The Bollinger Bounce.

Now let’s take a look at the Bollinger Bounce.

One thing you should know about Bollinger Bands is that the price tends to return to the middle of the bands.

That is the whole idea behind the “Bollinger Bounce.”

By looking at the chart below, can you tell us where the price might go next?

If you said down, then you are correct! As you can see, the price settled back down towards the middle area of the bands.

What you just saw was a classic Bollinger Bounce.

Why the Bounce?

The reason these bounces occur is that the Bollinger bands act like dynamic support and resistance levels.

The longer the time frame you are in, the stronger these bands tend to be.

Many traders have developed systems that thrive on these bounces and this strategy is best used when the market is ranging and there is no clear trend.

You only want to trade this approach when prices are trendless.

So be mindful of the WIDTH of the bands.

Avoid trading the Bollinger Bounce when the bands are expanding.

When this happens, it usually means the price is not moving within a range but in a TREND!

Instead, look for these conditions when the bands are stable or even contracting.

Now let’s look at a way to use Bollinger Bands when the market is TRENDING…

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