Bollinger Bands Case Study
2.2.6 Bollinger Bands
A band plotted two standard deviations away from a simple moving average, developed by famous technical trader John Bollinger.
Figure 9: Bollinger Bands Source: MetaStock (2006)
In this example of Bollinger Bands, the price of the stock is banded by an upper and lower band along with a 21-day simple moving average.
Because standard deviation is a measure of volatility, Bollinger Bands adjust themselves to the market conditions. When the markets become more volatile, the bands widen (move further away from the average), and during less volatile periods, the bands contract (move closer to the average). The tightening of the bands is often used by technical traders as an early indication that the volatility is about to
A band plotted two standard deviations away from a simple moving average, developed by famous technical trader John Bollinger.
Figure 9: Bollinger Bands Source: MetaStock (2006)
In this example of Bollinger Bands, the price of the stock is banded by an upper and lower band along with a 21-day simple moving average.
Because standard deviation is a measure of volatility, Bollinger Bands adjust themselves to the market conditions. When the markets become more volatile, the bands widen (move further away from the average), and during less volatile periods, the bands contract (move closer to the average). The tightening of the bands is often used by technical traders as an early indication that the volatility is about to