Bollinger Bands takes its name from the creator of the bands, John Bollinger.
Bollinger Bands are a statistical indicator, drawing its use from Mathematics branch called Statistics. Using statistical techniques to forecast the financial markets is a popular way to build models for analysis. Being statistical indicator the Mathematics of Statistics apply and use of this indicator is derived from statistical techniques which are applicable not only for stocks but also for other applications. Therefore, it is a diverse way to follow, or predict the market.
Knowledge of statistics may make this indicator easier to follow, but just for using this indicator, no prior knowledge of Mathematics, or statistics is needed. For someone who wants to have more insight into how this indicator tracks the stock market, or why it is set up the way it is, then they can refer to Statistical analysis and mathematical books.
Bollinger Bands are drawn on the stock chart itself and set up living of how high, or low the stock may go. That is why they are called bands, because they form bands higher and lower from the stock price.
The good thing about Bollinger bands is that they use another indicator to plot the values, namely the Moving average. So a moving averate, let' s say the 30 day moving average is used first and then the Bollinger bands are drawn above and below the MA by some statistical values.
Namely, the Bollinger Bands use the Standard Deviation from Statistics theory, to draw the bands above and below the Moving Average.
It is interesting that standard deviation plotted against the stock chart itself, may be adjusted to include 90% of the data within the bands and 10% only to lie outside the bands. This is also the way the chart is predicted, i.e. if the stock appears to be outside the Bollinger bands, i.e. either the High, or low Bollinger band then it may mean reversal of the stock, or may mean that the stock may have increased a lot, or it has high speed moving in that direction.
The recommended setting for Bollinger Bands, is two Standard Deviations above and below the Moving Average.
Also, the bands tend to narrow if the stock is not showing trends, and then they may become broader when the stock show strong trends. So, a popular way to use the Bollinger Bands, is also by buying if the Bollinger Band is thin, or to sell when the Bollinger band becomes very wide.
In overall, Bollinger Bands are good statistical means of predicting the stock market.
Bollinger Bands are a statistical indicator, drawing its use from Mathematics branch called Statistics. Using statistical techniques to forecast the financial markets is a popular way to build models for analysis. Being statistical indicator the Mathematics of Statistics apply and use of this indicator is derived from statistical techniques which are applicable not only for stocks but also for other applications. Therefore, it is a diverse way to follow, or predict the market.
Knowledge of statistics may make this indicator easier to follow, but just for using this indicator, no prior knowledge of Mathematics, or statistics is needed. For someone who wants to have more insight into how this indicator tracks the stock market, or why it is set up the way it is, then they can refer to Statistical analysis and mathematical books.
Bollinger Bands are drawn on the stock chart itself and set up living of how high, or low the stock may go. That is why they are called bands, because they form bands higher and lower from the stock price.
The good thing about Bollinger bands is that they use another indicator to plot the values, namely the Moving average. So a moving averate, let' s say the 30 day moving average is used first and then the Bollinger bands are drawn above and below the MA by some statistical values.
Namely, the Bollinger Bands use the Standard Deviation from Statistics theory, to draw the bands above and below the Moving Average.
It is interesting that standard deviation plotted against the stock chart itself, may be adjusted to include 90% of the data within the bands and 10% only to lie outside the bands. This is also the way the chart is predicted, i.e. if the stock appears to be outside the Bollinger bands, i.e. either the High, or low Bollinger band then it may mean reversal of the stock, or may mean that the stock may have increased a lot, or it has high speed moving in that direction.
The recommended setting for Bollinger Bands, is two Standard Deviations above and below the Moving Average.
Also, the bands tend to narrow if the stock is not showing trends, and then they may become broader when the stock show strong trends. So, a popular way to use the Bollinger Bands, is also by buying if the Bollinger Band is thin, or to sell when the Bollinger band becomes very wide.
In overall, Bollinger Bands are good statistical means of predicting the stock market.
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