Bollinger Band

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A Bollinger band [1] is a technical analysis indicator that compares volatility and relative price levels over a specific period of time. Three bands are plotted: a simple moving average, an upper band of the simple moving average, plus two standard deviations and a lower band of the simple moving average, minus two standard devations. As markets become more volatile, the bands typically widen, or move farther from the average. As markets become less volatile, the bands typically contract, or move closer to the average.

Developed by John Bollinger, Bollinger Bands are an indicator consists of three bands designed to encompass the majority of a security's or contract's price action.[2]

Bollinger used two standard deviations of closing prices and plotted the values above and below a simple moving average. The standard parameters for Bollinger Bands use a 20-bar simple moving average.[3]

Resources

References

  1. Technical Analysis Terms. Lind-Waldock.
  2. Bollinger Bands. StockCharts.
  3. Bollinger Bands. CQG.