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Charting Made Simple: A Beginner's Guide to Technical Analysis by Roger Kinsky

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Chapter 10: Bollinger bands

In this chapter I’ll discuss Bollinger bands, so named after their inventor John Bollinger. They’re another important charting tool that helps you identify trend changes and overbought and oversold conditions, but in a very different way to any other indicator I’ve outlined.

Bollinger bands are based on the normal distribution so I’ll discuss this first.

Normal distribution

In many circumstances we’re aware of differences in characteristics; for example, that each human being is a unique person. For some things there are no obvious differences and we assume equality; for example, each bottle of the same product on a supermarket shelf may appear exactly the same to us. In reality they’re not — the differences between ...

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