Leading or Lagging Indicator

The concept of riding the Bollinger bands was not anticipated by John Bollinger himself. He created this indicator to measure overbought and oversold levels so that we can mean the reverse. It is hence a lagging indicator as it is based on the concept of moving averages.

But if you use two different standard deviations you can use the same Bollingers to find the trend before the trend happens. It acts as a leading indicator hence. Quite amazing, isn’t it?

So it is highly unlikely that you have ever heard someone telling to buy a scrip when it breaks the Bollinger Bands. Because people tell “You short on the top of the Bollinger; buy on the low of the Bollinger”. It’s the king of mean reversion. But riding it you’re also using for breakouts.

The same indicator ruling both sides.