Bollinger Band Technical Indicator Strategy

Bollinger Band indicator acts as a measure of volatility. Bollinger Bands 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 Bands indicator use the concept of standard deviations to form their upper and lower Bands.

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

Bollinger Band Technical Indicator - How to Trade with Bollinger Band Index 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.