Bollinger Bands, developed by John Bollinger, are a versatile technical analysis tool used extensively in financial trading. They consist of a simple moving average (typically 20 periods) flanked by an upper and lower band, which are usually two standard deviations away from the moving average. The core concept behind Bollinger Bands is that they measure market volatility and help traders identify overbought or oversold conditions. When the bands contract, it signals low volatility, often preceding a significant price movement. Conversely, expanding bands indicate high volatility, suggesting increased price swings. Traders often look for price interactions with these bands to gauge potential turning points or trend continuations
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One of the most aggressive Bollinger Band strategies is trading the breakout. This involves looking for a "Bollinger Squeeze," a period where the bands contract tightly, signaling low volatility and a market coiling up for a big move. An aggressive trader doesn't wait for price to merely touch the band—they enter a trade the moment a candle decisively closes outside the upper or lower band on high volume. This move is interpreted as the start of a new, powerful trend. For example, if a stock in a squeeze suddenly rockets and closes above the upper band, an aggressive trader will immediately go long, anticipating a sustained rally. This approach is not about predicting the direction of the breakout but reacting instantly to it.
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Money Management: It is important to follow up with this strict rule of investment: If you have $100 in your account, each open position should be $5 tops If you have $200 in your account, each open position should be $10 tops If you have $500 in your account, each open position should be $25 tops If you have $1,000 in your account, each open position should be $50 tops If you have $2,000 in your account, each open position should be $100 tops If you have $5,000 in your account, each open position should be $250 tops
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Risk Disclaimer: Trading options involves financial risk and may not be appropriate for all investors. The information presented here is for information and educational purposes only and should not be considered an offer or solicitation to buy or sell any financial instrument. Any trading decisions that you make are solely your responsibility. Past performance is not necessarily indicative of future results.
