What is BB or Bollinger Bands in option Trading ?

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Bollinger Bands (BB) – Bollinger Bands (BB) are a widely popular technical analysis instrument created by John Bollinger in the early 1980s. Bollinger Bands consist of a band of three lines which are plotted in relation to security prices. The line in the middle is usually a Simple Moving Average (SMA) set to a period of 20 days (The type of trend line and period can be changed by the trader; however a 20-day moving average is by far the most popular). The SMA then serves as a base for the Upper and Lower Bands. The Upper and Lower Bands are used as a way to measure volatility by observing the relationship between the Bands and price. Typically the Upper and Lower Bands are set to two standard deviations away from the SMA (The Middle Line); however, the number of standard deviations can also be adjusted by the trader.

History
Bollinger Bands (BB) were created in the early 1980’s by financial trader, analyst and teacher John Bollinger. The indicator filled a need to visualize changes in volatility which is of course dynamic, however at the time of the Bollinger Band’s creation, volatility was seen as static.

Calculation
There are three bands when using Bollinger Bands

Middle Band – 20 Day Simple Moving Average
Upper Band – 20 Day Simple Moving Average + (Standard Deviation x 2)
Lower Band – 20 Day Simple Moving Average – (Standard Deviation x 2)
The basics
The Bollinger Bands indicator is an oscillator meaning that it operates between or within a set range of numbers or parameters. As previously mentioned, the standard parameters for Bollinger Bands are a 20 day period with standard deviations 2 steps away from price above and below the SMA line. Essentially Bollinger Bands are a way to measure and visualize volatility. As volatility increases, the wider the bands become. Likewise, as volatility decreases, the gap between bands narrows. What is done with this information is up to the trader but there are a few different patterns that one should look for when using Bollinger Bands.

What to look for
High/Low Prices
One thing that must be understood about Bollinger Bands is that they provide a relative definition of high and low. Prices are almost always within the band. Therefore, when prices move up near the upper band or even break through the upper band, many traders would see that security as being overbought. This would preset a possible selling opportunity. Of course the opposite would also be true. When prices move down near the lower band or even break through the lower band, that security may be seen as oversold and a buying opportunity may be at hand.

Cycling Between Expansion and Contraction
Volatility can generally be seen as a cycle. Typically periods of time with low volatility and steady or sideways prices (known as contraction) are followed by period of expansion. Expansion is a period of time characterized by high volatility and moving prices. Periods of expansion are then generally followed by periods of contraction. It is a cycle in which traders can be better prepared to navigate by using Bollinger Bands because of the indicators ability to monitor ever changing volatility.

Price Action Confirmations
Because of Bollinger Bands ability to display a critically important metric (changes in volatility), the indicator is often used in conjunction with other indicators in order to perform some advanced technical analysis. A good example of this is using Bollinger Bands (oscillating) with a Trend Line (not oscillating). As the example below shows, having the two different types of indicators in agreement can add a level of confidence that the price action is moving as expected.
Another good example is using Bollinger Bands to confirm some classic chart patterns such as W-Bottoms. Bollinger often used Bollinger Bands to confirm the existence of W-Bottoms which are a classic chart pattern classified by Arthur Merrill.
In order for the Bollinger Bands to confirm the W-Bottom’s existence, the following four conditions must take place.

A reaction low forms which may (but not always) break through the Lower Band of the Bollinger Band but it will at least be near it.
Price move back around the SMA (The Middle Band).
A second drop in price creates a lower low than the initial reaction low in condition 1 however; the second, new low does not break through the Lower Band.
A strong move brings price back towards the Middle Band. A breakthrough of a resistance line created by the move in condition 2 may signify a potential breakout.

Walking the Bands
Of course, just like with any indicator, there are exceptions to every rule and plenty of examples where what is expected to happen, does not happen. Previously, it was mentioned that price breaking above the Upper Band or breaking below the Lower band could signify a selling or buying opportunity respectively. However this is not always the case. “Walking the Bands” can occur in either a strong uptrend or a strong downtrend.

Bollinger Bands Uptrends, What is BB or Bollinger Bands in option Trading ?.

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Her injuries were so extreme that the possibility of her working once again in the near future was slim at finest.
Also, over the previous three years, PD and FCX have risen by higher portions than copper.

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Earning money in the foreign exchange is pretty easy as long as you don’t over-complicate things. This lasts about 60 days so it is well worth it to attempt a platform to your preference. Stops can be put at the other end of the BB.

If you’re like me, you want to find a way to trade the Forex that is constant. That’s successful. That’s simple. Forex trading signs can be your secret to all of this.

If you have a plan to use them successfully, Bollinger Bands can be a great addition to your forex trading strategy. They enable you to act without feeling and prevent expensive mistakes. A tool, that when used appropriately, can assist you read the market and discover entries. In this article, we will consider using them to go into breakouts after a price squeeze.

If your trade rapidly approaches the limitation cost and all your indicators state that the rate motion is just getting going & not likely to rapidly reverse on you, then you need to initially either remove your limitation rate & let the price run, or, raise your limitation rate another 5-10 pips. Then raise your stop to either your entry point or past it, to secure either breakeven or some revenue in case the cost suddenly reverses on you.

And irritating it is! In 2004 I opened up my first FOREX account with just a few hundred dollars in order to evaluate out the waters a bit. I figured, “OK, how hard can this be? I’ll just set my targets at three times the distance to my stops so I’ll have a 1:3 risk/reward ratio. Then, all I require to do to make a profit is be right more than 25% of the time on my trades. Any dolt can do that, right?” Well this dolt obviously couldn’t, since about a lots trades later on I believe I might have struck my target about twice Bollinger Bands Trader . Every other trade was stopped out. Amazing. What was occurring?

The next step is to get in touch with Bollinger Bands a direct-access broker and produce an account with them. Nevertheless, here it is very important for you to comprehend that day trading is managed by certain laws. Ensure you know those laws and that you follow them completely. For example, in order to be able to trade stocks and to keep the credibility of your account, it is legally compulsory for you to have at least $25000 in your account all the times.

So what we wish to do is merely pick a few that you are really comfortable with, then neglect everything else. If it’s a sell or a buy, the point of these signs is to help financiers identify. They all say the very same thing however in their own way. So it is very important to deal with what you are comfortable utilizing and throw away the extra fluff.

Should not cost more than a thousand dollars and continuous expenses must be very little. That must be the outright maximum quantity to pay somebody for their software application. The only thing you ought to be paying the supplier for after you have actually bought your software application is the ongoing data feed. Which’s it. If there are membership subscription costs, software application upgrade charges and other continuous costs, look somewhere else.

That’s where the concept of utilizing the stop hunters to my advantage is available in. A technique to persuade our mind might be visualization. PD and FCX are 2 of the largest 3 copper manufacturers (in addition to PCU).

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