What is a 'Bulge' A bulge, or bulge line, refers to a plot line that represents one standard deviation above the day simple moving average of a stock price. A bulge line is the uppermost line when plotting Bollinger Bands, in the course of a technical analysis of stocks. Welcome to the Bollinger Bands® Squeeze Package for TradeStation. Without a doubt the Squeeze is the most talked about of all the Bollinger Band strategies and this TradeStation Package is your key to the Bollinger Band Squeeze. First, some background: a Squeeze is a periodic low in BandWidth and a Bulge is a periodic peak in BandWidth.
The BandWidth indicator alerted traders to be ready for a move in mid-August. The stock obliged with a surge above the upper band and continued higher throughout September. The advance stalled in late September and BandWidth narrowed again in October. Notice how BandWidth declined below the lows set in August and then flattened out. The subsequent break below the lower Bollinger Band triggered a bearish signal in late October. The Squeeze can also be applied to weekly charts or longer timeframes.
Volatility and BandWidth are typically higher on the weekly timeframe than a daily timeframe. This makes sense because larger price movements can be expected over longer timeframes. As the consolidation narrowed and a triangle formed, Bollinger Bands contracted and BandWidth dipped below 10 in January Notice how BandWidth remained at low levels as the consolidation extended.
A bullish signal triggered with the breakout in July BandWidth also rose as prices moved sharply in one direction and Bollinger Bands widened. Chart 5 shows Honeywell HON with an extended trading range in the area.
There was a move to the upper band in May, but no breakout for a signal. Instead, HON clearly broke below the lower band to trigger a bearish signal in June This alerts chartists to prepare for a move, but direction depends on the subsequent band break. A squeeze followed by a break above the upper band is bullish, while a squeeze followed by a break below the lower band is bearish. Be careful of head-fakes however.
Sometimes the first break fails to hold as prices reverse the other way. Strong breaks hold and seldom look back. An upside breakout followed by an immediate pullback should serve as a warning. Bollinger BandWidth can be found in the indicator list on SharpCharts. The default parameters 20,2 are based on the default parameters for Bollinger Bands. These can be changed accordingly. BandWidth can be positioned above, below or behind the price plot. Click here to see a live example of BandWidth.
A shaded delta icon shows percentage change. A white delta icon shows absolute levels. Green boxes show stocks with relatively wide BandWidth. Light boxes show stocks with relatively narrow BandWidth. A list of the stocks with the narrowest BandWidth is shown at the bottom right of the Market Carpet Bottom 5.
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Learn how to establish profitable trading strategies using technical trader favorites such as Bollinger Bands and the moving Learn about indicators commonly used in conjunction with Bollinger Bands and how each one can give traders signals about Learn the most commonly used technical indicators of stock market volatility that are watched by stock market traders and Historical volatility is a long-term assessment of risk.
A stop loss should be placed a few pips above or below depending on the trade opened, just in case price action breaks out of the range.
When the price is close to the upper band, the market is more likely to be in overbought condition, and is likely to reverse.