Learning to read Bollinger Bands in cryptocurrency trading has allowed me to say goodbye to a monthly income of over ten thousand while working.
If one wants to remain undefeated in cryptocurrency trading, relying solely on luck or feeling is no different from being a gambler, and it is not a long-term strategy. Experienced experts usually analyze market trends based on historical data from previous years, which is why Bollinger Bands (BOLL) were invented and are hailed as a short-term trading tool. Today, I will talk to everyone about the principles of Bollinger Bands (please like + bookmark to avoid losing it later):
Bollinger Bands (BOLL) are also known as Bollinger Bands; they use statistical principles to determine the price volatility range and future trends by calculating the standard deviation of the cryptocurrency price, and use the bands to display the safe high and low price levels.
In statistics, if a set of data follows a normal distribution, then approximately 95% of the data will fall within two standard deviations of the mean. In Bollinger Bands, this rule is used to determine the 'normal' price volatility range, and price fluctuations outside this range are considered 'abnormal', potentially signaling market changes.
The Bollinger Bands consist of three lines (upper line, middle line, lower line), with the middle line being the moving average (MA), and the upper and lower lines being drawn based on the standard deviations offset from the middle line, creating a band around the price line.
Upper line = Middle line + K × Standard deviation over N periods.
Middle line = Simple moving average (EMA) over the past N periods, usually set to 20 days.
Lower line = Middle line - K × Standard deviation over N periods.
According to the original setting, the time will be set to 20 days (N=20) and two standard deviations will be captured (K=2).
You can find that the middle line of the Bollinger Bands is actually the 20-day moving average (monthly moving average), so in the initial setup, Bollinger Bands are suitable for analyzing trading durations of about a month.
Therefore, the setup of Bollinger Bands can be summarized as follows:
Upper limit of Bollinger Bands: 20-day moving average + two standard deviations
Middle of Bollinger Bands: 20-day moving average
Lower limit of Bollinger Bands: 20-day moving average - two standard deviations
Three long signals and three short signals (see above figures 4-6)
Long Signal
1. When the price crosses the lower line upwards, it is a buy signal.
2. When the price crosses the middle line upwards, it represents that the stock price may accelerate upward, indicating a buy signal.
3. When the price fluctuates between the middle line and the upper line, it indicates a bullish market.
Short Signal
1. When the price crosses the upper line downwards, it is a sell signal.
2. When the price has been between the middle line and the upper line for a long time, and then breaks down through the middle line from above, it is a sell signal.
3. When the price fluctuates between the middle line and the lower line downwards, it indicates a bearish market.