It is very interesting to observe trading veteran John Bollinger turn his focus to the most successful decentralized digital currency, bitcoin.
John Bollinger is the originator of the Bollinger Bands, an indicator that is used to confirm breakouts, indicate areas of support and resistance and to inform of highly profitable trades based on volatility in the market. The technique was introduced in the 1980’s, interestingly around the same time that Bill Williams developed his fractals trading method, both of which emphasize the dynamic nature of markets rather than the static nature characterized by many widely used trading indicators.
In Bollinger’s own words, the Bollinger Bands are described:
“So what are Bollinger Bands? They are curves drawn in and around the price structure usually consisting of a moving average (the middle band), an upper band, and a lower band that answer the question as to whether prices are high or low on a relative basis. Bollinger Bands work best when the middle band is chosen to reflect the intermediate-term trend, so that trend information is combined with relative price level data.”
When using the Bollinger Bands, we will see the price of the cryptocurrency or crypto-pair bracketed by an upper band, which indicates a relatively high price, and a lower band, which indicates a price zone that is relatively cheap. The middle bands acts like a simple moving average. When the market becomes more volatile, the bands widen whereas when volatility starts to settle, the bands contract.
There are a whole suite of indicators developed around the concept of Bollinger Bands, including the %b indicator, which acts like an oscillator, determining overbought and oversold conditions in the market.
The Bollinger Bands also act as dynamic support and resistance levels that change with the behaviour of the market, unlike traditional support and resistance levels, which are static.
Since mid-2016, Bollinger’s Twitter account has been analyzing and commentating on the price of bitcoin. With many financial commentators in the bitcoin space, John may provide a voice of reason for inexperienced traders and it is reassuring to Bitcoiners that he is bullish on the cryptocurrency.