Overview
John
Bollinger has written that,
"Trading bands are one
of the most powerful concepts
available to the technically
based investor, but they
do not, as is commonly believed,
give absolute buy and sell
signals based on price touching
the bands. What they do
answer is the perennial
question of whether prices
are high or low on a relative
basis." He goes on to
say, "It is the action
of prices near the edges
of the envelope that we
are particularly interested
in."
As
with most indicators, signals
generated by Bollinger Bands
should be confirmed using
complimentary indicators.
According to Bollinger,
one of the biggest mistakes
in technical analysis is
the multiple counting of
the same information. For
example, using different
indicators all derived from
the same series of closing
prices to confirm one another.
The
indicators he recommends
to complement Bollinger
Bands are:
RSI
or MACD
-- based on price alone
On-Balance
Volume (OBV)
-- combining closing
prices and volume
Money
Flow -- combining
price range and
volume
Quick
look at Bollinger
Bands - (more
about Bollinger
Bands)
Quick
look at MACD - More
about MACD
Quick
look at On Balanced Volume
(OBV) - More
about OBV
Quick
look at Money Flow - More
about Money Flow
