1. Understanding BOLL
1. The Bollinger Bands indicator, also known as the BOLL indicator, is one of the most popular technical analysis tools in today's trading market.
2. The Bollinger Bands consist of three lines: the upper line, the middle line and the lower line.
The middle line is the 20-period simple moving average (MA20). The upper and lower lines are drawn on either side of the SMA line, and the distance between them is determined by the standard deviation.
3. The upper and lower bands represent standard deviations, which means they reflect price fluctuations. When the bands shrink and are close together, it means the market is about to enter a downturn. On the contrary, when the distance between the bands widens, market volatility intensifies and price action increases.
The upper and lower rails serve as: pressure support lines
The middle track is: price average
Breaking through the upper rail is overbought, and falling below the lower rail is oversold. This is the basic definition.
2. BOLL trading rules
1. General description of BOLL's function:
(1) Determine the price trend (the direction of the boll track)
(2) Reading trend strength (overbought and oversold price conditions)
(3) Identify the best time to enter the market (Bollinger narrowing and expanding)
2. Use BOLL to determine the trend
(1) Track the direction of the BOLL track and the current price. If it is upward, it is long, and if it is downward, it is short.
(2) When the BOLL opening widens, it means that the market starts to fluctuate greatly or starts a strong one-way trend. When the BOLL opening narrows, it means that the market starts to fluctuate and the fluctuations begin to decrease.
3. Buying and selling methods after confirming the trend
(1) Buying method when the price breaks through the middle track
①First determine the market trend - the direction of boll track operation
② The way to break through the middle track trading method is:
If it is a long position, the price breaks through the middle line upwards, so go long; if it is a short position, the price breaks through the middle line downwards, so go short.
(2) Overbought and Oversold Trading Method
①First determine the market trend - the direction of boll track operation and the narrowing and expansion situation;
② If the track moves upward and expands, then the overbought is suitable for short-term longs, otherwise the overbought is suitable for shorting; if the track moves downward and expands, then the oversold is suitable for short-term shorts, otherwise the oversold is suitable for longs
4. BOLL’s buying and selling rules
(1) Determine the price trend: through the middle track and the direction of the Bollinger Bands
(2) Determine the strength of price trends: by looking at oversold and overbought conditions
(3) Determine the best entry time: Bollinger Bands narrowing and expanding, breaking through the middle track
5. Recommended use
(1) Mid-track trading method, trend is more recommended
(2) Overbought and oversold method, shock is more recommended
