Introduction to Bollinger Bands
The bands of Bollinger (the Bollinger Bands, sometimes there is a transcription “Bollinger”) – can be defined as an indicator, similar to moving average envelopes, but based on the current volatility in the market. Unlike the envelopes of moving averages, the Bollinger bands vary not only depending on the direction of the price movement, but also on the nature of this movement (the speed of the price movement).
Bollinger bands provide a statistical assessment of how far short-term traffic can go before it returns to the mainstream.
A measure of volatility in the Bollinger bands is the mean-square deviation (SDE), which in the Western literature is called the Standard Deviation term.
Formula for Bollinger Bands
The indicator consists of three bands:
Central band – is a moving average, which can be simple, weighted, exponential or sliding of another type.
The upper band is the moving average + (coefficient x RMS)
The lower bar represents…