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Bollinger Bands

Utility: Measuring Volatility / Evaluating Trend Strength

Standard Settings: 20 Periods

 

The Bollinger Bands

Bollinger Bands are two (2) volatility bands that are placed above and below a moving average. The Bollinger Bands can be used to measure volatility but also to evaluate the strength of the trend.

When the distance between the two bands widens then the volatility increases.

When the distance between the two bands is getting narrow then volatility decreases.

The Bollinger Bands

 

Bollinger Bands Squeeze

When the Bollinger Bands converge on the moving average, that is an indication of limited price volatility. This called the "Squeeze" and it is a reliable trading signal that works with forex trading.

 

Bollinger Bands Calculation:

Upper Band = 20-day SMA + (20-day Standard Deviation of Price x 2)

Middle Band = 20-day SMA (simple moving average)

Lower Band = 20-day SMA - (20-day Standard Deviation of Price x 2)

 

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What are the Bollinger Bands?

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