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§5.10 Bollinger bands

It is easier to explain this indicator after describing the RAVI indicator because these indicators have similar principles even though they look very different.

Firstly, the Bollinger indicator is created directly on the price chart. The way the price line crosses the indicator’s line defines the forecast on which direction the price will take.

Secondly, the indicator uses wavy lines instead of straight lines which are, in fact, also moving averages but there are three of them at once and they almost never intersect each other unless the trend is horizontal. Therefore, the price line is enclosed by these two lines (upper and lower lines) and the third line goes along the price line.

The interesting thing about this indicator is

The interesting thing about this indicator is that trades are made if only the price moves towards the middle line.If the price starts moving from the upper line towards the middle line then it signals a downtrend.

If the price moves from the lower line towards the middle line then it signals an uptrend.

The indicator is exceptionally sensitive. However, at the same time it has a lot of false signals. If you use it then it is highly recommended to apply other indicators. RSI is an extremely good pair for the Bollinger indicator.

§5.11 RSI indicator→