Day trading is one of the most technical types of investing of all, and that makes it naturally appealing to many analytically minded people. Whereas some traders try to succeed by gauging the likeliest emotional reactions of market participants to the latest news, day traders tend to prefer far more clinical and numerical takes on price movements.
As a series of YouTube videos posted by Rockwell Trading founder Markus Heitkoetter make clear, there are plenty of highly suitable approaches for day traders to make use of. One video’s explanations of a trading tool known as the Bollinger Band, for example, clarifies a fairly technical subject in helpful fashion.
A Mainstay of Day Traders Since Its Invention
The eponymous inventor of the Bollinger Band sought a better way to visually encapsulate the volatility of recent price movements relative to historical norms. While there were already a number of widely utilized band-style trading indicators tied to volatility measurements at the time, the introduction of Bollinger Bands in the 1980s advanced the state of the art significantly.
Like many similar tools, Bollinger Bands include lines that depict moving averages over various trailing periods, with these typically being adjusted as might be most appropriate to the time scales being studied. They add to these commonly utilized indicators others that mark out carefully selected multiples of standard deviations from these figures, with the resulting bandwidth providing an instantly recognizable feeling for the historical volatility of the asset in question.
Turning Vague Ideas Into Concrete, Actionable Assessments
Compared to similar approaches of most other kinds, Bollinger Bands seem to many traders to make it much easier to judge when the current price of a stock, foreign exchange pair, or other asset is notably high or low relative to recent history. With this being such a key consideration in many trading strategies, being able to quickly make such accurate judgments can be of immense value.
Day traders who make heavy use of Bollinger Bands tend to feel more confident in deciding when a particular level of resistance might have been reached or when a strong seeming trend looks ready to reverse. Because they have so much to offer in these ways and others, many traders consider charts that incorporate such features truly indispensable tools.