Bollinger Bands are a powerful indicator that traders use to gain clarity when the markets are rallying, consolidating and correcting.
Trading is neither an exact science nor art. It is a mixture of both. There are scores of publicly available indicators and each claims to be the best. However, none of them are perfect or designed to be used in isolation.
One of the more popular indicators widely used by several traders is Bollinger Bands, an indicator that can be used to spot price peaks, lows, and opportunities for shorting during exhausted rallies.
Bollinger Bands can spot volatility
According to John Bollinger, assets switch between phases of low volatility and high volatility. Therefore, after periods of low volatility, traders may expect the volatility to shoot up, which could result in trending moves.