Bolinger bands are one method of technical analysis that is quite widely used by traders. This method was first invented and introduced to the public in the early 1980s by John Bolinger, which is useful for conveying between volatility and real-time prices during a period of analysis. The basic form of bolinger bands itself is the three lines that have the upper and lower border and a moving average line that functioned into the center line bolinger.
As we mentioned earlier, this indicator has the upper and lower limits that make up a useful belt as a price barrier. At the time of demand and supply are not balanced with each other then the bolinger bands will widen compared to normal conditions, it indicates that when there is a large volatility of prices to occur such unbalanced conditions. Now you look at the picture below.
There are several instances where demand and supply are unbalanced and reduce prices. Where in the first decline the price falls from the peak 1.25962 to the base at 1.23762 and a second decline when the price is at 1.25542 towards 1.24190. And now you can compare when the price is normal at some time before, there is a significant correlation, where when prices tend to move sideways, bolinger bands will become narrower than usual because the price is not as fast as the imbalance between demand and supply.
In other words, this indicator is very useful to measure a volatility but in fact this bolinger bands indicator can not stand alone, this is only used as an early indicator only to measure the volatility and relative prices. Yes, the bolinger bands indicator is not an action indicator that allows you to specify when to open and close. So we strongly recommend that you also use other indicators that you can use to open open or open sell decisions.
FORMULA MATEMATIS BOLINGER BANDS
Basically bolinger bands consist of three lines, namely bolinger top, bottom and diameter. Where the line line itself is obtained from the standard deviation which is a useful statistical calculation to measure how much deviation that occurs in a data.
Uper band = Simple Moving Average + (multiplier factor x standard deviation)
Middle band = Simple Moving Average
Lower band = Simple Moving Average - (multiplier factor x standard deviation)
Where the multiplier means here [0.6174 x ln (Bollinger Bands period)] + 0.1046.
Where the standard deviation formula is as follows :
Where Xi = data to I and X = average
Here the data used not only the closing price just like in high school in general. What is used here is the combination of the highest (high) low price (low and closing price)
Taking the price on the bolinger center line there are two types, using Typical Price and Weighted Price
But until now the most widely used is the typical price
CHARACTER BOLINGER BANDS
As you already know before, each indicator is assured to have a different character each different. Similarly, this bolinger bands indicator, where there is a unique thing that makes each person interpret this indicator with each way.
This itself is expressed by John Bolinger where the creator says, although there are rules in it, still each trader has his own way to use bolinger bands, there are even traders who use bolinger bands to take short and long buy and sell decisions with Using bolinger bands and modifications to the deviation.
In general this is the character of bolinger bands that you can know
Generally the bolinger bands indicator is not an action indicator, but you can combine it with some other action indicators like RSI, Stochastic or momentum
Generally the price will move inside the bolinger but also the price moves inside the bolinger, where this could be a sign of a reversal going on or it could even be a sign of strengthening the current trend that is happening.
The smaller the period used the width of the bolinger belt will be smaller, apply vice versa.
As we mentioned earlier, this indicator has the upper and lower limits that make up a useful belt as a price barrier. At the time of demand and supply are not balanced with each other then the bolinger bands will widen compared to normal conditions, it indicates that when there is a large volatility of prices to occur such unbalanced conditions. Now you look at the picture below.
There are several instances where demand and supply are unbalanced and reduce prices. Where in the first decline the price falls from the peak 1.25962 to the base at 1.23762 and a second decline when the price is at 1.25542 towards 1.24190. And now you can compare when the price is normal at some time before, there is a significant correlation, where when prices tend to move sideways, bolinger bands will become narrower than usual because the price is not as fast as the imbalance between demand and supply.
In other words, this indicator is very useful to measure a volatility but in fact this bolinger bands indicator can not stand alone, this is only used as an early indicator only to measure the volatility and relative prices. Yes, the bolinger bands indicator is not an action indicator that allows you to specify when to open and close. So we strongly recommend that you also use other indicators that you can use to open open or open sell decisions.
FORMULA MATEMATIS BOLINGER BANDS
Basically bolinger bands consist of three lines, namely bolinger top, bottom and diameter. Where the line line itself is obtained from the standard deviation which is a useful statistical calculation to measure how much deviation that occurs in a data.
Uper band = Simple Moving Average + (multiplier factor x standard deviation)
Middle band = Simple Moving Average
Lower band = Simple Moving Average - (multiplier factor x standard deviation)
Where the multiplier means here [0.6174 x ln (Bollinger Bands period)] + 0.1046.
Where the standard deviation formula is as follows :
Where Xi = data to I and X = average
Here the data used not only the closing price just like in high school in general. What is used here is the combination of the highest (high) low price (low and closing price)
Taking the price on the bolinger center line there are two types, using Typical Price and Weighted Price
But until now the most widely used is the typical price
CHARACTER BOLINGER BANDS
As you already know before, each indicator is assured to have a different character each different. Similarly, this bolinger bands indicator, where there is a unique thing that makes each person interpret this indicator with each way.
This itself is expressed by John Bolinger where the creator says, although there are rules in it, still each trader has his own way to use bolinger bands, there are even traders who use bolinger bands to take short and long buy and sell decisions with Using bolinger bands and modifications to the deviation.
In general this is the character of bolinger bands that you can know
Generally the bolinger bands indicator is not an action indicator, but you can combine it with some other action indicators like RSI, Stochastic or momentum
Generally the price will move inside the bolinger but also the price moves inside the bolinger, where this could be a sign of a reversal going on or it could even be a sign of strengthening the current trend that is happening.
The smaller the period used the width of the bolinger belt will be smaller, apply vice versa.
Comments
Post a Comment