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Markets move between low volatility trading range moves to high Volatility trend moves. One of the best ways to see this taking place is with the Bollinger Bands. When a market makes a extremely narrow range move, the Bollinger Bands will noticably narrow together. When the bands narrow down, it shows an extremely low volatiltiy market. A low volatility market forecasts - a high volatility trend move is more than likely - just around the corner. This is a big trading setup and a money making opportunity is at hand. The Bands narrowing together does not forecast the direction that the breakout will be but often times it is fairly clear from classic technical analysis which way the odds favor the breakout to be. |
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