where the next direction of the price determined by the powers that be in the picture, and the strength of the price barrier. If compared to a vehicle, then draw the curve is the vehicle that the drive power and limit the price, there are signs that divert or let the graph moves in a straight line.
Looking at the existing power in the table and with respect to its border, in fact, we can see what the chart patterns that will be formed later.
The trick is the first see the power interests of the graphic form and Note barrier in front of it is strong or weak , is impenetrable or not, also pay attention to whether the current organization still reasonable or moderate abuse.
However, if the schema then predicted only in this way only, graphically generated stiff and rough, but proper motions of the flexible market, this means that the graph can reach the level of guides are not always exactly right at a certain price, but changing but still around. Therefore, to refine the shape of the graph so that both profit targets and stop losses are realistic, we need to see the position of the limiting chart pattern that is flexible.
flexible graphical Limitation we can get from the value of the indicator Bollinger band.
Why should use Bollinger Bands?
As Bollinger band value of the indicator is calculated using the following formula limits the maximum deviation of the distribution of data, measured from the average of a group of data. Thus, it could be a limit on the price movement. To better understand the following example:
Here are pictures of small red balls containing red ink by counsel. When the small ball falls at point A, then the ball has been broken and spread of red ink on the boards. The outer limit of the distribution of red ink is called limit deviation.
In addition, if the ball fell to the point A is larger and the content of red ink in it more?
Check it out:
The result was the spread of the ink over red so that the distance between the point A with outer boundary further than the previous image. As well, which means that when the size of the ball is greater ability to spread further.
As the graph, when the agency candlesticknya would mean great driving force fueling the travel movement away.
If the ink on the spread in all directions because this graph refers to the dimension of time, the direction of its extension may not be to an earlier time, but only for the next time. Like this:
In addition, due to the movement by force of change if the price goes up or down, then there is no means that the future distribution. Because if menyebanya before means a fixed or non-mobile prices. Thus, in the foreign exchange market, the direction of spreading only from the top down. And limit its spread was only 2 which is the upper limit and lower limit only. And seeing the Bollinger Bands provide the upper and lower limit like that, so it was appropriate that we chose Bollinger Band as a limit on the price movement.
The meaning of the above image Bollinger Band:
- Point A is the middle line of the Bollinger band. Or an average of several points OHLC candlestick. For example, the average close to several candlesticks.
- Ball is a candlestick. The ball size is a candlestick with a body length, and a small ball is a candlestick with a short body
-. The upper limit is a line Bollinger bands mentioned above, and the lower limit is a strip line lower Bollinger.
If we connect with the previous understanding, the state's interest that driving the price, it means the length of the candlestick body depends on how much interest. So, plus interest, the gap distance
The logic :.
When interest decreased interest increasingly can move prices, the price of moving the shorter, the candlestick body formed shorter, the limit deviation closest to the line of Bollinger bands midline upper Bollinger and narrowed bottom.
When higher interest, interest increasingly able to change the price, the price to go further and further, the body of the candlestick that formed the the gap limit out of the line of Bollinger bands Bollinger midline of upper and lower expanded.
Logical Other
When market power is low, the mileage of the market at a time for moving straight and turning to the court, so that the maximum limit that can be hit the market had to adjust the distance as close to market value.
When the energy market is strong then it can move right away or can also reverse with much. Because the band Bollinger status as an outer limit that can be triggered and the widening Bollinger band adjust to market intact.
From the above logic, we can take the conclusion that the Bollinger band which measures the interest that is marketed. Because of the interest has a throat, the Bollinger Bands also have to follow the pattern of that interest.
Interest throat like this:
Start Growth => Increasingly, builds => Stable => L weakening => Starting Out
Then it will be reflected in the band pattern Bollinger like this:
in the photo above is the normal form of graphs and Bollinger band is currently interest flows normally, but it is common in the market, it is generally like this:
from the image above, we can see the live band Bollinger to an interest period .Yaitu:
horizontal phase => Landscape stage => phase Alignment => conical stage => horizontal phase
discussion on the Bollinger band phase we will learn in the following material.