Bollinger Bands
Although the 200-MA and 50-MA represent a strong signal methodology, it is not the only way that MA is used in trend analysis. The Bollinger Bands method is one effective use of multiple moving average analysis, based on the SMA method.
Bollinger Bands sets up a statistical summary of price range and movement. The middle band is a 20-day SMA. The upper and lower bands are two standard deviations removed from this middle band. This three-band system sets up a number of potential reversal signals while tracking trends over time. Testing price volatility is only one aspect of the band system. This also indicates movement above and below expected breadth, which signals likely reversal points. However, like most indicators, strong ...
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