Bollinger Band Indicator Strategy

Bollinger Band indicator acts as a measure of volatility. Bollinger Band indicator is a price overlay indicator.

Bollinger Band indicator consists of three lines or bands: the middle band (moving average), an upper band a lower band. These three bands will enclose the price & the price action will move within these three bollinger bands.

Bollinger Band indicator forms upper & lower bands around a moving average. The default moving average for bollinger bands indicator is the 20-SMA. Bollinger Band indicator use the concept of standard deviations to form their upper & lower Bands.

The example of Bollinger Band indicator is shown and illustrated below.

Bollinger Band Indicator - How to Trade with Bollinger Band Stock Strategy

Because standard deviation is a measure of price volatility and volatility of the market is dynamic, the bollinger bands keep adjusting their width. Higher price volatility means higher standard deviation & the more the bollinger bands widen. Low price volatility means the standard deviation is lower & the bollinger bands contract.

Bollinger Band forex indicator use price action to give a large amount of price action movement information. The price information given by the this bollinger bands indicator includes:

• Periods of low volatility - consolidation phase of the market.
• Periods of high volatility - extended trends, trending markets.
• Support & resistance levels of the price.
• Buy and Sell points of the price.