Bollinger collects information about the market Price to generate a channel. This channel is generated on the basis of three points:
- The central line that corresponds to a simple average of the configurable period
- The 2 bands projected over the central line upwards and downwards based on the standard deviation (applied n times) with the same period as the first line
Two possible interpretations:
- When the price breaks a band, we act according to the trend (buyouts when breaking the upper, sales in case of breaking the lower.
- When a band is broken we act against the trend waiting for the price to return (buyouts when breaking the lower band, sales when breaking the upper band)
- When we cross the central line