How to Use Bollinger Bands

Congratulations!  You have made it to the 5th grade! Each time you make it to the next grade you continue to add more and more tools to your trader’s toolbox.
“What’s a trader’s toolbox?” you may ask.
 It is simple!
Compare trading with a brick building of home.  Which tools is used to the building? You wouldn’t use a hammer on a screw, right? Nor would you use a buzz saw to drive in nails. There’s a proper tool for each situation.
It is similar to in trading business, some trading tools and indicators are best used in particular environments or situations. So, the more tools you have, the better you can adapt to the ever-changing market environment.
Or if you want to focus on a few specific trading environments or tools, that’s cool too. It’s good to have a specialist when installing your electricity or plumbing in a house, just like it’s cool to be a Bollinger Band or Moving Average expert.
There are billions different ways to grab some pips!
For this lesson, as you learn about these indicators, think of each as a new tool that you can add to that toolbox of yours.
You need not use all of these tools, but it’s always nice to have plenty of options, right? You might even find one that you understand and comfortable enough to master on its own. It is enough discussed.
Now, come to start!

Bollinger Bands

  John Bollinger ,a chart indicator developed it. It is used to measure a market’s volatility.
Basically, this little tool tells us whether the market is quiet or whether the market is LOUD! When the market is quiet, the bands contract and when the market is LOUD, the bands expand.
Notice on the chart below that when price is quiet, the bands are close together. When price moves up, the bands spread apart from.

That’s all there is to it. Yes, we could go on and bore you by going into the history of the Bollinger Band, how it is calculated, the mathematical formulas behind it, and so on and so forth, but we really didn’t feel like typing it all out.
You don’t need to know any of that junk in all honesty,  . We think it’s more important that we show you some ways you can apply the Bollinger Bands to your trading.
Note: If you really want to learn about the calculations of a Bollinger Band, then you can go to www.bollingerbands.com.

 

The Bollinger Bounce

 You should know about Bollinger Bands is that price tends to return to the middle of the bands. That is the whole idea behind the Bollinger bounce. By looking at the chart below, can you tell us where the price might go next?

Whenever you said down, then you are correct! As you can see, the price settled back down towards the middle area of the bands.

What you just saw was a classic Bollinger Bounce. The reason these bounces occur is because Bollinger bands act like dynamic support and resistance levels.
It true that, the longer the time frame you are in, the stronger these bands tend to be. Many traders have construct systems that thrive on these bounces and this strategy is best used when the market is ranging and there is no clear trend.
Now come to learn the usage how the market trends, where, when and how does it go bend.

Bollinger Squeeze

This is very pretty self-explanatory. When the bands squeeze together, it usually means that a breakout is getting ready to happen.
If the candles start to break out above the top band, then the move will usually continue to go up. If the candles start to break out below the lower band, then price will usually continue to go down.

you can see the bands squeezing together  whenever you look at the chart above. The price has just started to break out of the top band. Based on this information, where do you think the price will go bend?

If you reply, down , you are not correct!
This is all about a typical Bollinger Squeeze works.

The strategy aboveis constructed for you to catch a move as early as possible. Setups like these don’t happen every day, but you will be able to spot them a few times a week if you are stare at a 15-minute look at the chart.