Introduction to Bollinger Bands

Introduction

Developed by John Bollinger, Bollinger Bands are volatility bands placed above and below a moving average. Volatility is based on the standard deviation, which changes as volatility increases and decreases. The bands automatically widen when volatility increases and narrow when volatility decreases. Bollinger Bands are similar to moving average envelopes. The difference between Bollinger Bands and envelopes is envelopes are plotted at a fixed percentage above and below a moving average, whereas Bollinger Bands are plotted at standard deviation levels above and below a moving average. Bollinger bands are drawn within and surrounding the price structure of a trading instrument. It provides relative boundaries of highs and lows.

Calculation

Bollinger Bands are displayed as th

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