One thing you should know about Bollinger Bands is that price tends to
return to the middle of the bands. That is the whole idea behind the
Bollinger bounce. By looking at the chart below, can you tell us where
the price might go next?
What you just saw was a classic Bollinger Bounce. The reason these
bounces occur is because Bollinger bands act like dynamic support and
resistance levels.
The longer the time frame you are in, the stronger these bands tend
to be. Many traders have developed systems that thrive on these bounces
and this strategy is best used when the market is
ranging and there is no clear trend.
Now let's look at a way to use Bollinger Bands when the market
does trend.
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