Bollinger bands are reactive to recent price moves. These different moves of Bollinger bands in technical charts are highly useful.
Bollinger Bands® are very powerful, dynamic & non-static indicators. These bands are drawn within & surrounding the price structure of a financial instrument. They can change their shape quickly with recent price action.
They can expand & contract depending on the volatility of underlying security or bond. These bands expand if volatility increase and contract if volatility decreases. This will ultimately create a very accurate trending envelope.
Generally, price stays close to outer band (either upper band or lower band) during strong trend (either uptrend or downtrend). If price pulls away from outer band as trend continues, it indicates fading momentum.
These bands often show different types of shapes or patterns during a trend. This unique characteristic makes them a popular indicator among traders & investors. Here are 4 different moves or patterns of Bollinger bands in technical charts:
(1) Upper Band & Lower Band Both Are Moving Flat
It is one of the most significant moves of Bollinger bands in technical charts. In bullish trend, the prices are trending in the buy zone i.e. between upper band & middle band.
During this phase, upper band & lower band both are almost flat. This flat move of bands is likely to be short lived. Traders & investors can expect a sharp reversal to the lower band within short period of time.
On the other hand, in bearish trend, the prices are trending in the sell zone i.e. between lower band & middle band. During this phase, lower band & upper band both are almost flat.
This flat move of bands in bearish trend is also likely to be short lived. Traders & investors can expect a sharp reversal to the upper band within short period of time.
The post 4 Different Moves Of Bollinger Bands In Technical Charts appeared first on GetUpWise.