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