Bollinger Bands

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Ladies and Gentleman,

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Honestly, I am gonna say it. TA is kind of gay. I would rather look at the fundamentals of a company rather than scribble on a chart a bunch of hokey lines, but there are a few technical indicators that kind of make sense.

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Well, one of them is Bollinger Bands.

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Back in the 80’s a man named John Bollinger decided to go full nerd mode and create a technical indicator that can help us identify trends, breakouts, sell-offs, and anything to do with price action.

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So what are Bollinger Bands and how can we use them?

Bollinger Bands are really quite simple to read.

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Bollinger bands are based on a 20-day moving average (the middle line), so the closing price of the asset for the last 20 days, divided by 20, essentially the 20-day moving average gives a clear vision of the underlying trend without fluctuations.

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Now the lines above and below are just 2 standard deviations away from the mean (the SMA- simple moving average).

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I don’t know what John Bollinger was smoking when he came up with this shit, but pass that jawn my way.

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All you need to know about Bollinger Bands is how to read them, they were created for an easy-to-digest visual, fortunately enough every charting platform out there can plot this for us.

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So how can we use John’s Little Lines to make money?

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Here are the principles of Bollinger bands:

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Outside lines getting further apart = increased volatility.

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Outside lines getting closer = decreased volatility

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Price constantly tapping the top line and trending in the top half of the bands (top channel) = uptrend

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Price touching or exceeding top-line = overbought, potential pullback

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Price hitting the bottom line or crossing below = oversold, potential bounce

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Basically, we can use these lines as bumpers for the price.

Hit the top and come back down, Hit the bottom and come back up.

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However, in some instances when it is consistently bouncing off the bottom it indicates a strong downtrend, and vice versa when it bounces off the top.

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Look, just cause you know about these lines now, it doesn’t mean you are a stock guru and can predict price action, you should use Bollinger bands with several other technical indicators alongside it to confirm.

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for example, MACD, Volume, and RSI are some compatible indicators that can help reassure your whacked-out theories.

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But the truth is, if you learn to read these lines and listen to my next 3 weekly lessons on MACD, Volume, and RSI, you can actually use these lines to greatly improve your trading game.

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All in all, I am still a fundamental guy, and just use these indicators to help snipe entries & exits on positions I have a fundamental thesis’ on.

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