|Bollinger Bands are a type of envelope (or trading band) plotted at standard deviation levels above and below a moving average. Plus or minus two standard deviations where the standard deviations are calculated historically in a moving window estimation. Hence, the bands will widen if the most recent data is more volatile. If the prices break out of the band, this is considered a significant move.
Because standard deviation measures volatility, the bands widen during volatile markets and contract during calmer periods.
Mr. Bollinger notes the following characteristics of Bollinger Bands:
- Sharp price changes tend to occur after the bands tighten, after volatility lessens.
- When prices move outside the bands, a continuation of the current trend is implied. Bottoms and tops made outside the bands followed by bottoms and tops made inside the bands call for reversals in the trend.
- A move that originates at one band tends to go all the way to the other band. This observation is useful when projecting price targets.
- Bollinger Bands are displayed in two bands which are plotted at standard deviation levels above or below a moving average.
- Bollinger Bands provide a view of the current trading range. They can be used with other indicators to determine when it's time to buy or sell.
Choose from several popular technical indicators. The indicators are: - Bollinger Bands - Parabolic SAR - MA ...
Calculated by using the standard deviation of underlying asset price changes from close-to-close of trading going ...
Where prices on a chart move off their latest tops or bottoms in swings of 38.2%, ...
« View the Stock Market Dictionary »
Latest Financial Advice
Free Investment Advice
|Get free stock market tips and investing advice by subscribing to our newsletter:
* Your information will not be shared or sold.
- Trading Basics
- Investing 101
- Investing Essentials
- Understanding the Risks
- Beginning to Trade
- Trading Strategies
- Trading Psychology
- Retirement Investing
- Personal Finance
- Advanced Trading
- Penny Stocks
- FOREX Trading
- Commodity Futures
- Stock Tips
- Going Public
- Real Estate
- Research Tools
- Stock Spam
- Stock Market Dictionary