Bollinger Bands

Online Trading Concepts suggests that Bollinger Bands consist of three main components, which are in the form of bands, or lines; the upper band, the lower band, and the middle band, also known as the moving average. Playing the bands is used as a buying and selling method. Stock prices tend to move in a pattern, in contrast to the Bollinger bands. When a stock trades above the upper Bollinger band, it is considered to be overbought, and when a stock trades below the lower Bollinger band it is said to be oversold. Simply put, when a stock moves above its upper Bollinger band, one should think about selling the underlining stock, and vice versa. When a stock moves below its lower Bollinger band, one should think about buying the underlining stock.