History is full of cases where, creating something for their own convenience and advantage, talented people invented a real treasure for the whole world. This happened with American financial analyst John Bollinger, who in 1984 decided to develop his own system for calculating investments in financial markets. After seven long years, the trader introduced his indicator to the investment community, which was highly valued by its participants. Soon, this innovative system was enthusiastically adopted by traders around the world and was named Bollinger Bands. Although Bollinger’s brainchild was created 30 years ago, it does not lose its relevance for traders of the 21st century. We will tell you right now about the secret and uniqueness of this tool.
Bollinger Bands are a technical indicator used to measure market volatility. With Bollinger Bands, a trader can assess whether the current price is high/low compared to the moving average over the recent period, and predict the possibility of a fall or rise to its level. The key task of this tool is to help the investor make a decision on buying or selling an asset.
Bollinger Bands consist of three main lines:
A fall in price to the lower line indicates that the asset is trading at a comparatively low price and is considered oversold. This means that it is time to buy it, expecting a further rise in price towards the central band.