The Bollinger band indicator draws three lines; the upper line is the pressure line, or resistance, and the lower line is the support line. The middle can be regarded as the price average line.
When the prices increase or decrease, its band area will become wider or narrower accordingly. When the price breaks through the upper line, it means overbought conditions, and when it falls below the lower limit, it represents oversold conditions.
How to use
- When the Bollinger Bands move horizontally, it means the current price of the coin is in a normal state and no further actions are required.
- When the price breaks through the upper limit or upper band areas, it represents the short-term retracement, a short-term selling signal.
- When the price falls below the lower limit, it lowers the band area, which indicates the short-term rebound or short-term buying opportunity.
- If the band moves in the upper right or lower right, it indicates an out-of-normal condition. You will only participate in the trading when the prices move continuously in the upper vertical direction or lower vertical direction.
In conclusion, the Bollinger Bands is the path-based indicator that is very useful in calculating the standard deviation of the prices and finding the confidence interval of the prices.
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