Trading Peaks & Valleys

Use Bollinger Bands to Find Great Trading Opportunities

Nothing about stock price movement is linear. Price doesn’t go straight up or straight down. If it does, it’s usually a very powerful move that soon exhausts itself.

Being able to identify price extremes has a few benefits:

1. It will help you know when to “buy the dip”, as a trader or LT investor.

2. It’ll help you know when to take profits and raise cash to buy at better prices.

Identifying price extremes is more of an art than a science; it’s not perfect, and you have to use whole brain thinking to be successful.

The tool we use to identify extremes is called Bollinger Bands, which gives us a read of how “volatile” price is. Bollinger Bands also tell us how far the current price is from the historical mean.

Everything, over time, reverts to its mean. Bollinger Bands give us that insight.

Let’s dive in with some basic principles.