Bollinger Bands are a technical analysis tool and volatility indicator developed by John Bollinger in the 1980s that measures deviations in price relative to previous trades. There are bands that are positioned above and below a moving average. When volatility increases, the bands widen and when the volatility decreases, the bands become narrower.
Read the following excerpt from Connors Research Trading Strategy Guidebook Bollinger Bands® Trading Strategies That Work*:
Created by legendary money manager and researcher John Bollinger, Bollinger Bands® are one of the most popular indicators applied by traders throughout the world in nearly all markets. It’s rare today to see a chart not accompanied by Bollinger Bands as they’ve become a must have visualization tool which allows traders to see how overbought or oversold a security is.
There has been an abundance of information published on how to trade with Bollinger Bands. Much of it though is discretionary in theory. The how‐to‐use Bollinger Bands information usually pushes it back to the trader to interpret what the security’s price is doing relevant to its Bands.
What you will learn is how to exactly identify overbought and oversold key levels with Bollinger Bands® and applying them knowing what the historical returns have been when they reached specific levels.
With the Trading with Bollinger Bands® Strategy Guidebook, you will learn how to identify the best historical entry and exit triggers, along with multiple levels of intraday pullbacks to increase the edges of the Bands. We’ll also teach you various exit points to allow for even more flexibility in your trading.
* Previously titled Trading with Bollinger Bands®.