include price movement of the stocks. It indicates the various degrees of highs
and lows in market prices. The movement of the price to the middle of the band is called
“Bollinger Bounce.” They act like resistance level or dynamic support.For instance, if you are in a longer time frame, these bands will be stronger. And when the
bands squeeze in together, they are called “Bollinger Squeeze.” With the candles of the
bands going up and down, the prices fluctuate respectively.
Several traders have developed systems that get premised on these bands, and it is most
suitably applied when the market goes through fluctuation, and there is no particular trend.
Bollinger bands effectively measure the stock swings from high point to low point to map
the volatility of the market. A standard error that many novices commit is to sell and
purchase when the prices are highest or lowest; however, it is a point to note that most
money gets made between these extreme points.
Above all, you can use Bollinger bands for trade in any global market. It works equally well
with equities, forex, options, and futures.

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