Technical Analysis of Stocks - Bollinger Bands

bhuwanpatel · #1 4th November 2005, 07:58 AM

Hi,
Can anyone tell me how to use Bollinger Bands to analyse stocks?
Also can anyone please refer me to some good URLs providing some info on technical analysis?
Thanks in Advance.
Regards,
Bhuwan.

Traderji · #2 4th November 2005, 10:18 AM

Bollinger Bands is a technical analysis technique in which lines are plotted two standard deviations above and below a moving average, and at the moving average itself. Because standard deviation measures volatility, these bands will be wider during increased volatility and narrower during decreased volatility. Some technical analysts consider a market which approaches the upper band to be overbought, and a market which approaches the lower band to be oversold.

Developed by John Bollinger, Bollinger Bands allows users to compare volatility and relative price levels over a period time. The indicator consists of three bands designed to encompass the majority of a security's price action.

1. A simple moving average in the middle

2. An upper band (SMA plus 2 standard deviations)

3. A lower band (SMA minus 2 standard deviations)

Standard deviation is a statistical term that provides a good indication of volatility. Using the standard deviation ensures that the bands will react quickly to price movements and reflect periods of high and low volatility. Sharp price increases (or decreases), and hence volatility, will lead to a widening of the bands.

You can read the tutorial on Bollinger Bands at http://www.bollingerbands.com/services/bb/

Saint · #3 4th November 2005, 11:28 AM

Great stuff as always,Traderji!!

Saint

rangarajan · #4 4th November 2005, 12:37 PM

Nicely explained without using any jargons & to the point & could be understood by a novice aswell who has some basic knowledge.Thanks
ranga

hmp · #5 4th November 2005, 12:50 PM

Thanks Dear Traderji For Simplyfying Otherwise Intricated Topic.
Regards.
Hmp

nautilus · #6 5th November 2005, 07:19 PM

Quote:

Originally Posted by Traderji

Bollinger Bands is a technical analysis technique in which lines are plotted two standard deviations above and below a moving average, and at the moving average itself. Because standard deviation measures volatility, these bands will be wider during increased volatility and narrower during decreased volatility. Some technical analysts consider a market which approaches the upper band to be overbought, and a market which approaches the lower band to be oversold.

Developed by John Bollinger, Bollinger Bands allows users to compare volatility and relative price levels over a period time. The indicator consists of three bands designed to encompass the majority of a security's price action.

1. A simple moving average in the middle

2. An upper band (SMA plus 2 standard deviations)

3. A lower band (SMA minus 2 standard deviations)

Standard deviation is a statistical term that provides a good indication of volatility. Using the standard deviation ensures that the bands will react quickly to price movements and reflect periods of high and low volatility. Sharp price increases (or decreases), and hence volatility, will lead to a widening of the bands.

You can read the tutorial on Bollinger Bands at http://www.bollingerbands.com/services/bb/

Dear Traderji:

This is a very good explanation. Although am a trend trader I have found the Bollinger Bands very useful in adjusting my stop-losses. I use the indicator to see if the trend has streched to far from the "mean" and then use it as an indicator which prepares me for when the market makes its move for "reversion to mean" from an over streched position of the existing trend.

Regards

Nautilus

gandharvashu · #7 5th November 2005, 08:15 PM

Hi!

The technical site where you can get information on indicators like Bollinger Bands is chartfilter.com. They cover basically all basic indicators and some advanced ones.

bhuwanpatel · #8 6th November 2005, 11:30 PM

Thanks a lot Traderji, for this wonderful information about Bollinger Bands. I am also looking into other analysis techniqies like Exponential Moving Avarage (EMA)
I'll be glad to know your views on EMA.
Usually people say that don't confuse yourself by using lots of techniques. Use 2 or 3 techniques to judge the stock. What are the preffered TA techniques which you would recommend???
Also, How far should one rely on Technical Analysis? I mean does it really help all the time? Any good experiences? any bad experiences?

gandharvashu,
The site 'chartfilter.com' is not opening up.

Traderji · #9 7th November 2005, 07:42 AM

You can use one or two indicators (moving averages, ADX) to identfy the trend and a couple of oscillators to identfy overbought and oversold levels.
You can read the following thread on A Moving Average Trading System

gsbisen · #10 18th November 2005, 09:47 PM

Hi traderji,
This was wonderful piece of information on Bollinger bands. But this indicator doesn’t work every time (for example financial technologies).Can you suggest few more tips on BB or few indicators that can be clubbed with BB so as we can extract more precise information.
thanx
gsbisen

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