This article will serve as a precursor to my next article in the series, where I go into detail describing my Bollinger Band Breakout Strategy. The article aims to provide a good foundation on Bollinger Bands as a technical analysis tool.
Bollinger Bands are named after the creator John Bollinger. As pictured on the right.
He is a technical analyst that developed the tool as a measure of volatility. He has wrtten a book titled "Bollinger on Bollinger Bands" and is considered the foremost expert on the subject.
He also currently runs a website and has a pay service where he analyzes the markets for setups as per different bollinger band strategies he has developed.
Without going into excessive detail on the construction of Bollinger Bands, to briefly illustrate I will provide some examples of different types of setups and information that can be obtained from the bands. The bands themselves are a measure of volatility based on previous price action. They utilize the simple moving average and the amount of data to be measured back is input by the user. The standard settings, and often the default is based on a 20 period Moving average.
I will illustrate some of the com…