Bollinger Bands (BOLL) was invented by John Bollinger. It is one of the commonly used technical indicators in the financial market and belongs to the price path indicator. It uses statistical principles to find the standard deviation and its confidence interval of stock prices, thereby determining the range of stock price fluctuations and future trends, and uses wave bands to show the risks of stock prices and safe high and low prices, so it is also called Bollinger Bands.
- Bollinger band calculation method
The BOLL belt draws the support line (LOWER), resistance line (UPER), and midline (MID).
MID=N-day moving average of closing price UPER=midline plus offset value LOWER=midline minus offset value Parameters:
N sets the number of statistical days, generally 26; P sets the width of the BOLL belt, generally 2.
The Bollinger Band is composed of three rail lines, of which the upper and lower lines can be regarded as the pressure line (UPER, the upper rail) and the support line (LOWER, the lower rail) of the stock price. Between the two lines is a stock price. The average line (MID, that is, the middle rail), in general, the price line travels in a band composed of upper and lower rails, and automatically adjusts the position of the rails as the price changes. When the wave band narrows, fierce price fluctuations may occur immediately, indicating that the change is imminent; if the high and low points cross the pressure line or the support line and quickly return to the wave band, there will be a retracement or rebound.
- Bollinger Bands have four main functions
(1) Bollinger Bands can indicate support and pressure positions;
(2) Bollinger Bands can show overbought and oversold;
(3) Bollinger Bands can indicate trends;
(4) Bollinger Bands have channel function.
The theoretical use principle of the Bollinger Bands is: when the stock price crosses the outermost pressure line (support line), it means that the selling point (buying point) appears. When the stock price moves up (down) along the pressure line (support line), although the stock price has not crossed, if it breaks through the second line, it is a selling point or a buying point.
- Main trading rules of Bollinger Bands
(1) When the stock price crosses the lower rail (LOWER) from bottom to top, it can be regarded as a buy signal.
(2) When the stock price crosses the middle track from bottom to top, the stock price will rise faster, which is a signal to increase the position and buy.
(3) When the stock price fluctuates between the middle rail and the upper rail (UPER), it is a long market, and the shares can be held on the sidelines.
(4) After the stock price has been running between the middle rail and the upper rail (UPER) for a long time, a downward break from the upper rail is a sell signal. (5) When the stock price fluctuates downward between the middle rail and the lower rail (LOWER), it is a short market. At this time, investors should keep the currency and wait and see.
(6) Bollinger’s middle track has been flat after a long period of sharp decline, and there is an upward turning point, and the stock price will be above the middle track within 2 to 3 days. At this time, if the stock price pulls back, its retracement low is often the short-term entry point for a moderate low.
(7) For the strong stocks operating between Bollinger’s middle rail and upper rail, it may as well take the middle rail as the low buying point, and the middle rail as its important take-profit and stop-loss line.
(8) Soaring stocks often rush out of the Bollinger Band for a short period of time. Once they surpass the upper limit too much, and the trading volume cannot continue to be released, pay attention to the short-term high-throwing knot. , At this time is also a selling point.