Bollinger Bands Price Action in Range Bound Trading Markets

Bollinger Bands is also used to identify periods when a stock market trend is overextended. The rules below are considered when applying this stock indicator to a sideways indices trend.

Bollinger Bands is very important because it's used to give indices signals that a indices price breakout may be upcoming.

During a indices trending market these techniques do not hold, this only holds as long as Bollinger Band are pointing sideways.

If the stock trading market stock price touches/tests the upper band it can be considered overextended on the upside - over-bought.
If the stock trading market stock price touches the lower band the stock price can be considered overextended on the bottom side - oversold.

One of the uses of Indices Bollinger Band is to use the above overbought and oversold guidelines to establish buy and sell targets during a ranging stock market.

If stock price has bounced off the lower band crossed the center-line MA then the upper band can be used a sell level.
If stock 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 Range Bound Trading Markets

Bollinger Band in Range Bound Trading Markets - Bollinger Bands Strategy

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

Index trades can be opened when the stock trading market hits the upper resistance area or lower support zone. A stop loss order should be placed a few pips above/below depending on the indices trade opened, just in case the stock price action breaks out of the range within these Bollinger band.

Learn More Courses & Topics:

Trade Stock Indices

Bollinger Bands Price Action in Range Bound Trading Markets