How to use Bollinger Bands in trading?2021-07-02
What is Bollinger Bands?
Bollinger Bands are the technical indicator which consist of three lines: Upper rail, middle rail and lower rail.
middle rail is the price moving average, Upper rail is the repressive line, lower rail is the support line.
How to use Bollinger Bands in trading?
When the price is between the middle and upper rail, the market is in a uptrend, the trading strategy is to buy at low price.
When the price is between the middle and lower rail, the market is in a downtrend, the trading strategy is to sell at high price.
It is a volatile market when the price runs in the middle rail. At this time, we should make short positions near the upper rail and long positions near the lower rail.
When the price runs along the upper rail , the market will rise unilaterally, we should make long positions and hold them.
When the price runs along the lower rail, the market will fall unilaterally, we should make short positions and hold them.
After the price trend kept for a period of time, the channel shrinks and the price fluctuates in a small range, which is the precursor of a large trend market.
The sudden expansion of the channel is a good time to enter the market. When the price break up we can go long, while the price break down go short.
When the expansion reaches a certain range and the price breakouts, it means that the market will reversal. At this time, the trading strategy is to go short after breaking through the upper rail and go long after breaking through the lower rail.