{"id":37804,"date":"2022-09-27T19:15:36","date_gmt":"2022-09-27T16:15:36","guid":{"rendered":"https:\/\/forklog.com\/en\/?p=37804"},"modified":"2025-08-29T21:48:04","modified_gmt":"2025-08-29T18:48:04","slug":"bollinger-bands-using-the-indicator-in-crypto-trading","status":"publish","type":"post","link":"https:\/\/forklog.com\/en\/bollinger-bands-using-the-indicator-in-crypto-trading\/","title":{"rendered":"Bollinger Bands: using the indicator in crypto trading"},"content":{"rendered":"<div class=\"wp-block-text-wrappers-cards single_card\">\n<h2 class=\"card_label\">Key points<\/h2>\n<ul class=\"wp-block-list\">\n<li>Bollinger Bands (BB) are a volatility indicator comprising a three-line band built on a simple moving average (SMA). The middle line is the SMA; the upper and lower lines reflect deviations from that average.<\/li>\n<li>BB are used to identify relative lows and highs on price charts of stocks and cryptocurrencies, indices, commodities, options and futures. The tool is also applied to trading volumes, market momentum and statistical data.<\/li>\n<li>The indicator assumes that price near the upper band indicates overbought conditions, while price near the lower band indicates oversold conditions. Bollinger Bands do not generate buy or sell signals; they help infer direction and the potential impulse of future moves.<\/li>\n<\/ul>\n<\/div>\n<div class=\"wp-block-text-wrappers-cards single_card\">\n<h2 class=\"card_label\">Who created the indicator and when<\/h2>\n<p>Today, BB is one of the most popular indicators for <a href=\"https:\/\/forklog.com\/en\/news\/what-is-technical-analysis\">technical analysis<\/a>. The author of Bollinger Bands is John Bollinger, an American analyst, president and founder of Bollinger Capital Management.<\/p>\n<p>The BB concept was <a href=\"https:\/\/www.bollingerbands.com\/bollinger-bands\" target=\"_blank\" rel=\"noreferrer noopener\">developed<\/a> in the 1980s, drawing on the work of Wilfrid Led and on Chester Keltner\u2019s trading bands. The indicator gained broader recognition with the book \u201cBollinger on Bollinger Bands,\u201d published in 2001.<\/p>\n<p>Bollinger also developed two additional indicators: \u201c%b\u201d and \u201cBandWidth\u201d. %b shows where the BB sits relative to the SMA and is used for pattern building and trend identification. BandWidth shows the distance between the upper and lower Bollinger Bands.<\/p>\n<\/div>\n<div class=\"wp-block-text-wrappers-cards single_card\">\n<h2 class=\"card_label\">How Bollinger Bands work<\/h2>\n<p>On a chart, Bollinger Bands form a channel that tracks an asset\u2019s price line and consist of three lines: middle, upper and lower. The basis is the middle band, which is a simple <a href=\"https:\/\/forklog.com\/en\/news\/what-is-a-moving-average-and-how-is-it-used-in-crypto\">moving average<\/a> (SMA). The other two lines represent positive and negative standard deviations.<\/p>\n<p>The author recommends standard BB settings of a 20 period and a deviation of 2. For a daily bitcoin chart, for example, that means a 20\u2011period SMA with a deviation of 2.<\/p>\n<p>Bear in mind that the higher the period, the lower the indicator\u2019s sensitivity. In practice, with proper BB settings, as Bollinger noted, the price should spend about 90% of the time between the lower and upper bands.<\/p>\n<\/div>\n<div class=\"wp-block-text-wrappers-cards single_card\">\n<h2 class=\"card_label\">How to use Bollinger Bands in trading<\/h2>\n<p>Bollinger compiled a set of short rules that underpin how to read BB. The full list is available on the Bollinger Capital Management <a href=\"https:\/\/www.bollingerbands.com\/bollinger-band-rules\" target=\"_blank\" rel=\"noreferrer noopener\">website<\/a>. Some of them:<\/p>\n<ul class=\"wp-block-list\">\n<li>A mere touch of a band by price is not, by itself, a buy or sell signal; the indicator complements other trading tools.<\/li>\n<li>A close beyond the bands more often points to continuation in the direction of the breakout.<\/li>\n<\/ul>\n<p>Bollinger Bands can be used for many assets, including cryptocurrencies. The indicator suits any timeframe, including five\u2011minute, hourly, daily, weekly and monthly. The chosen period should have sufficient volatility for BB to make sense.<\/p>\n<figure class=\"wp-block-image size-large is-resized\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/forklog.com\/wp-content\/uploads\/bollinger-fl-1-1024x506.png\" alt=\"Bollinger Bands on the bitcoin chart\" class=\"wp-image-186034\" width=\"820\" height=\"405\" srcset=\"https:\/\/forklog.com\/wp-content\/uploads\/bollinger-fl-1-1024x506.png 1024w, https:\/\/forklog.com\/wp-content\/uploads\/bollinger-fl-1-300x148.png 300w, https:\/\/forklog.com\/wp-content\/uploads\/bollinger-fl-1-768x380.png 768w, https:\/\/forklog.com\/wp-content\/uploads\/bollinger-fl-1-1536x760.png 1536w, https:\/\/forklog.com\/wp-content\/uploads\/bollinger-fl-1.png 1834w\" sizes=\"auto, (max-width: 820px) 100vw, 820px\" \/><figcaption>Bollinger Bands on the BTC\/USD chart from March 2021 to February 2022. Standard settings used: period 20, deviation 2. Data: ForkLog<\/figcaption><\/figure>\n<\/div>\n<div class=\"wp-block-text-wrappers-cards single_card\">\n<h2 class=\"card_label\">Benefits and risks of using Bollinger Bands<\/h2>\n<p>Bollinger Bands help determine average volatility for a given asset. Using BB can help identify a potential price maximum or minimum based on standard data over a past period. The author also <a href=\"https:\/\/www.bollingerbands.com\/bollinger-band-rules\">noted<\/a> that the indicator suits the identification of price patterns including \u201cdouble top\u201d or \u201cdouble bottom\u201d. There are risks, too. Among them:<\/p>\n<ul class=\"wp-block-list\">\n<li>Low volatility. Using Bollinger Bands requires sufficient volatility to form a channel. A lack of activity makes applying BB pointless.<\/li>\n<li>Trading risks. Using Bollinger Bands without additional tools and indicators when making trading decisions entails risks. The BB indicator by itself does not provide buy or sell signals.<\/li>\n<li>Channel breakouts. A breakout of the Bollinger Bands boundaries most often means the trend will continue in the direction of the breakout. Holding above the channel boundaries does not, by itself, generate buy or sell signals.<\/li>\n<li>Using \u201csimilar\u201d indicators. Bollinger Bands should not be applied alongside indicators based on moving averages. For example, do not use EMA together with Bollinger Bands. Under Bollinger\u2019s rules, indicators should not be directly related.<\/li>\n<li>Excessively long periods. Using BB over very long periods makes the indicator less sensitive to change. Setting the period above 20 creates undesirable \u201cstability\u201d for analysis.<\/li>\n<\/ul>\n<\/div>\n<div class=\"wp-block-text-wrappers-cards single_card\">\n<h2 class=\"card_label\">Further reading<\/h2>\n<p><a href=\"https:\/\/forklog.com\/en\/news\/what-is-mev-in-ethereum\">What is MEV in Ethereum and how will it change after the move to PoS<\/a><\/p>\n<p><a href=\"https:\/\/forklog.com\/en\/news\/sopr-finding-bitcoins-highs-and-lows\">The SOPR indicator: finding price lows and highs for bitcoin<\/a><\/p>\n<p><a href=\"https:\/\/forklog.com\/en\/news\/where-to-track-cryptocurrency-prices\">Where to track cryptocurrency prices?<\/a><\/p>\n<p><a href=\"https:\/\/forklog.com\/en\/news\/why-does-price-slippage-occur-in-crypto-trading\">Why does price slippage occur when trading cryptocurrencies?<\/a><\/p>\n<p><a href=\"https:\/\/forklog.com\/en\/news\/what-is-a-market-maker\">What is a market maker?<\/a><\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>What are Bollinger Bands for? How do you set them up correctly? What are the risks of using this indicator? We answer in cards.<\/p>\n","protected":false},"author":1,"featured_media":37805,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"select":"1","news_style_id":"1","cryptorium_level":"3","_short_excerpt_text":"","creation_source":"","_metatest_mainpost_news_update":false,"footnotes":""},"categories":[2113],"tags":[2118,1268,1253],"class_list":["post-37804","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-cryptorium","tag-101-trading-and-investing","tag-on-chain-analysis","tag-technical-analysis"],"aioseo_notices":[],"amp_enabled":true,"views":"133","promo_type":"1","layout_type":"1","short_excerpt":"","is_update":"","_links":{"self":[{"href":"https:\/\/forklog.com\/en\/wp-json\/wp\/v2\/posts\/37804","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forklog.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forklog.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forklog.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/forklog.com\/en\/wp-json\/wp\/v2\/comments?post=37804"}],"version-history":[{"count":1,"href":"https:\/\/forklog.com\/en\/wp-json\/wp\/v2\/posts\/37804\/revisions"}],"predecessor-version":[{"id":37806,"href":"https:\/\/forklog.com\/en\/wp-json\/wp\/v2\/posts\/37804\/revisions\/37806"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/forklog.com\/en\/wp-json\/wp\/v2\/media\/37805"}],"wp:attachment":[{"href":"https:\/\/forklog.com\/en\/wp-json\/wp\/v2\/media?parent=37804"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forklog.com\/en\/wp-json\/wp\/v2\/categories?post=37804"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forklog.com\/en\/wp-json\/wp\/v2\/tags?post=37804"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}