Using Bollinger Bands® Stock Indicator

Bollinger Bands Identify Candlestick Platforms Prior to Runs

Bollinger Bands have been gaining in popularity in the past couple of years. This is no surprise given the changes in the Market Structure, and how price behaves with more of the Exchanges, Dark Pool Alternative Trading Systems, Electronic Communication Networks, and other order venues which are now automated.

Using Bollinger Bands in Charts offers a highly visual method of seeing the compression patterns that occur before breakouts of significant magnitude.

This indicator also helps those Individual Investors and Retail Traders who are still struggling with Spatial Pattern Recognition Skills™ and have trouble recognizing whether a stock is still trending up or down, or if it has shifted sideways. The sooner an Individual Investor or Retail Trader can identify a sideways shift the better, because sideways patterns require different entries, stop losses, and exit strategies.

It is important to maintain a good ratio on your chart screen so that the Bollinger Bands are properly displayed. Many times traders attempt to use too many indicator windows on one chart template layout. Be sure that the height and width ratios are close to the Golden Mean ratios.

Using Bollinger Bands in Charts makes it far easier to determine if a Candlestick Platform is underway, or if it is a wider sideways Trading Range pattern. Below is an example of a stock that had been in a Trading Range pattern over a few months, then had a High Frequency Trading velocity run.

The current compression shows near perfect horizontal Bollinger Bands on both the upper and lower bands, indicating that price is compressing inward equally from highs and lows. This is a powerful price Platform Market Condition pattern that is often missed by beginner Independent Investors and Traders.

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Trade Wisely,

Martha Stokes CMT

TechniTrader technical analysis using TC2000 charts, courtesy of Worden Bros.

Chartered Market Technician
Instructor & Developer of TechniTrader Stock & Option Courses

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