Bollinger band


Written By: Ehsan Jahandarpour

Bollinger Bands is a technical analysis tool invented by John Bollinger in the 1980s as well as a term trademarked by him in 2011. Having evolved from the concept of trading bands, Bollinger Bands and the related indicators %b and bandwidth can be used to measure the “highness” or “lowness” of the price relative to previous trades. Bollinger Bands are a volatility indicator similar to the Keltner channel. Bollinger Bands consist of: an N-period moving average (MA) an upper band at K times an N-period standard deviation above the moving average (MA + Kσ) a lower band at K times an N-period standard deviation below the moving average (MA − Kσ) Typical values for N and K are 20 and 2, respectively. The default choice for the average is a simple moving average, but other types of averages can be employed as needed. Exponential moving averages is a common second choice. Usually the same period is used for both the middle band and the calculation of standard deviation.