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Trade Safe by Using Bollinger Band Indicators While Analyzing the Market

Stock Market

There is difficulty in identifying specific factors that influence the market as a whole. A difference between what providers are supplying and what consumers are demanding in a market economy can evaluate any price movement. For this reason, economists say that markets tend towards equilibrium, where supply is equal to demand. Similarly, it works with stocks, where the supply is the amount of shares that people want to sell, and demand is the amount of shares that people want to purchase.

It can be explained as if there are a greater number of buyers than sellers then the buyers bid up the prices of the stocks to entice sellers to get rid of them. On the other hand, a larger number of sellers bids down the price of stocks hoping to entice buyers to purchase.

Generally, the buying and the selling of the stocks depend on the performance of the issuing entity. Whether the entity will be valued more highly in the future stocks or be able to repay its debts.

It would be not wrong to say that the confidence in the stability of future investments plays a large role in whether markets go up or down. All the investors are more likely to purchase stocks if they are convinced their shares will increase in value in the future. They can predict the future with the help of some technical indicators like Bollinger band indicators. The indicator implies a formula of subtracting the lower Bollinger band value from the higher Bollinger band value. In other words it calculates the percentage difference between the upper band and the lower band.

Bandwidth is directly proportional to Bollinger bands. As the Bollinger bands gets narrow the bandwidth decreases and as the Bollinger bands widen up the bandwidth increases. Volatility is the up and down situations of the market, which can be measured by the standard deviation of the stocks. To measure the volatility there are several other indicators used apart from the above described indicators.

On the other side, if there is reason to believe that shares will perform poorly, there are often more investors looking to sell than to buy.

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