in the context of the actual price movements. In fact, for me, they define the stock chart. Stock charts tell me way more about future movement with the BB placed on them. I rarely do any analysis without them, except for perhaps an initial viewing of a stock chart I am considering for watch list placement. BB's therefore do not give you a number, like most other indicators, they don't tell you an overbought or oversold condition. They just provide a visual, a story, of where a stThe Bollinger Band is the closest thing to 'The Holy Grail' of technical analysis there is. Especially for large cap stock traders, it just cannot be beat for analyzing charts. Having said that however, there is probably no other technical indicator misused or misunderstood as often as the Bolinger Band (BB). This article is to provide the technical analyst with the basics needed to interpret the many faces of the BB.

Before we begin, let me explain the type of trading done at http://livingonlargecaps.blogspot.com. We trade large cap stocks, we generally hold stocks for less than two months, and make about 3-5% on an average trade. Done over and over again throughout the year, we have made over 50% annual returns for the last three years.

Now lets discuss what the Bollinger Band (BB) is. In its standard usage, the BB is derived from taking the 20 day moving average of the stock price. And then adding and subtracting two standard deviations of that stock price and placing a line above the moving average and below the moving average. Now without having to re-visit my statistics classes of some 25 years ago, I will try to clarify a standard deviation. It is simply a measurement of how far the price has deviated above or below the moving average. A stock going through a particularly volatile patch, will see its BB's expand, and a stock going through a calm period, will see them contract.

BB's are available on most charting software. Yahoo has them on their technical analysis charts, as do most other web sites that are dedicated to technical analysis. If you are unfamiliar with them I urge you to right now, go experiment with them, using a few stocks and market indicators like the Dow, or Nasdaq.

If you are familiar with technical analysis, and use indicators such as the RSI or stochastic. You know one of the unique things about the BB's is they are placed right on the stock charts. They are viewed in the context of the actual price movements. In fact, for me, they define the stock chart. Stock charts tell me way more about future movement with the BB placed on them. I rarely do any analysis without them, except for perhaps an initial viewing of a stock chart I am considering for watch list placement. BB's therefore do not give you a number, like most other indicators, they don't tell you an overbought or oversold condition. They just provide a visual, a story, of where a sto

http://livingonlargecaps.blogspot.com. We trade large cap stocks, we generally hold stocks for less than two months, and make about 3-5% on an average trade. Done over and over again throughout the year, we have made over 50% annual returns for the last three years.

Now lets discuss what the Bollinger Band (BB) is. In its standard usage, the BB is derived from taking the 20 day moving average of the stock price. And then adding and subtracting two standard deviations of that stock price and placing a line above the moving average and below the moving average. Now without having to re-visit my statistics classes of some 25 years ago, I will try to clarify a standard deviation. It is simply a measurement of how far the price has deviated above or below the moving average. A stock going through a particularly volatile patch, will see its BB's expand, and a stock going through a calm period, will see them contract.

BB's are available on most charting software. Yahoo has them on their technical analysis charts, as do most other web sites that are dedicated to technical analysis. If you are unfamiliar with them I urge you to right now, go experiment with them, using a few stocks and market indicators like the Dow, or Nasdaq.

If you are familiar with technical analysis, and use indicators such as the RSI or stochastic. You know one of the unique things about the BB's is they are placed right on the stock charts. They are viewed in the context of the actual price movements. In fact, for me, they define the stock chart. Stock charts tell me way more about future movement with the BB placed on them. I rarely do any analysis without them, except for perhaps an initial viewing of a stock chart I am considering for watch list placement. BB's therefore do not give you a number, like most other indicators, they don't tell you an overbought or oversold condition. They just provide a visual, a story, of where a st

tock price and placing a line above the moving average and below the moving average. Now without having to re-visit my statistics classes of some 25 years ago, I will try to clarify a standard deviation. It is simply a measurement of how far the price has deviated above or below the moving average. A stock going through a particularly volatile patch, will see its BB's expand, and a stock going through a calm period, will see them contract.

BB's are available on most charting software. Yahoo has them on their technical analysis charts, as do most other web sites that are dedicated to technical analysis. If you are unfamiliar with them I urge you to right now, go experiment with them, using a few stocks and market indicators like the Dow, or Nasdaq.

If you are familiar with technical analysis, and use indicators such as the RSI or stochastic. You know one of the unique things about the BB's is they are placed right on the stock charts. They are viewed in the context of the actual price movements. In fact, for me, they define the stock chart. Stock charts tell me way more about future movement with the BB placed on them. I rarely do any analysis without them, except for perhaps an initial viewing of a stock chart I am considering for watch list placement. BB's therefore do not give you a number, like most other indicators, they don't tell you an overbought or oversold condition. They just provide a visual, a story, of where a st

tware. Yahoo has them on their technical analysis charts, as do most other web sites that are dedicated to technical analysis. If you are unfamiliar with them I urge you to right now, go experiment with them, using a few stocks and market indicators like the Dow, or Nasdaq.

If you are familiar with technical analysis, and use indicators such as the RSI or stochastic. You know one of the unique things about the BB's is they are placed right on the stock charts. They are viewed in the context of the actual price movements. In fact, for me, they define the stock chart. Stock charts tell me way more about future movement with the BB placed on them. I rarely do any analysis without them, except for perhaps an initial viewing of a stock chart I am considering for watch list placement. BB's therefore do not give you a number, like most other indicators, they don't tell you an overbought or oversold condition. They just provide a visual, a story, of where a st

in the context of the actual price movements. In fact, for me, they define the stock chart. Stock charts tell me way more about future movement with the BB placed on them. I rarely do any analysis without them, except for perhaps an initial viewing of a stock chart I am considering for watch list placement. BB's therefore do not give you a number, like most other indicators, they don't tell you an overbought or oversold condition. They just provide a visual, a story, of where a stock has been. Therefor you have to interpret.

But what can be learned is crucial, to guessing what will happen next. BB's can help you predict price movements, like no other tool. The trick is, to know what to look for. In other articles I will present what I require a price pattern to look like before I even consider it. But for this article, realize that price patterns need to be structured, calm, heading up, down or flat. But they can't be erratic. Erratic price patterns are never worth trading..

If the upper band and the lower band are not moving in unison then the pattern is erratic. There is one exception to this rule, and that is at the beginning of a powerful up or down move. Remember, the bands tell you where the price will fall in relative to the 20 day moving average. Well, if a powerful move is underway, then the price is moving away from the average, and the bands expand. Once the bands expand it is too late to trade that move, but the stock is worth watching, one can climb on board on the next pull back.

But trading the way we do on our blog ,at http://livingonlargecaps.blogspot.com, that has produced greater than 50% return three years running, we like the bands to move in unison. That shows predictability. And predictability is crucial in getting large returns. It is not the home run we are looking for, just hit after hit after hit. Load the bases repeatedly and you generate runs. OK enough baseball analogy. Here is an example, take the chart HIG. With BB's in place look at the chart in early June 2005. It is just after the powerful upward move, that occurred in May. First notice in May how the BBs expanded, as the stock shot straight up. Then in June the bands moved in unison. Around mid June the stock touched its 20 day moving average, then its formation started to 'bowl' as it moved up. Buy it here. Once it hits a 5% profit move up a sliding stop, and ride the price up.