Let’s get started with one of the major technical indicators that measure the volatility. Yes, It your favourite “Bollinger bands”. It has some great features that other indicator doesn’t have. If you don’t have added to your chat then please add and let the setting to be default. This technical indicator was developed by the famous Market analyst “John Bollinger”. The technique involved in Bollinger band is nothing it’s the overlaying of the three bands. The upper Bollinger band, the middle Bollinger band and the lower Bollinger band.
The middle Bollinger band is simply the simple moving average. The upper and lower Bollinger band measures the deviation. Being a trader you should not be concerned about the Formula, what you should focus is the usage of the formula. The Bollinger Bands are so strong in diagnosing the trends and the reversals.
The bands expand and contracts with the price action. These bands quantify the volatility and can be added to the chat so that it can help to spot when the big price moves are likely to occur. When you see there is no volatility in the market and the market is slow you will see that the upper band and the lower band becomes close to each other .Always remember that when you notice the market is slow and it makes a narrow range a breakout that can be of a big trend on the way. With the help of the range you can directly predict the direction of the breakout. The close price is very important if you are trading with the help of Bollinger Bands.
A Bollinger band also helps the traders in showing the reversal signals. A nice reversal sign can be formed when a candlesticks breaks out the one of the bands either upper band or the lower band.
Traders should be inclined to use Bollinger Bands with the other indicators to see the confirmation. It helps the traders with clear and frequently timely signals for buying and selling. Traders can take the best advantage of this technical indicator in most volatile positions. Trader should keep an eye on the squeeze to get into profitable trades.