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Strategies & Market Trends : Technical Analysis- Indicators & Systems
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To: Gary Ball who wrote (18)10/3/1996 12:07:00 AM
From: gonzongo   of 3325
 
Gary: Thanks for your question- I began using bollinger bands just recently. I call them the" price river" because they clearly mark the basic boundaries of the price movement and on a chart they look like a river which gets narrow at the rapids and wide on the flatlands. The price normally bounces off the 21 day band. I use 21 days because as I understand it, John Bollinger uses a 20 day band. i am hooked on fibonacci numbers and 21 is one of them. When a trend is strong, the price will pierce the band showing strong upward movement or downward as the case may be. When a stock begins to consolidate, the bands narrow. As they get very close, it usually precedes a breakout- up or down after a base. When there is volatility in price, the bands widen. So you get a visual display of what is happening. Envelopes on the other hand are relatively fixed and do not give you the flavor of the price movement as B.bands do.

When it bounces off the lower band(or upper), it often follows through to the other band as the completion of the current move. So you can use it to estimate potential price movement and estimate the next high or low.

I do not use it as the basis of a trade, rather a confirmation of what other indicators are saying.

Bollinger bands are bands around a moving average plotted generally two standard deviations above and below the related moving average. Mr. bollinger wrote a book on the subject but I have not read it.

It is clear from your posts that you have an inquisitive mind. that is great. Put it to good use and you will develop the system you trust for trading

YT

andy
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