- Market Navigator
- Posts
- Are You Ready for the Deep Dive? 🔍
Hey Guys and Gals,
Yesterday, I gave you a brief introduction to Bollinger Bands, an essential tool for options traders like us.
Bollinger Bands are a beautiful, graphic representation of the kind of statistics you need to understand as an options trader. The data is in real time and actionable.
Now, let's delve deeper into the mechanics:
In the bell curve above, the dotted line running through its center represents the current market price of a stock. Flanking this central line are two yellow lines that depict the first standard deviation. This is the zone where, statistically, 68% of all potential future prices are projected to reside, and it's this principle that forms the cornerstone of my options trading methodology.
These two lines, as subtle as they appear, are teeming with insights. I’ll show you here on the chart from yesterday:
Notice in the first half of the chart, the bands are close together, in a contraction. This occurs when the market is calm, and pricing is bound into a tight trading pattern. On the contrary, on the other half of the chart, the bands are wider, indicating that price action becomes volatile.
What’s important to note is that periods of contraction are always followed by periods of expansion and periods of expansion are followed by periods of contraction. This regression to the mean is something we can always count on.
So how can we apply these insights for sharper trading decisions? Stay tuned. I touch on that tomorrow.
But, if you really can’t wait and want to tap into comprehensive options training reserved for my premium subscribers, don't hesitate to find out more here.
Thanks for reading and here’s to your success,
P.S. If you feel you might have a credit or just have a general question, please give Jeff Brown a call at 443-870-4406 or you can email him at [email protected].
DISCLAIMER: To more fully understand any Ragingbull.com, LLC ("RagingBull") subscription, website, application or other service ("Services"), please review our full disclaimer located at https://ragingbull.com/disclaimer.
FOR EDUCATIONAL AND INFORMATION PURPOSES ONLY; NOT INVESTMENT ADVICE. Any RagingBull Service offered is for educational and informational purposes only and should NOT be construed as a securities-related offer or solicitation, or be relied upon as personalized investment advice. RagingBull strongly recommends you consult a licensed or registered professional before making any investment decision.
RESULTS PRESENTED NOT TYPICAL OR VERIFIED. RagingBull Services may contain information regarding the historical trading performance of RagingBull owners or employees, and/or testimonials of non-employees depicting profitability that are believed to be true based on the representations of the persons voluntarily providing the testimonial. However, subscribers' trading results have NOT been tracked or verified and past performance is not necessarily indicative of future results, and the results presented in this communication are NOT TYPICAL. Actual results will vary widely given a variety of factors such as experience, skill, risk mitigation practices, market dynamics and the amount of capital deployed. Investing in securities is speculative and carries a high degree of risk; you may lose some, all, or possibly more than your original investment.
RAGINGBULL IS NOT AN INVESTMENT ADVISOR OR REGISTERED BROKER. Neither RagingBull nor any of its owners or employees is registered as a securities broker-dealer, broker, investment advisor (IA), or IA representative with the U.S. Securities and Exchange Commission, any state securities regulatory authority, or any self-regulatory organization. Employees, owners, and other service providers of RagingBull.com, LLC are paid in whole or in part by commission based on their sales of Services to subscribers.
WE MAY HOLD SECURITIES DISCUSSED. RagingBull has not been paid directly or indirectly by the issuer of any security mentioned in the Services. However, Ragingbull.com, LLC, its owners, and its employees may purchase, sell, or hold long or short positions in securities of the companies mentioned in this communication.