a big space between the upper and lower bands indicates price volatility is high, a small space indicates it is low.as the price reaches the lower band, it is considered oversold and tends to rise back up towards the moving average band.as the price reaches the upper band, it is considered overbought and tends to fall back towards the moving average band.it identifies whether a price is high or low compared to its recent moving average and predicts when it might fall or rise back to that level.The interpretation of Bollinger Bands is based on the fact that prices tend to remain between the upper and lower bands. the lower band is the moving average - 2 standard deviationsĪ trader can choose the period of the moving average at his discretion, just like the number of standard deviations (standard values of 20 and 2, respectively).
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