Confused by the ups and downs of trading coins? Try Bollinger Bands, your simple volatility navigator!
What does it look like?
Three Bands: On the K-line chart, you will see three lines wrapping around the price.
Middle Line (Middle Band): The core! Usually the 20-day simple moving average (SMA) of the price, representing recent average cost/trend direction.
Upper Band (Upper Track): Middle Band + (2 times standard deviation). Imagine it as a 'ceiling', often marking areas where prices are relatively high.
Lower Band (Lower Track): Middle Band - (2 times standard deviation). Imagine it as a 'floor', often marking areas where prices are relatively low.
Core Principle:
Bollinger Bands suggest that prices will operate within the channel formed by the 'upper band' and 'lower band' for most of the time (about 95%). The width of the channel ('bandwidth') directly reflects the size of market volatility - the wider the channel, the more intense the fluctuations; the narrower the channel, the calmer the market (which may brew a trend change!).
How can beginners use it? Simply look at three points:
Find 'cheap' and 'expensive' (overbought and oversold):
When the price touches or breaks through the upper band, it indicates that it may have risen too much in the short term (overbought), be cautious of the risk of a pullback; do not chase the high.
When the price touches or falls below the lower band, it indicates that it may have dropped too much in the short term (oversold), presenting a potential rebound opportunity; do not blindly sell off.
Learn more practical knowledge, follow Da D for professional team trend analysis, doubling assets with Da D is not a dream.
