Let's continue about Bollinger Bands. Another well known approach is to use 2 sets of Bollinger bands: Bollinger bands (20, 2) and Bollinger bands (20, 1) together on one chart.. What it does, it creates a set of channels, the borders of which can be effectively used to gauge the strength of a trend. John Bollinger, the developer of Bollinger Bands, says you should always use an indicator with the bands for confirmation. He has a website that is dedicated to Bollinger Bands and the .
When the market becomes more volatile, the bands will correspond by widening and moving away form the middle line. When the market slows down and becomes less volatile, the bands will move closer together. Price moves in upper bands channel — uptrend, lower - downtrend It is very simple to identify dominating price direction by simply answering the question: If below the middle line — in the lower channel — we have a prevailing downtrend.
Simply look for dips towards the middle Bollinger Bands line and enter in the direction of the trend. Low volatility, followed by high volatility breakouts When Bollinger Bands start to narrow down to the point when they are visually forming a neat tight range measured no other way than by eye , as shown on the screenshot below, the situation signals of an upcoming increase in volatility once market breaks outside the bands.
It is similar to a quiet time before the storm. The more time passes while price is contained within the narrow Bollinger Bands range, the more aggressive and extensive breakout is expected.
Price moves outside the bands — trend continuation When price moves and closes outside the Bollinger upper or lower bands, it implies a continuation of the trend. With it Bollinger Bands continue to widen as volatility rises.
But it is not always straight forward: Bollinger Bands alone are not able to identify continuation and reversal patterns and require support from other indicators, such as often RSI, ADX or MACD — in general all types indicators that highlight markets from a different than volatility and trend prospective momentum, volume, market strength, divergence etc. Trend reversal patterns with Bollinger Bands As a rule, a candle closing outside Bollinger Bands followed later by a candle closing inside the Bollinger Bands serves as an early signal of forming trend reversal.
The wick illustrates the highest and lowest traded prices of a security during the time interval represented. The body illustrates the opening and closing trades. If the security closed higher than it opened, the body is hollow or unfilled, with the opening price at the bottom of the body and the closing price at the top.
If the security closed lower than it opened, the body is solid or filled, with the opening price at the top and the closing price at the bottom. A black or red candle represents a price action with a lower closing price than the prior candle's close. A white or green candle represents a higher closing price than the prior candle's close. Thus, the color of the candle represents the price movement relative to the prior period's close and the "fill" solid or hollow of the candle represents the price direction of the period in isolation solid for a higher open and lower close; hollow for a lower open and a higher close.
A candlestick need not have either a body or a wick. To better highlight price movements, modern candlestick charts especially those displayed digitally often replace the black or white of the candlestick body with colors such as red for a lower closing and blue or green for a higher closing.
In addition to the rather simple patterns depicted in the section above, there are more complex and difficult patterns which have been identified since the charting method's inception. Complex patterns can be colored or highlighted for better visualization. Rather than using the open-high-low-close for a given time period for example, 5 minute, 1 hour, 1 day, 1 month, 1 year , candlesticks can also be constructed using the open-high-low-close of a specified volume range for example, 1,; ,; 1 million shares per candlestick.
Generally, the longer the body of the candle, the more intense the trading. A hollow body signifies that the stock closed higher than its opening value. A filled body signifies the opposite.
Candlestick charts are a visual aid for decision making in stock , foreign exchange , commodity , and option trading. For example, when the bar is white and high relative to other time periods, it means buyers are very bullish.
The opposite is true for a black bar. Candlestick charts serve as a cornerstone of technical analysis. The main usage of a candlestick patterns is to identify trends. Unlike with regular candlesticks, a long wick shows more strength, whereas the same period on a standard chart might show a long body with little or no wick. English Choose a language for shopping. Amazon Music Stream millions of songs. Amazon Drive Cloud storage from Amazon.
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