Advanced Technical Indicators - Bollinger Bands

If you follow our blog, then you are definitely familiar with trader Larry Levin, President of Trading Advantage LLC. We have gotten such a great response from some of his past posts that he has agreed to share one more of his favorite trading tips as a special treat to our viewers. Determining the direction of the market can be tricky and just plain confusing at times, but Larry’s expert opinion keeps it simple.

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Let's take another look at a more advanced technical tool - Bollinger Bands. These were developed by John Bollinger in the 1980s. In simple terms, they use a simple moving average and standard deviations to give a different perspective on potential highs and lows.

Bollinger Bands have a middle band and two outer bands.

The middle band shown on this indicator is a moving average, usually a simple moving average (see Tip #29 for more on those) although some traders do use the exponential moving averages. The standard deviation calculations for the outside bands can be calculated like this example: Continue reading "Advanced Technical Indicators - Bollinger Bands"