Bollinger Bands Price Action in Ranging Trading Markets

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

Bollinger Bands Indicator is very important because it is 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 Bands are pointing sideways.

• If the stock trading market stock price touches the upper band it can be considered overextended on the upside - overbought.
• 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 Bands indicator 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 moving average 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.

Bollinger Bands in Ranging 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 transactions.

Indices trades can be opened when the stock trading 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 indices trade opened, just in case the stock price action breaks out of the range within these Bollinger bands.