Everything you always wanted to know about trading options... Explained in plain English.

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Price Expansion and Retraction: The Rubber Band Effect

If you pull a rubber band too far, too fast, what happens?

It snaps back, right?  The same thing happens with stocks, indexes, and currencies.  If they’re pulled too far in one direction, eventually they’ll snap back and revert to back to the mean.  In fact, we see it happen all the time.

To spot that, we begin to look at Bollinger Bands.

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