Bollinger Bands and Trading
Without a doubt, Bollinger bands are one of the greatest tools ever created to aid an amateur trader with his entries and exits.
The reaction of an upper or lower band, within the Bollinger bands, to approaching price provides the active trader with a vital sign of what will likely take place over the next few periods or more.
This reaction provides valuable insight into whether or not this will be just a few bars or quite a few bars.
There are, of course, a few variations on how to use Bollinger bands depending on market conditions.
The three major signals from Bollinger bands are these:
- The squeeze
- The expansion
- 2.0 STDV close
Of course these variations are often referred to by different titles and names but the overall concept is the same
Likewise the upper bands “personality” during this time is also very telling.
A 
B 
In example A above notice how the lower band responds to price as it approaches.
Look at example B as price approaches.
One continues a small trend while the other pierces and reverts to the mean.
This reaction to approaching price is just the beginning of what Bollinger bands will tell you.
If you know what to look for with from both the upper and lower band, you are able to identify incredibly accurate entries as well as some rather perfect exits.
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