Chart Indicator 101: Bollinger Bands

Thanks to John Bollinger, traders were equipped with an indicator which tells them if the market is quiet or loud. With two simple bands that narrows and spreads apart when there is action.

So how does it work? When one band is pierced, price has a tendency to move to the other band. Most people think that when a candle pierces a band, it signals a change in price automatically. That’s a big mistake. This usually happens after that section or wave of the trend is done. But other conditions must apply. Remember that the use of Bollinger Bands must be in context with other indicators such as Moving Averages or the Elliott Wave pattern.

I just made this video about Bollinger bands a few days ago. It also includes Scott Shubert’s talk on the indicator as it appeared in his forex trading training program. Hopefully this helps. Happy trading!

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