Bollinger Band Stock Index Price Action in Ranging Stocks Markets

Bollinger Band Indicator is also used to identify periods when a Indices market trend is overextended. The guidelines below are considered when applying this Stock Index indicator to a sideways Stock Index trend.

Bollinger Band Indicator is very important because it is used to give Indices signals that a Indices price breakout may be upcoming.

During a trending market these techniques don't hold, this only holds as long as Bollinger Bands are pointing sideways.

• If the market price touches the upper band it can be considered overextended on the upside - overbought.
• If the market price touches the lower band the currency can be considered overextended on the bottom side - oversold.

One of the uses of Stock Indices Bollinger Bands indicator is to use the above overbought and oversold guidelines to establish buy & sell targets during a ranging market.

• If price has bounced off the lower band crossed the center-line moving average then the upper band can be used a sell level.
• If price bounces down off the upper band crosses below the center moving average the lower band can be used as a buy level.

Trading Bollinger Bands in Ranging Stock Markets - Bollinger Bands Stock Index Trading Strategy

In the above ranging market the instances when the Indices price hits the upper or lower bands can be used as profit targets for long or short Stock Indices trade positions.

Stock Index trades can be opened when the market hits the upper resistance level or lower support level. A stop loss order should be placed a few pips above or below depending on the trade opened, just in case the Indices price action breaks out of the range within these Bollinger bands.