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In the 1980s, John Bollinger improved on moving average channels by making them account for12 changes in market volatility, creating what are called Bollinger Bands.
To create Bollinger Bands, one starts with a normal 20-period moving average.
Instead of making normal channels, using a specific percentage, above and below this moving average, we put the lines two standard deviations above and below the moving average.
Although traders have many different ways of using Bollinger Bands, there are three methods that can be used to signal possible changes in market psychology.
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