Bollinger Bands Indicator Application

1/ Support and Resistance Indicators: The upper and middle bands of the Bollinger Bands exert pressure on the price of the cryptocurrency, while the middle and lower bands provide support. When the price breaks out above the upper band, a pullback may occur. Recently, the upper and middle bands of the Bollinger Bands have exerted pressure on the cryptocurrency price, while the middle and lower bands have provided support.

When the price breaks out above the upper band, a pullback may happen; if it falls below the lower band, a rebound may occur, indicating overbought or oversold conditions. In cryptocurrency trading, for example, when BTC experiences significant price fluctuations and touches the upper Bollinger Band, it often faces pullback pressure due to short-term profit-taking; conversely, when the price of Bitcoin significantly drops near the lower Bollinger Band, some bottom-fishing funds may enter the market, pushing the price back up.

2/ Trend Judgment: Strong cryptocurrencies often trade between the middle and upper bands, while weak cryptocurrencies commonly operate below the middle band. When the price line is above the middle band of the Bollinger Bands, it generally indicates a bullish market, allowing for holding positions or buying; when it is below the middle band, it usually suggests a bearish market, requiring caution in buying. The upper and lower bands of the Bollinger Bands represent extreme strength and extreme weakness, respectively. Taking Ethereum as an example, during its bull market, the price generally maintained between the middle and upper Bollinger Bands, indicating strong upward momentum; during the bear market phase, the price remained below the middle band for an extended period, creating a strong bearish atmosphere in the market.

3/ Band Change Signals: A narrowing of the upper and lower bands of the Bollinger Bands may indicate an impending breakout, so do not rush into trading. If the price K-line breaks upward through the upper band with an upward opening of the channel, it signals that the price will enter an upward channel, and buying is recommended; if the K-line breaks downward through the lower band with a downward opening of the channel, it means the price will enter a downward channel, necessitating selling.

4/ K-line Breakthrough Situations: If the price K-line breaks upward from below the middle band, it indicates strong price action, and buying is recommended. If it breaks upward through the upper band from above the middle band, it indicates extreme strength in the price, suggesting potential significant short-term gains, allowing one to hold their position or buy short-term.

5/ Price Movement Above the Bollinger Bands: If the price K-line runs above the Bollinger Bands for a while and then turns downward to break through the upper band, it indicates that the short-term bullish trend will end, and it is advisable to sell promptly, especially for those cryptocurrencies that have seen substantial short-term increases; if it breaks downward through the middle band, selling should also be the primary action.