Navigate the Market with This Essential Trading Tool

Why I Use Bollinger Bands

Author

Jeff Williams
September 08, 2023

Hey Guys and Gals,

In yesterday's email, I unpacked the ripple effect of jobless claims on our market and shared a glimpse of my strategic approach. As a reminder, while we may observe a short-term market uptick, I will be watching for potential drops later this month as fears of rate hikes resurface.

Today, and through the weekend, I want to introduce you to an essential tool from my arsenal that could sharpen your trading strategy during the current market climate: Bollinger Bands.

Why Bollinger Bands?

Volatility, Volatility, Volatility! It's pivotal in options trading. Bollinger Bands, built on the bedrock of standard deviation, encapsulate volatility seamlessly. They're not just indicators; they're invaluable guides in the world of option premiums.

The Basics of Bollinger Bands

At its heart, Bollinger Bands comprise a Simple Moving Average (SMA) surrounded by two outer bands. These bands aren't random—they're a meticulous calculation of standard deviations from the SMA.

In the chart above, a dotted blue line runs through the center (that's your SMA). Now, flanking this line are the outer bands, marking one standard deviation above (upper band) and below (lower band).

In the world of stocks, a prevalent trend emerges: most stocks oscillate within one standard deviation of their current value. Bollinger Bands serve as a visual embodiment of this concept, mapping out phases of volatility expansion and contraction with uncanny precision.

Hungry for more? Hang tight. Tomorrow, I’m going to go farther into Bollinger Bands, decoding their nuances.

And, for those who're eager to leapfrog ahead and tap into comprehensive options training reserved for my premium subscribers, don't hesitate to explore 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.