Day Trading - Bollinger bands
What are Bollinger bands? - Named after their founder John Bollinger. Bollinger bands help day traders analyze stock patterns and the stocks ranges. These bands can be set up in such a way that help the day trader predict points of strength and weakness. Many day traders trade of these bands.
 Bollinger Band Example
This one shows a nice little bounce that even went through the 5 minute moving averages.
Could be a sign of a trend reversal.
If you were short from the top you would be looking to get out now if you had not already done so.
The Bollinger bands are in yellow above.
There is a fast moving average and a slow moving average. Many day traders will be looking at this.
The Bollinger Band Plays
Play 1 - Look just before the green line is crossed. Many people that are risky traders but want to make more money take a short position from here in the hope they are early to the resistance line breaking. This time the were. People play off the moving averages all the time. Be aware of that!
Play 2 - Look as the bollinger candlesticks hit the yellow line after the cross the green support line. Usually they take a bounce from the line. It looks like it wants to climb back up to the center lines but it can't and continues to drop. The stock is weak. Shorter may enter here but the position is not great.
Play 3 - Many people that are short may cover at the next low bollinger band touch as the expect the bounce. Some may also take long positions here to ride what's called the short squeeze.
Play 4 - Many people that are short may cover when the realize the stock has not only began to rise but also crossed the moving averages. Many may take long positions here up to the upper bollinger band. Other may wait until the next candlestick comes in before either covering their short position or taking a quick long position.
Trading Psychology Of Bollinger Bands
1. There is a lot of sound theory behind these bands and many day traders look at them. Try not to enter in their channels and expect bounces of the top middle and bottom lines.
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