BOLLINGER TAPES
Bollinger bands invented by John Bollinger are plotted with the help of moving averages. A total of 3 lines are obtained by calculating the standard deviation of the moving average. It is based on the principle that low volatility will create high volatility, high volatility will cause low volatility, and this will continue as a cycle.
Standard period values are 20 and 2. It can be used as 10 a 2, 10 a 4. This depends on your experience, experience, market expectation.
These bands narrow in periods of low volatility and expand in periods of high volatility.
It should not be forgotten that if there is volatility, there is movement. Volatility is where money is earned or lost.
The narrowing bands indicate that there will be an upward or downward movement, but this does not give information about the direction of the movement. At this point, other indicators or clearing data can be used.
Upper band resistance is considered as lower band support. If the price movement starting from the lower band crosses the middle band up, it is assumed that there will be a movement up to the upper band. John Bollinger come to Turkey in the Bosphorus conference he gave in a situation that had expressed its generally accepted common but many analysts believe this assumption.
Hard and sudden rises out of the band indicate that the price will enter the channel again.
In the graphic above, it is seen that corrections have been made after overflows beyond the upper and lower bands. It is worth noting the following point here. If there is an overshoot, if there is no direction change in the other lane, prices continue by holding on to the overflow side, which indicates that there is a trend. I've witnessed a comment from many analysts that "if the band breaks up, an uptrend begins". What they want to explain here is the point we have stated in bold above. If this is not the case, it is assumed that the moving average will attract prices like a magnet due to volatility.
At the point shown by the red vertical line in the graph above, the prices that exceeded break in the middle band and reveal the decreasing trend by sticking to the lower band. Whenever there is a change in the upper band, the direction of the trend is changing.
After the narrowing band from the green line, the uptrend started from the blue line, and as long as prices stick to the band and continue, there is no problem. If there is an overshoot (yellow vertical line) and a change is observed in the other band after this overshoot, prices enter the correction process. Is this always the case? It is an assumption that we see in the chart, I have not come across a statistical research, but I can say that if you have experience in a period that suits your point of view, Bollinger bands can open a window to your mind.
Bollinger% b
An indicator derived from Bollinger bands. Actually, we can say that the bollinger bands are a single line.
matrix formula;
((C-BandBot (C, 20, E, 2)) / (BBandTop (C, 20, E, 2) -BBandBot (C, 20, E, 2))) * 100; 0; 50; 100
graphically seen as follows;
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If you pay attention to the vertical lines in the graph, when% b takes 100, the upper band is formed, when it takes 50, the middle band is formed, when it takes 0, the lower band is formed.
% b indicates where the prices are in the bollinger. It is useful in algorithms to be written using Bollinger.
for example, simply long position if it supports the buy signal from trend indicators when% b takes the value 100.
When% b takes the value of zero, a logic such as take short position can be established with the sell signal coming from the trend indicators.
AUTHOR:
Ali Erkan TANACIOĞLU
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