Bollinger Band Trading Indicator & Stock Indices Price Volatility
When Stock Indices price volatility is high; Indices prices close far away from the moving average, the Stock Indices Bollinger Band width increases to accommodate more possible Stock Indices price action movement that can fall within 95% of the mean.
Bollinger bands Stock Indices indicator will widen as Stock Indices price volatility widens. This will show as Bollinger band bulges around the Stock Indices price. When Stock Indices Bollinger bands widen like this it is a continuation Stock Indices pattern & price will continue moving in this direction. This is normally a continuation Stock Indices trading signal.
The Bollinger bands Stock Indices indicator example below illustrates the Bollinger bulge.
High Stock Indices Price Volatility - Bollinger Band Bulge
When Stock Indices price volatility is low: Indices prices close closer towards the moving average, the width decreases to reduce the possible Stock Indices price action movement that can fall within 95% of the mean.
When Stock Indices price volatility is low price will begin to consolidate waiting for price to breakout. When Stock Indices Bollinger bands indicator is moving sideways it is best to stay on the sidelines & not to place any Indices trades.
The Bollinger bands indicator example is shown below when the Stock Indices Bollinger bands narrowed.
Low Indices Price Volatility - Bollinger Band Squeeze
