Bollinger Bands and complementary indicators as suggested by John Bollinger

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A look at Bollinger Bands and complementary indicators for Bollinger Bands as suggested by John Bollinger

John Bollinger has written that, "Trading bands are one of the most powerful concepts available to the technically based investor, but they do not, as is commonly believed, give absolute buy and sell signals based on price touching the bands. What they do answer is the perennial question of whether prices are high or low on a relative basis." He goes on to say, "It is the action of prices near the edges of the envelope that we are particularly interested in."

As with most indicators, signals generated by Bollinger Bands should be confirmed using complimentary indicators. According to Bollinger, one of the biggest mistakes in technical analysis is the multiple counting of the same information. For example, using different indicators all derived from the same series of closing prices to confirm one another.

The indicators he recommends to complement Bollinger Bands are:

RSI or MACD -- based on price alone

On-Balance Volume (OBV) -- combining closing prices and volume

Money Flow -- combining price range and volume

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