How Bollinger Bands Can Help You Identify Crypto Trading Opportunities
If you pull a rubber band too far, too tight, what happens?
It snaps back.
The same thing happens with stocks ETFs, indexes and even crypto currencies. In fact, 85% of the time when a coin moves too high, or too low, it has a tendency to snap back, or revert to mean.
One way to identify such opportunity is by keeping an eye on Bollinger Bands (2,20).
When it comes to Bollinger Bands (plotted at standard deviation levels above and below moving averages, such as the 20-day moving average), crypto prices tend to stay within the upper and lower bands. And they can help traders understand where prices may be bottoming or topping out along the way.
In short, Bollinger Bands let us know how far we can pull our rubber band.
Take a look at Ethereum Classic (ETC) for example.
Learn How to Spot Unique and Predictable Patterns in Cryptos
Notice what happens about 80% of the time when the upper or lower Band is touched or penetrated. ETC begins to pivot and reverse course. Then again, we can’t just rely on a single indicator as our reason to buy or sell a crypto.
That’d be foolish.
Instead, what we want to do is confirm our findings with other momentum indicators, such as relative strength (RSI) and MACD. Notice what happens when the upper Band is hit and MACD spikes coupled with an RSI spike to or above the 70-line.
Shortly after, the coin begins to pivot and move lower.
Or, look at what happens when ETC drops to its lower Band coupled with a massive dip in MACD, coupled with a drop to or below the 30-line on RSI. The coin begins to pivot and move in the other direction again.
We can see the same thing happen with Ethereum (ETH), as well.
All we’re attempting to do is spot when the “rubber band” has been pulled too far, too tight in one direction. Once we spot that “pull,” we can increase our chances of pinpointing coin reversals up to 80% of the time.
In fact, pull up your favorite coin chart now and take a look at one-year chart. See if you can spot the same opportunities that we can highlight with Bollinger Bands, RSI and MACD.
Bonus Report: There are several patterns that can pintpoint the likely price movement of cryptos. Click Here to get the full report on how to spot these patterns.