Bollinger Bands

Like before, if the core system produces a buy signal the indicators you enabled would need to have underlying bull trends to validate the trade. This article try to sum up the answers to the questions [Read more This method doesn't work in sideways markets, only in volatile trending markets.

In trending markets price can, and does, walk up the upper Bollinger Band and down the lower Bollinger Band. Closes outside the Bollinger Bands are initially continuation signals, not reversal signals. This has been the basis for many successful volatility breakout systems.

The default parameters of 20 periods for the moving average and standard deviation calculations, and two standard deviations for the width of the bands are just that, defaults. The average deployed as the middle Bollinger Band should not be the best one for crossovers. Rather, it should be descriptive of the intermediate-term trend. For consistent price containment: If the average is lengthened the number of standard deviations needs to be increased; from 2 at 20 periods, to 2.

Likewise, if the average is shortened the number of standard deviations should be reduced; from 2 at 20 periods, to 1. Traditional Bollinger Bands are based upon a simple moving average. This is because a simple average is used in the standard deviation calculation and we wish to be logically consistent. Exponential Bollinger Bands eliminate sudden changes in the width of the bands caused by large price changes exiting the back of the calculation window.

Exponential averages must be used for BOTH the middle band and in the calculation of standard deviation. Make no statistical assumptions based on the use of the standard deviation calculation in the construction of the bands. The distribution of security prices is non-normal and the typical sample size in most deployments of Bollinger Bands is too small for statistical significance. The position within the bands is calculated using an adaptation of the formula for Stochastics.

BandWidth tells us how wide the Bollinger Bands are. The raw width is normalized using the middle band. Using the default parameters BandWidth is four times the coefficient of variation. So we have decided to make a little list of tools on how to get rid of this too-much-money-problem [Read more Crypto video library Here at Daytraderland we are getting a lot of questions about crypto currencies. But it is mostly questions about when to buy and not so much questions about the technology, the dangers, wallets etc.

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