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How Bollinger Band Bitcoin Indicator Works

To figure out the Bollinger Band for cryptocurrency, it uses standard amounts of change to create the lines, usually set at 2.

Bollinger Band Calculation

middle Bollinger band indicator line is a simple MA

The upper band indicator is: Middle line + Standard Deviation

The lower Bollinger band indicator is: Middle line - Standard Deviation

The Bollinger Bands use a 20-period moving average as the default. They overlay the bands on the Bitcoin price chart.

Standard Deviation is a statistics concept. It originates from the theory notion of normal distribution. One standard deviation away from the mean average either plus or minus, will enclose 67.5 % of all bitcoin price action movement. Two standard deviations away from the mean average either plus or minus, will enclose 95 % of all bitcoin price action movement.

The Bollinger Bands cryptocurrency indicator utilizes a standard deviation of 2, which encompasses 95% of all Bitcoin price movements. Only 5% of price action falls outside these bands, making them key points where traders often enter or exit trades.

The most important thing that the Bollinger Band cryptocurrency indicator does is to see how wild the bitcoin price changes are. What the upper and lower lines of the Bollinger bands try to do is keep the bitcoin price within about 95 percent of all the possible closing bitcoin crypto prices.

The Bollinger Band indicator, when applied to cryptocurrency, calculates the disparity between Bitcoin's current closing price and its moving average of past closing prices. The magnitude of this difference quantifies the volatility of the present Bitcoin price relative to its historical average. Fluctuations in Bitcoin's price volatility directly cause adjustments in the standard deviations that define the width of the Bollinger Bands technical indicator.

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