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What is a Bollinger Band?

Bollinger BandsBollinger bands is a very important and effective technical analysis tool.This tool was created and developed by the American author and financial analyst in the year 2011.These bands are excellent measure of the stock volatility in a particular stock market.Bollinger bands and Keltner channels both are used by the investors to analyze the volatility of the stocks in the market.We will provide the investors with five important ways/tips for the investors to conduct technical analysis through the bollinger bands.

A typical Bollinger band consists of N period moving average,upper band and lower band.

Bollinger bands are successfully used by the stock traders while buying and selling their securities in the market.Experts advise that selling should be done when the price of a stock touches the lower bollinger band and buy stock when it touches the upper bollinger band.Some traders claim that these bands have the ability to predict volatility and coming large rally in the market.

Financial experts have conducted different types of studies on the effectiveness and success of the bollinger bands.They found mixed results about the effectiveness of the bollinger bands in predicting and helping stock trends.According to them these types of tools are successful in booming markets like china etc.Bollinger bands are also effective when traders are trading in a market having lots of selling pressures.

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