What are Bollinger Bands? A Guide to Using Bollinger Bands in Crypto Trading

 1. What are Bollinger Bands?

Bollinger Bands (BB) are a technical indicator developed by John Bollinger in 1983, used to measure market volatility. BB consists of three components:

Middle Band: 20-period Simple Moving Average (SMA).

Upper Band: SMA20 plus two standard deviations.

Lower Band: SMA20 minus two standard deviations.

2. How to Set Up Bollinger Bands

To set up Bollinger Bands on trading platforms:

Select the "Indicators" option.

Search for "Bollinger Bands".

Choose and apply the indicator to the price chart.

3. Meaning and Functionality of Bollinger Bands

Bollinger Bands Expansion and Contraction: When the market is less volatile, the bands contract; when the market is more volatile, the bands expand.

Trend Identification: The middle band (SMA20) can act as dynamic support or resistance in uptrends or downtrends.

4. Trading Strategies with Bollinger Bands

Trading within Bollinger Bands:

 - Buy when the price touches the lower band.

 - Sell when the price touches the upper band.

 - Take profit at the middle band.

Trading during Bollinger Band Squeeze and Breakout:

 - When Bollinger Bands contract, it signals an upcoming significant price movement.

 - Wait for the price to break out of the narrow accumulation zone.

 - Use Fibonacci retracement to determine entry and take-profit points.