Bollinger Bands And Volatility
A 1-minute lesson from the MarketPro academy, one of 22 in trading indicators.
Bollinger Bands plot a moving average with two bands above and below it, spaced according to recent price volatility, giving a visual sense of how far price is stretching relative to its recent normal range. The bands are typically set at a fixed number of standard deviations from a moving average (commonly two).
Bollinger Bands plot a moving average with two bands above and below it, spaced according to recent price volatility, giving a visual sense of how far price is stretching relative to its recent normal range.
How The Bands Behave
The bands are typically set at a fixed number of standard deviations from a moving average (commonly two). When volatility increases, the bands widen; when volatility contracts, the bands narrow. A period of unusually narrow bands, sometimes called a "squeeze," is often watched as a sign that a bigger volatility expansion may follow — though it does not indicate which direction that expansion will go.
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