How to make money using Bollinger Bands

Bollinger Bands

Bollinger bands is a technical analysis devised after adding statistical technique to a moving average.

Statistical techniques mean using standard deviations of price movement to determine the price volatility with certain probability.

The Bollinger band draws a line in ± 1σ (the first standard deviation), ± 2σ (second standard deviation), and ± 3σ (third standard deviation) from the center towards the outside; investment decision can be judged from position and directionality of the present value.

Probability that the value lies between [-1σ] to [+1σ] is 68.3%
Probability that the value lies between [-2σ] to [+2σ] is 95.5%
Probability that the value lies between [-3σ] to [+3σ] is 99.7%
If there is an outliner outside the range [-2σ] – [+2σ] of the Bollinger bands, the probability that the value will fall within ±2σ is predicted to be 4.5

If the value falls to break – 2 σ lines, yet rebounds to rise from there, it is a signal for “buying”.

If the value exceeds +2σ or falls far below -2σ, it is a signal for selling.