Algorithmic Trading: Stock Trading Strategy With Python Using Bollinger Bands

Use Bollinger Bands to Determine When To Buy & Sell Stock

Disclaimer: The material in this article is purely educational and should not be taken as professional investment advice. Invest at your own discretion.

A Bollinger Band is a technical analysis tool defined by a set of trendlines plotted two standard deviations (positively and negatively) away from a moving average like a simple moving average (SMA) of a security’s price, this can be adjusted to a users preference however.-investepdia.com

Bollinger Bands: Three Main Components

• Upper Band: The upper band is just two standard deviations above the moving average of a stock’s price.
• Middle Band: The middle band is just the moving average of the stock’s price. There are many different types of moving averages, for this article I will be using a Simple 20-day Moving Average.
• Lower Band: Two standard deviations below the moving average is the lower band.

When To Buy & Sell ?

A price movement such as the closing price of a stock above the upper band seemingly indicates a good time to sell the stock, while a price movement of the stock below the lower…