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Bollinger Band width Stock Indices Technical Analysis and Bollinger Band width Stock Indices Signals

Developed by John Bollinger.


This indicator is derived from the original Bollinger indicator.


Bandwidth is a measure of the width of the Bollinger Bands.


Calculation


Bandwidth =  Upper Band - Lower Band

Middle Band



Bollinger Bandwidth Stock Indices Indicator


This is an oscillator, based on the theory that stock index price and volatility occurs in cycles.


Periods of high volatility is followed by periods of low volatility.


When volatility is high, bands are far apart, the bandwidth will also be wide apart.


When volatility is low, Bands are narrow and the bandwidth indicator will also not be narrow.


The blue line represents the highest Bandwidth value for a previous number of periods.

This line also identifies periods of high volatility


The red line represents the lowest Bandwidth value for a previous number of periods.

This line also identifies periods of low volatility


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Stock Indices Technical Analysis and Generating Stock Indices Signals


Consolidation - Bollinger Squeeze


Bollinger Bandwidth is used to identify the squeeze, which is a consolidation period of stock index price, after which the stock index price then breaks out in a particular direction.


Signals are generated when there is a stock indices price breakout signal is generated by the indicator starting to go up after touching the red line. When the bandwidth line starts to move up it signifies that volatility is rising as the stock index price is breaking out.

Bollinger Bandwidth Stock Indices Indicator Squeeze

Squeeze


Breakout Signal After Bollinger Bandwidth Squeeze

Breakout Signal After Bandwidth Squeeze


However, this is a directionless indicator and needs to be combined with another indicator such as the moving average to determine the direction of the trend/ Breakout.

 

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