What are Bollinger Bands
Bollinger Bands is a technical indicator developed by John Bollinger in the 1980s. This indicator measures the volatility of a stock base on standard deviation. As the volatility increase, the bands will get wider and the bands get narrow when volatility decrease.
How does Bollinger Bands work?
Bollinger Bands provides a high and low that a stock may go. It is similar to support and resistance of a stock. When a a stock hits the lower end of the Bollinger Bands, it usually means the stock is at a cheap price. When a stock price hits the higher end of the Bollinger Bands, it usually give selling alert to a stock.
How to trade Bollinger Bands
Following is a Google chart and the “Buy”s are you buying entry points and the “Sell”s are you selling entry points where you buy at the low range of Bollinger Bands and sell at the high range of the Bollinger Bands. As you can see, it is profitable in this chart and you are able to make money here. Keep in mind, sometimes a stock can go even higher and if you sell at the high end of Bollinger Bands, you will miss out some profit. However, if you are a conservative trader and want to protect your profit, then it is good enough to make some profits at the high end.
